MARCH 2019 IN
RICK ASTER’S WORLD
For two years PledgeMusic looked like the one reliable corner of crowdfunding for music artists, but it was all an illusion. Last month it emerged that PledgeMusic was insolvent that entire time. Now it has virtually stopped processing transactions. Musicians who had built their release cycles around PledgeMusic are trying to figure out what to do now and how to plan for the future.
There seems little hope that PledgeMusic can ever return. The company has stopped making payments and is no longer talking to some of its famous creditors. In a statement it asks for patience and hints that it is looking for a buyer or investor. That might sound like a sensible last-ditch effort, but coming from a company that has closed its doors, it is essentially asking for a chance to start all over.
The problems that PledgeMusic faces are so pervasive that if it can somehow return to business, it will effectively be a new company. An investor, if one can be found, would surely want to gain the advantages of a new company and an untarnished brand.
According to bands, PledgeMusic has faced cash flow problems all along. Bands often waited for months to receive the money their fans have paid to finance their record releases, resulting in embarrassing delays and cancelled tours.
I saw only a hint of this myself as a customer of PledgeMusic. Most CDs and other products I purchased on the PledgeMusic site were delivered within two weeks of the promised release date, but the latest one was delayed without explanation for two months. Based on the stories heard from other recording artists, it seems likely that the band was waiting to receive the money that buyers, including me, had paid to purchase the new release. Probably the band gave up on getting the money, but found other money to ship the purchases to fans. Last month I tried to buy another new release on PledgeMusic but, a week before release, the band was showing it as out of stock. The band probably reduced the inventory levels showing on the PledgeMusic site as it started to suspect it too would never be paid.
It is hard to overstate how damaging this turn of events is for PledgeMusic’s reputation. Its brand promise was that musicians could collect money “directly” from fans. That was described as an improvement over working through a record label that kept most of the money and paid recording artists little or nothing. If it turns out that PledgeMusic was just as bad as a record label, keeping the money spent by music fans and not paying the musicians, the argument for its existence is swept away.
If the ethical flaw in the company’s current position is hard to see, it becomes clearer after reading the story of the death of one recording artist who had gone unpaid by PledgeMusic. Fans organized an alternate funding campaign for the artist’s album, living, and medical expenses. The clock is ticking, artists need to eat, and a company that has run off with fans’ money cannot expect much sympathy from its victims.
Where do music crowdfunding campaigns go now? Some recording artists have moved whole projects to their own web sites. New crowdfunding campaigns that look like they were planned for PledgeMusic are turning up on their own web domains. Many artists seeking a dedicated crowdfunding site have relocated to Patreon or Kickstarter. Some have set up a “tip jar” at PayPal.
A small fraction of fans are requesting refunds from their credit cards. Of course they are entitled to their money back, but credit card refunds are a labor-intensive process for everyone, and the refunds will surely siphon off any remaining cash from an already insolvent broker.
There are accounting questions that will have to be answered. What happened to the money that was supposedly being held in trust? Did PledgeMusic spend too much on rent? Did it overpay executives? Were the owners raiding the company for cash? Did officers make false statements to investors as they tried to cover up the extent of the problems? Aware of the scrutiny and suspicion, the company is keeping quiet. Unfortunately, these are questions that look more likely to be sorted out in or after bankruptcy than before.
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