Three months ago Kickstarter celebrated its third anniversary collecting funds for creative projects. With the system, the general public is able to kick start projects with financial support to receive rewards.

Kickstarter began publicly releasing its statistics June 21, 2012. Since the company’s launch in April 2009, $302 million has been pledged towards projects classified in 13 categories including music, film/video, publishing, art, theater, and photography.

Fifty-four percent of Music campaigns have reached their goals, Country being the most successful genre at 62%. The catch, however, is that donations are paid on an all-or-nothing basis. Meaning, if the forecasted financial goal is not met, all pledges will be void and the project remains unfunded.

With a total of 65,425 projects launched for all categories (3,756 in progress), and an overall success rate of 44.01%, the paid total equates to some $249 million.

In May, musician Amanda Palmer set out to raise $100,000 with her campaign. Thirty days later, the musician became an anomaly, breaking the $1 million mark with the support of almost 25,000 backers. Palmer’s $1.2 million marks Kickstarter’s seventh most profitable campaign—the highest being for a watch that syncs with smartphones that reached $10.3 million.

It is worth mentioning that Palmer did not get her start with this Kickstarter project. She had an established following from a Roadrunner Records deal as part of The Dresden Dolls. When the duo separated from the label in 2010, Palmer maintained constant communication with fans online.

For creators, clearly defined goals with fun and creative incentives are key. Palmer’s fans received a digital album for donations of just $1; a PDF for $5; $25 and $50 for digital plus CD or vinyl, respectively; and a limited-edition art book plus the above for $125. Kickstarter outlined a breakdown of the rewards with the corresponding graph.

Of nearly 23,000 digital pre-orders, a notable 80% of Palmer’s backers paid in excess to receive tangible additions including private shows, personal mixtapes, and studio visits.

In a May 22 blog post, Palmer debunks a frequent question of: “Are you loaded?” with a detailed analysis of the cost layout for overhead, rewards, and touring, noting she will personally take home about $100,000:

It COSTS REAL MONEY to manufacture and distribute a record, to have a staff and a publicist, to promote an artist and tour a band. That will never truly change.
 But now, because we can reach out fans directly without the machine, artists are empowered to call the shots and keep whatever’s leftover…not the labels. Of course, I could send cheap-ass jewel case CDs, fire my staff, make a cheap book on xerox paper, and tour just with a solo piano…with no crew, no band….and RAKE IN THE DOUGH. I could potentially do that and walk with close to half a million dollars. but the products would suck and nobody would ever trust me again.

There are no fees to begin a campaign, but successful projects are subject to a 5% Kickstarter fee and anywhere from 5-10% processing fee from Amazon. The company is based out of New York, currently supporting a staff of 39.

Isn’t it fun to watch the “human wave” seemingly glide around the perimeter of a stadium as excited fans toss their arms up creating an energy that moves across the crowd with such ease and grace?

That movement could be a way to visualize the active switch taking place to digital music, especially among country consumers. YTD digital country album sales are up 40.7% and digital country tracks are ahead almost 13%. These two numbers are high enough, but when you factor in country’s almost 30% TEA Index (track equivalent albums; 10 tracks=1 album) it shows the balance between albums and track sales is also being boosted substantially by digital track sales.

During the past few years total country album sales have been mostly constant, but the physical slice of that same size pie is definitely contracting. There’s a lot of factors at work contributing to the digital uptick. Physical shelf space has been shrinking, making it more difficult to find catalog and other fan favorites in local music sections which pushes consumers online. At the same time adoption of digital tools including mobile, tablet, laptop and desktop continues to explode. Whereas once upon a time many consumers just didn’t know how to purchase and download an album, the procedure is becoming so “user friendly” that even Mom and Grandma are starting to give it a try.

Nielsen Soundscan numbers are a blessing, but they can sometimes hide the underlying essential metric—profitability. The march to files should lower costs such as shipping, manufacturing, printing and returns. But unfortunately, we are also seeing pricing slide on the digital side. Recently Amazon and Google Play offered complete new albums for $3.99 and sometimes even 99¢. In many of those cases, the store is paying full wholesale price to the label but more recently labels are begining to offer some discounts. Either way the sale prices pose a serious problem to the economic album equation. Consumers will soon expect to purchase new product at these attractive and lower rates which are not sustainable with today’s current royalty rates and other costs.

For example, on July 3, Amazon offered twenty album titles at 99¢ including Katy Perry and the Black Keys. According to Billboard’s Keith Caufield (7/21/12) the entire promotion scanned 454,000 digital albums for the week versus the previous week when the same twenty titles scanned a meager 64k.

I’ve been expecting to see the TEA index rise, but it’s possible that cut-rate album promotions have been artificially propping up the album share. Readers of this column will remember that the TEA index sums physical, digital and TEA (track equivalent albums; 10 tracks=1 album) then calculates the percentage of total album sales that come from TEA. Is it possible that the discount album pricing is responsible for keeping the TEA Index flat? Quite possible. Digital album discounts are the latest in a series of troubling sales revelations. (After all, if 10 tracks are sold for a dollar, that means they are only worth 10¢ each.)

Charting This Week
Topping this week’s country album list is Zac Brown Band whose Uncaged has a strong second week scanning over 78k units (40% digital downloads) and falling about 67% from last week. Old Crow Medicine Show debuts at No. 4 this week with about 17k and Warner’s The Farm is planting a few seeds starting out at No. 35 with over 2.7k. In the wake of Zac’s strong debut last week, country album sales tumbled 29% this week.

ZBB and Kenny Chesney (No. 2; 23k) are the most recent superstar releases. Chesney after five weeks has a RTD total of almost 353k and ZBB which is selling at a slightly faster clip than Kenny has 312k in week two. Also, what about Luke Bryan who continues to show strong sales. Even in week No. 50 his Tailgates & Tanlines perches nicely at No. 3 with RTD of almost 1.3 million units.

Clicking over to the digital country tracks this week’s story is all about Jason. Mr. Aldean comes a’slammin’ out of the box to scan over 189k units of “Take A Little Ride.” According to Aldean’s GreenRoom information station it’s the highest-ever digital track debut from a male country artist.

New faces in the country tracks Top 10 include Hunter Hayes (no. 3; 69k), Love And Theft (No. 7; 41k) and Gloriana (No. 10; 38k). For a list of upcoming new albums click HERE.

This writer will be on assignment studying album sales outside the U.S. for the next few weeks… please welcome MusicRow publisher Sherod Robertson who will be kindly filling in until my return.