I normally don’t do predictions, because they tend to ignore the human factor and the influence that single, talented individuals can have when they appear in exactly the right moment.

However, having spent most of my career in streaming, building niche models that can live side-by-side with streaming’s status quo, I have various deep-rooted beliefs that allow me to project with more confidence.

The following predictions are based on a 5 to 10 year time horizon.

Streaming’s payment model will not significantly change

The gripes many artists have with streaming and the fact that they get fractions of a penny per stream will remain unanswered. Changing to user-centric payments or higher subscription fees will not change this in a significant way. One option could be metered streaming, but in an internet of abundance, that’s too complex an offering for most consumers. People don’t want to make a decision whether to listen to some music in the shower, where maybe they can’t hear it that well, or save those minutes for later. The friction of such a model is frustrating and cannot compete with streaming services who have the all-you-can-eat model. Nobody will want to make the first move.

Furthermore, the winners of streaming are the large record labels in the world. Are they going to undermine this business model or place bets on things that may undermine it? Probably not.

One could simply say: “streaming services should pay more – let them figure it out.” I think this leads us back to a similar scenario, but one where Spotify, Deezer and Tidal can no longer compete with tech giants like Google, Apple, Amazon, Tencent and ByteDance. The latter can afford to keep prices low for end consumers, creating an irresistible offering subsidized by other parts of their business. Still, while everyone would welcome more money, even getting $400 per year instead of $200 will not satisfy most artists.

Streaming should be seen as a base layer for the recorded music economy. It’s something to be built on top of and its data to be leveraged. For artists, they can utilize this layer to create a larger variety of revenue streams for their recorded music as well as other verticals.

Adaptive music will become normal

Our music players are no longer simple devices that read from a disc and play back the music… They’re fully fledged computers that are more powerful than the computers we had on our desks not long ago. It’s surprising that music is largely still following the conventions of the age of the recording. It’s static and it’s the same every time you hear it.

10 years ago, when I first started speaking about this topic at conferences, I expected that it would be artists leading the way in popularizing the medium. Looking back, I think advancements in media need a business case before the pioneering artists can set a new standard. Artists experimenting with recording music didn’t popularize the record: the business around records did and they needed pioneering artists to help.

The goal for streaming services is to capture as much attention as possible. This is either to sell ads or in order for people to justify their music streaming subscription fee. This has led to a “music for every moment” race and a utilitarian approach to music: music for doing the dishes, Monday evening detox playlist, workout playlists, sleep playlists, and the lo-fi hiphop trend going so hard that any background music that you can use for studying now sometimes gets referred to as ‘lo-fi’.

To further their business models, streaming platforms need to figure out how to fit into even more moments and I think making music more dynamic will play a role. Music that adapts when you’re running, when you’re in a loud environment, when you’re studying, when you’re driving. The challenge is that some of these improvements are marginal and may not significantly move the needle on metrics, whereas the investment in terms of development is large. I do think whoever figures it out will have something akin to the next Discover Weekly on their hands; something that wows consumers & gets everyone scrambling to copy it.

Metaverse integration

This is an easy one to predict, but it’s worth pointing out the strategic fit. A large amount of work at streaming services goes into integrations with hardware. Think different types of devices and their operating systems, think cars, speakers, voice-controlled devices, consoles, etc. When people pay for a streaming service, they want it to be highly compatible with how they play music. If someone has invested a lot of money into their sound system and your service doesn’t play nice with it, they’re very likely to switch to a competitor that does.

So now consider the virtual worlds in which a greater number of us are spending our time in. What role does music play there? How do we take our favourite music with us? Currently a lot of these things are integrated at the system level, for example in the operating system of a console or PC, or at the level of a game launcher like Steam. As virtual worlds and our behaviours therein grow in complexity, people will expect higher degrees of granularity in how they can control their music in these worlds. Should they hear their music constantly at full volume or should the music coming from that virtual stereo sound different depending on your position relative to that object? There’s value in immersion.

NFTs will not change the way streaming services license music

I just don’t see the scenario. Licensors like to negotiate and get the best out of their deals. The human relations in these scenarios are very important. It’s not in their interest to let everyone get default terms in an automated way, since it doesn’t let them leverage their influence. Keep in mind: these negotiations are not just about money, but also about visibility in playlists, frontpages, promotional partnerships, etc.

Given that so much must be done by people, I don’t think it’s worth the switching cost for most parties involved.

