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Fairsharemusic.com faces an uphill struggle

Fairsharemusic.com launched this week with a healthy dose of press coverage, including this prominent article in the Daily Telegraph.

In case you missed it, it’s a music download site that promises to donate half its net profits to charity – they call it “feel-good downloading”. The British Heart Foundation, Centrepoint, NSPCC and Friends of the Earth are among the site’s partner organisations, but music fans can opt to donate to the charity of their choice if they prefer.

Those charities can expect somewhere in the region of 3p per track. Not a fortune, it admits, but it offers consumers a convincing case for the value of what it calls “microdonations”.

Fairsharemusic.com might be new, but the basic business model isn’t; it follows many other start-ups that have sought to embed charitable giving into everyday transactions, such as search engine Everyclick – which this year passed the £1m raised for charity mark – and Monday, the short-lived rival to the National Lottery which folded after a year.

These businesses have experienced varying degrees of success, and they typically attract lots of press coverage when they launch (it’s hard to believe now, but one day back in 2006 the launch of Monday was the lead story on the front page of The Times).

One thing they all have in common is the difficulty of persuading people to abandon trusted household names. Often, it seems the satisfaction of giving to charity is not enough to convince consumers to switch. Fairsharemusic.com is a bright business idea that deserves to do well, but it will face an uphill struggle to compete with iTunes.

  • Ivor Sutton

    I strongly believe that there is a vital opportunity for those operating Charities to adopt a business and corporate attitude towards their goals, not least their financial sustainable for the future.

    Already, we see Charities ‘reaching out’ to achieve funding goals – even desperate of survival for the near future, without having confidence for the following year. Is this not a good or best reason to ‘think business’ and grasp hold of business partners and sit around that meeting table and invest in innovative and creative policies aimed at producing revenue streams that secure their passion for Community Development, while also being realistic in their own development too.

    Surely, you don’t expect ‘The Charity’ to sit back and remain locked into a mode that says “we will continue to remain financially sustainable by grants or philanthropy for the long term?

    Charities have a lot to learn fro the private sector. Charities need to learn to balance private sector business and people management skills, while sustaining their love for community and empathetic stance towards social challenges amid the social mobility goals people desperately seek.

    This is possible!

  • Tom Power

    Sorry, John, charities are businesses. Ivan Sutton has nailed the point. If a charity cannot become self sustaining then it will encounter immense problems by relying on grants and subsidies.

  • Debra Allcock Tyler

    If you look at the evidence over several hundreds of years of revenue sources for our sector, the only sustainable of income into charities has been grants and gifts. They are relatively recession proof (indiviual and trust giving is largely unaffected by the general economic climate) and the giving is for purpose. It is a popular myth that business models make charities more sustainable – in fact there is not a single charity who survives purely on trading income.

    Further, many people in need of charity services are there precisely because the private and public sector model has failed them in some way. There is nothing wrong with adopting a different model to serve vulnerable people and causes. In fact, history shows us that the traditional funding model for the sector is highly reliable.

    • Ivor Sutton

      Hi Debra,

      I’ve just noticed your comment and thought I’d respond.

      I don’t feel that third sector organisations are recession-proof – in that they are not sustainable by their own client base. If the financial sustainability of any company or organisation is either based on grants, government (even locally subsidised) and philanprothy, one surely cannot guarantee a recession-proofing to this as its when a recession is effecting the economy that such a business plan is most vulnerable in securing that desperate funding to continue its services. Self-sustainability is another point – this point is currently driven by client-base services whereby there is a ‘financial return’ by the public/consumer for the reliance or demand for that service.

      Just to give you an example of what I feel is a recession-proof ‘business’ model: private sector companies who have financial services built into other business activities – where there is demand for this service – and a financial return by clients – no matter the economic climate.

      For the third sector to become self-sustainable, it has to start by thinking outside of the box – encourage the engagement of a diverse range of knowledge and skills in order to develop innovative solutions to reach such goals.

      Sadly, and as passionate as I am about the third sector, I have not seen any evidence to suggest that the third sector is either ready, willing or eager to become innovative in how it does things – achieve goals and establish growth. For that will require a fundamental engagement with private sector talent who have also crossed-over into the third sector. When has the third sector ever ‘reached out’ to such talent that can facilitate refreshing policies and practices that drive the sector forward into this self-sufficient model it needs to become?

      Afterall, third sector organisations are businesses!

  • trevor o’farrell

    Much agreement to your point Debra. I have even heard it rumopured that some charities have existed before the neo-con free marlet globalised agenda started strangling ordinary people some 35 years ago. Only a rumour though.

  • Nick Aldridge

    “Operating like businesses” can mean (amongst other things)
    a) Having a focus on financial sustainability and value for money
    b) Restricting all services to customers who can afford to pay for them

    Charities might well serve their aims through a focus on (a), but not usually through (b).

    We shouldn’t forget that many businesses fail too. In fact the OECD reckons nearly half of businesses fail within 4 years. (FSB and University of Westminster 2008, New Businesses in the UK). So adopting business practices may not be a guarantee of long-term survival.

  • Joseph Nagle

    I don’t think charity can be defined as: “those that have, giving to those in need”. Charities have much to offer donors and donors get a huge amount from charities: recognition, thanks, a feeling of altruism, knowledge that they have helped/given something back. That is why grants and gifts remain resilient in poor economic climates – because people still want those things.

    I think any sensible non-profit strategy has got to diversify income streams and any responsible board of trustees should be constantly looking at ways of maximising income streams. I think it would be a disaster for charities to move away from grants but there is nothing wrong with adopting more diverse income streams including charging more for one service in order to subsidise another. On a micro scale that would be a small community centre charging 50p for a cup of coffee in their community cafe when it cost them 5p to produce while on a macro scale it would be comparable to concessions for membership of The National Trust or running charity shops.

    I think that asking yourself how you can stay sustainable if you keep offering services for free is the most important question to ask yourself. If the answer is “I can’t!”… what do you do then?

  • Michael Wedgeworth

    Persuasive….as always

  • Mike Wild

    Have to agree, Richard (…well apart from the bit about Community First being a ‘noble attempt’ but that’s another story). The combined effect of all these things is more polarisation of the sector between large and small organisations. I think what does need highlighting in this is the fact that it is the smaller sector which is grown within and by local communities: they’re assets to the community but because they’re not “at scale” they flounder in this new harsher environment.

    I think one thing we will need to do in buiding the understanding of a vibrant sector is build up the number of positive facts we can present. For example, I was talking to the manager of a small community centre yesterday, run on a shoestring budget but regularly hosting 15 other groups, providing all kinds of support and help with information. There’s enough evidence by now to be able to assert that this kind of thing *works* (so long as the organisation delivers it well) without the need constantly to amass more data in shiny new evaluation models. It’s not that we keep reinventing the wheel, it’s that funders keep asking us to re-evaluate it. We need to move the understanding forward to the point where some things are accepted as proven.