The Deal: Universal Canada Inks With PledgeMusic

WHAT: Universal Music Canada has partnered with direct-to-fan service PledgeMusic to find new avenues to fans. While PledgeMusic allows artists to raise funds for projects -- a la Kickstarter, Indiegogo and RocketHub -- it positions itself primarily as a platform that markets albums from the beginning of the recording process through their commercial releases. Thus, a major label can run a pre-order campaign on PledgeMusic and allow fans to receive updates and exclusive content until the album is released. "It's very hard for labels to integrate with companies like ours because of the fan-funding moniker," PledgeMusic CEO Benji Rogers says. But Universal Music Canada "realized we can be a big marketing tool that augments rather than replaces its own direct-to-fan efforts."

WHO: The deal brings together the only music-specific platform of its kind and a division of the world's largest music company. Labels owned and distributed by Universal Music Canada will use the PledgeMusic platform for front-line and catalog releases and will enjoy reduced commissions (normally 15% of each pledge). The first project of the partnership, "Love + Fury" by Canadian rock band Headstones, exceeded its goal and debuted at No. 7 on the Canadian albums chart. PledgeMusic pre-orders accounted for a "sizable" portion of first-week sales, Rogers says. PledgeMusic is making a commitment to the Canadian market: It will place staff in the country and has created a French Canadian version of its website.

WHY: The explosion of crowd-funding services has changed how creators generate revenue and how fans support creators. A platform like PledgeMusic allows an artist to sell a multitude of products -- from digital downloads to CDs to LPs -- as well as unique experiences. Part of PledgeMusic's service is the ability to give supporters updates and exclusive content like audio and video from the recording studio. Artists can also include experiences in the funding tiers. A few hundred dollars might get a fan a CD, LP and a visit to the studio. In either instance, the fan becomes part of the creative process, and all evidence points to fans wanting to be vital to it. In 2012 alone, Kickstarter collected $35 million for nearly 9,100 music projects.

IF: The partnership could be the first step in attracting major labels to direct-to-fan platforms. There's incredible potential in the United States alone: According to a report by Nielsen, direct-to-fan platforms could account for incremental spending from $450 million to $2.6 billion. Music fans of all kinds -- the heaviest buyers, active digital customers, big-box retail consumers and the mildly engaged -- expressed a willingness to pre-order an album download for $15 in order to get access to exclusive content while a favorite artist is recording the album. Nielsen also found untapped demand in live streaming: 68% of fans would pay up to $27 to view a performance online by a favorite act.