Where I do see a role for tokens is where artists, labels and other rightsholders interface with distributors. It makes sense for money and data to be streamed to a smart contract and automatically distributed based on whoever holds the tokens associated with that smart contract (note: there are other mechanisms to make this work too). The advantage of this is higher transparency and faster payments, as well as making it easier for DAOs to interface with streaming (e.g. as artist communities or community-run labels).

Competition will accelerate in the niche

While it’s unrealistic for anyone other than a tech giant to take on music streaming’s status quo, there are opportunities in underserved niches. These niches can be local or specific to certain use cases or genres (e.g. classical music & IDAGIO where I led the product org before). For these services to succeed, they have to be hyperspecific. They need to pick one thing and excel at it in a way that is hard to copy. This can be curatorial (e.g. very specific local curation, like MENA-focused Anghami) or based around a genre (e.g. classical music aficionados have a very specific way of navigating all the recordings of their favourite music or by their favourite performers and composers in their genre). Building a great music streaming is hard — the streaming giants’ weak spot is that they have to serve many different types of people with a wide range of different needs and behaviours… Apps that optimize for a specific niche, need or behaviour can stand out enough for people to justify the cost of another subscription and more importantly the mental cost of using 1 more app for music.

Social listening apps like the BPM Discord bot, that plays music NFTs from Zora and Catalog, come to mind. The niche is where Web3 can play a role… until it is no longer niche.

I’ve spent over a decade writing about music. Much of that decade I’ve also spent in senior product roles at music streaming services. When not working in full-time roles, I’ve helped founders with strategy for their company, product or community. Below are some of the most important things I’ve learned – often the hard way as a young dreamer.

Forget about ‘disrupting’

Yes, your startup is going to reinvent the entire industry. Fix all the broken things. Cut out all the people who profit while contributing very little. Cool. But in the beginning, you need traction. To scale, you will typically need world class music involved. Telling everyone you want to disrupt them is not going to make you any friends. There are many people in the industry (that you’d like to disrupt) who think exactly the same way you do. Hone a message of partnership and of co-investing time, energy and money into solving a specific problem.

Common trap: Proudly proclaiming “I’m going to cut out the middlemen” to the decision-makers who have been hired by artists so that they can stay focused on their art.

Understand the industry

People have oversimplified ideas about how the industry actually works, as well as hopelessly outdated perspectives that date back to the early days of p2p filesharing when CD sales reigned and iTunes was just launching. This oversimplified perspective can cause you to waste a lot of time (and resources). For example, people hear “Spotify pays too little” and think “let’s build a streaming service that pays more, easy-peasy” and then start building a product before understanding who takes a cut from streaming royalties, why royalties are as low as they are, what it means to compete in this space with tech giants, how little the industry cares about platforms without an audience, how much time it takes to license music, what type of technical measures you have to comply with when handling licensed music, etc. And that is just one specific example.

Common trap: Not spending some hours to read the most recent edition of All You Need to Know About the Music Business by Donald S. Passman before overcommitting resources.

Know whose problem you’re solving

Many startups try to solve industry problems, without understanding exactly who their customer will be. Many startups, initially pitching to fans and artists, end up pivoting into B2B-models down the line. Those are the ones that actually survive. Spend time up front to interview people. Build very basic prototypes to see if people actually use your service the way you imagine. Don’t rationalize towards the answer you want to see: if people don’t exhibit repeat-behaviour, meaning they come back to your service over and over, then you are not solving the right problem for the right person.

Common trap: Thinking you’re solving the artist’s problem, rather than that of their management, marketing team, record label, tour promoter, etc.

Speak to your customers

A lot of startup founders spend entire conferences talking to other startups. Unless you’re building something specifically for startup founders, then I’d say it’s a big waste of time. Yes, build a network of startup founders, so you can learn from each other about building a business, but don’t mistake that time as contributing to your product’s success. The #1 most important thing you can do with your time, besides hiring the right people, is spending it with (intended) customers. Learn about them, get their feedback, get them involved.

Common trap: Believing in the “build it and they will come” trope and spending weeks or months building a service while spending not even 1/10th of that time actually speaking to the people that will use it.

Speak to your partners

Most music startups have a dynamic where two groups’ problems need to be addressed. Your source of revenue may be with one group of end-users, e.g. concert-goers, but you need to spend time to understand the need of all those around them: venues, teams of touring artists, etc. The key to success with your partners will be how well you solve your customer’s problem. Consider what relationships augment that solution most effectively.

Common trap: Trying to solve a problem without understanding how partners might help you (e.g. it may be faster to license great music than to wait for independent musicians to show up & upload a sizeable catalogue).

