British Venture Capitalists Think Older Artists Equal At Least A Little Money In The Bank

The Wall Street Journal takes a look at Ingenious, a London investment bank that is using its cash reserves to fund albums by older artists–including Travis^*, the Prodigy, and Peter Gabriel–whose recent efforts have been passed over by record labels. The company’s logic: Swooping into territory where the currently suffering music industry would be wary of going, namely albums that may not have a lot of upside but less of a risk of being an out-and-out flop, could result in modest profits. Ingenious puts up the money for albums by these artists, then outsources tasks like distribution and marketing; all of the records it finances do manage to get international distribution. Here’s how the relationship between Ingenious and it most recent signing, UB40, came to be:

UB40’s investment advisers, Coutts, a London-based unit of Royal Bank of Scotland Group PLC, suggested the band see if Ingenious would fund it. UB40’s contract with EMI Group PLC’s Virgin label ended in 2005. Their business manager, Lanval Storrod, says the eight band members felt other record companies weren’t effective at promoting “heritage” musicians — an industry term for performers over 40.

“The biggest problem for heritage bands is record labels tend to market everyone the same whether they are a boy band or have been around 20 years,” says Mr. Storrod. An EMI spokesman said it has a good relationship with UB40.

As one of the world’s best-selling reggae bands, UB40’s members thought the group was a good bet because sales of its new album would likely cover production and marketing costs even if it wasn’t a hit, Mr. Storrod says. The band had an idea that could be tough to market: Its new CD would focus on political and social issues.

Ingenious put up $2 million to make, distribute and promote the album, which is scheduled for release at the end of the year or early next year. Any initial profits will go to the Ingenious fund. Once the fund’s investment has been paid back, the fund and UB40 will share any additional profits.

One aspect UB40 likes about the deal: Unlike a record label, Ingenious executives haven’t asked for an update on the album or visited their recording studio in Birmingham.

For their part, big record companies in the U.S. say they aren’t threatened by this arrangement–an executive vice president at Universal gives a sputtering quote to the reporter saying that bands “are not equipped with the necessary specialist skills to take care of business” like hiring producers, lining up publicists, and so on. But given UB40’s enthusiasm about being able to work without label-imposed constraints, perhaps that’s the point? Surely there are enough people who have been laid off by labels at this point who can pick up the “necessary specialist skills” slack, unless they’re turned off by what seems to be Ingenious’ relatively frugal budgeting.

Venture Capital, Rockin’ to the Oldies [WSJ]

^* It’s not even 9 a.m. and already i feel ancient. Thanks, WSJ!