Where rock music meets the City

By Ben Morris
Business Reporter, BBC News

How about this for a deal? Be a part of the record industry, help develop new artists, get tickets for gigs and, best of all, make money.

Mancini is the first band that the Power Amp fund has invested in

That is the sales pitch of a new investment fund, Power Amp, run by music industry insiders and City financiers.

Needless to say, there are a couple of catches.

You will need to provide a minimum investment of £10,000 and there is no guarantee you will make any money; indeed the cash could be lost.

Nevertheless the managers of the Power Amp Fund are confident they can raise £10m.

That money will be invested directly in bands and performers, cutting out the traditional record labels.

The added attraction for musicians is that, unlike a traditional record deal, they keep their music rights and the money that flows from that ownership.

In return, Power Amp will take a cut of all the band's income, including live events and merchandising, over the lifetime of their agreement.

Established artists

Tim Parry is one of the music brains behind the fund.

Tim Parry has managed Soul II Soul, Verve, Snow Patrol and others

During his 21 years in the industry he has managed Soul II Soul, the Verve, Snow Patrol and is currently working with the Klaxons and the Futureheads.

"The challenge was to find something that worked for the artist, which is where we're coming from - artist management - and something that works for the investor," he says.

"We obviously feel that we've got it."

His fund plans to invest in established artists, who do not want to deal with major record labels and new artists who need an initial investment to get their careers going.

"The idea is to end up with a balanced portfolio of artists. So there are some that are like a safe bet - you know what the income is going to be," he says.

"With the new artist, it's our job to sort out the best ones."

Power Amp's success depends on spotting and developing new music talent and that is not easy.

"You can sign a great artist, produce a great album and it should be huge, but for some reason it just doesn't work anyway," says Chris Cooke, the editor of music industry website CMU.

"If they don't get that success, then will investors go off the idea?"

Power Amp already think they have one potential hit band, Mancini, fronted by singer Iraina Mancini.

They have invested in the London based, electro-rock group and are very excited about their prospects.

Power shift

Power Amp and others are trying to take advantage of a shift in power in the music industry.

The big record labels, like EMI, are struggling.

CD sales are falling, recording technology has become much cheaper and music can be distributed easily on the internet.

Also, bands are less willing to sign away their music rights and that's led to some surprising innovations.

Radiohead

Radiohead took a huge risk with its last album.

Last year it released "In Rainbows" on the internet and listeners were invited to pay what they liked.

Around half of those that downloaded the album paid, although the band will not say how much.

Nevertheless, Radiohead probably still made more than a traditional release as it did not have to share any of the revenue with a record label.

Mr Parry welcomes innovations like that.

"People are less likely to steal music if they know it's the artists that are directly involved," he says.

But even if the old order is breaking down, Power Amp will still rely on hits.

Worst case

And for investors that is a risky proposition.

"It's much easier to assess the risk and potential of a gadget, but pop music is completely different," says Ben Yearsley, an investment manager at Hargreaves Lansdowne.

He says that funds like Power Amp offer attractive tax breaks, but warns that it is a risky investment.

"You've got to assume the worst case. Go into it with your eyes open and know the risks. Very few pop stars make it at the end of the day."