This post originally appeared on Sciblogs.co.nz.
One way of looking at the world of music is to say the game is changing. Another way is to say it's a complicated mess where making money's nowhere as simple as it used to be.
However, in a world of free and of digital there are two facts that remain.
Firstly, bands need to establish and grow their fan base, and many of those fans are prepared to pay for music and merchandise associated with music that they love to support the bands they love.
How to connect the two is a conundrum that not only the old school record labels are trying to figure out, but also every man/woman and his dog (perhaps even the HMV dog for those who are old enough to figure the analogy) with access to the Internet.
Enter Wellington start-up company, MusicHype.
Its goal is to reward music fans for loyalty to their favourite bands, and increase bands' revenue opportunities through ticket sales, merchandise and other derivative products of their music.
MusicHype only began life in January 2010, and, pretty surprisingly for a start-up, has even managed to reach cash flow break-even recently.
It is still in growth stage, but its performance and business model has been enough to see it invited to MIDEM, the world's largest Digital Music conference, a 'destination for music business connection and knowledge', which showcases 'latest technologies and new models for distribution and monetisation'.
MusicHype, along with 29 other global companies and start-ups, were selected from hundreds of global companies to pitch to the audience and judges at the end of January.
"For us it is a big deal," says MusicHype managing director, Jeff Mitchell.
The start-up came into being following numerous yarns between serial entrepreneurs Dave Moskovitz, Nick Rowney and Mitchell (and others). As musicians, Moskovitz and Rowney were interested in how unsung bands (to risk mixing metaphors) could promote themselves via the web. Mitchell had experience in building global Internet technology platforms, and selling content online.
Its first test crash dummy (sticK is using a bit of poetic licence here) was reasonably well-known band 'The Mint Chicks', a group Mitchell describes as being open to new ideas. They had just come off full contract rights with a recording company, which is important "as we only want artists who are in full control of themselves; we're not interested in licensing deals."
This allowed MusicHype to work up its business model, and the result was an exclusive USB memory stick with loaded with the Mint Chicks' new EP, also designed by the band, that was only available through MH. A limited edition of 500 were sold at $25 each, with revenue shared between the band and MusicHype.
Another initiative during May's NZ Music Month was an independent mix tape. The public, via the net, was asked to select their top 12 songs from 40 bands. Again an exclusive MH USB, and clear blue vinyl record (yes record) was produced.
"We wanted to pull an online experience with an offline, tactile experience," he says.
Online's not just about being digital - fans also appreciate a physical product, according to Mitchell.
"Our secret sauce is 'The Appreciation Engine'," Mitchell says. "All campaigns are run on top of this, and it integrates across all social networks."
MusicHype has centralised online music fan identification across Facebook, YouTube, Twitter and other platforms, pulling out the music parts of their conversations.
To do so, MusicHype integrates with social media API's (Application Programming Interface), following authorisation from the user to do so. This allows MH to connect, track and reward music fans for what they do.
"Everytime a person does something good for a band, they get a "note", or loyalty reward, kind of like air points, says Mitchell. There's some complicated algorithms and programming that enables MH to carry out these functions, as well as rewarding fans.
If fans collect enough notes, they're able to purchase products, including tickets to live performances, from MH's online shop. Naturally, they can also use real cash (or credit cards) to purchase products too.
The company's business model is to work with a band or label, and put together a campaign. This has to be focused around merchandise and/or digital downloads, with both partners clipping the ticket says Mitchell.
Most of the shared income is obtained through these sources, though some affiliate programmes provide other money through (other partners') ticket sales.
Mitchell says that the distribution and sale of music through the Internet isn't that difficult, with options such as iTunes being available.
"The real difficulty is how to rise above the noise," he says. "That's what we're providing, and we generate sales on that band's excitement."
MusicHype plans to extend the Appreciation Engine to cover other industries.
For example, the Appreciation Engine could track and reward fans' appreciation of sports teams, automobiles, or any consumer brand.
Their dream is to be the loyalty engine of the Internet, once they've fixed the broken music industry.
Peter Kerr is a journalist, writer and consultant in the innovation space. View his work and that of 35 other scientists and science writers at Sciblogs, New Zealand's largest science blogging network.
This post originally appeared on Sciblogs.co.nz.