Be honest about competition and don’t underestimate ‘switching cost’

It’s not enough to do something incrementally better. People have established routines. They’re happy with apps that get the job done and it’s typically not worth establishing a new habit for minor improvements.

Let’s say your app is the best way to discover new artists. The app has a novel interface the world has never seen before. There is simply nothing like it. Yet, there is. People have developed complex behaviours for discovering new music, this may involve concert line-ups, various social media platforms and accounts, streaming service algorithms, curated playlists, YouTube channels, etc. You are competing with all of these services for this music discovery behaviour. Understand the whole behaviour and the key differences in behaviours that may exist. Understand the trigger “I’m at work and I quickly want to find something new to listen to that’s not too demanding of my attention” and the end state “the music is playing from my WiFi-speakers and I can save new songs I like to my favourite playlist with one tap”. Can your solution achieve such an outcome? If not, is it so great that it’s worth the switching cost?

Common trap: Thinking you have no competition due to a lack of direct competitors (sidenote: they may all have struggled to gain traction and died). You are competing for behaviours. What behaviour are you targeting? Has anyone already monopolized this behaviour? How do you get in there?

Concluding

The music business is a highly appealing space for startup founders. Everyone loves music. Investors like to take a risk occasionally and add a fun project to their portfolio. Unfortunately, a lot of startups I’ve seen in over a decade of writing about music tech no longer exist. While I actually value naivety, since it can lead founders to pull things off that nobody thought was possible, I hope sharing some of these common pitfalls will help more of you succeed and create more amazing tools, experiences and a blossoming artist-centric music business as a result.

P.S. Never stop dreaming. 💖

One of our common flaws in thinking is we assume a certain linearity and continuity, which means the convergence of exponential trends and the resulting outcomes can often take us and our businesses by surprise. Trends in the 2010s had such a powerful impact on contemporary culture that it’s hard to consider anything other than linearity, but the trends that created these changes also carry the seeds to their own disruption.

Some of the most important converging trends for music & culture in the 2010s were:

• The smartphone & mobile data, which helped streaming take over.
• Online payments & mobile payments becoming normal. These were not mainstream things before the last decade, especially outside North America.
• Modern social networks like Facebook & Twitter.
• Mobile-first social apps like Instagram, WhatsApp, Musically / TikTok, WeChat, etc.
• Recommendation algorithms to prioritize content & maximize people’s attention, engagement and time spent on a site, platform, or app.

These trends have had more impact on the music landscape than the actions of any single music company, assuming they’re deterministic. They’ve impacted our social life, our commercial worlds, the way we navigate media like music & film. These trends have made the world that exists of digital media move from a secondary reality to something that near-seamlessly integrates with physical reality. A convergence of IRL and URL.

The social web became one of hyperpersonalization, endless feeds of information shared by friends, marketeers and agents of misinformation, anything you want at your fingertips. Time magazine, already back in 2006, proclaimed the person of the year to be You, to celebrate the contributions millions of people were making through user-generated content on young websites like YouTube, MySpace and Wikipedia.

Information overload

“You control the Information Age”, Time magazine proclaimed on its cover, but how many people feel that way now? Endless feeds of information have caused a sense of being overwhelmed. The effects of social media on mental health are well-documented.

One way to mitigate information overload is to dive deep into a specific community and create meaning – moving away from the superficial information dosing committed while scrolling through endless feeds.

Loneliness

The ironic thing about social media is that nearly all platforms are set up to create a very lonely experienced. They have based themselves on the singular You principle celebrated by Time in 2006. Your feed with your likes, your friends, your music, you you you you. To some degree that’s great, but it also creates a world where we have less shared experience between the people we know. Close friends you’ll have known your whole life likely have a very different feeds from you, even if you share a lot of aspects in life. We know that what people see when they open the same apps is different. That’s unique. The internet didn’t really function that way pre-modern web 2.0. Social spaces in the real world certainly don’t function that way.

This individualisation creates a sense of loneliness and isolation that the pandemic confronted us with. The pandemic was the trigger needed to set off this countertrend for shared, communal experiences: Clubhouse, livestreams, Discord, apps to watch YouTube & Netflix together, Twitter Spaces and much more.

Wariness of platforms

For various, sometimes conflicting, reasons people have become wary of the large platforms. Do they have our best interests at heart? Or do they ruthlessly prioritize profit for shareholders? Are we free to express ourselves in these places (as long as we cover up our nipples)? There is a shared, distinct feeling of having no control over our most important mediums to connect with each other. None of the most important social platforms for music are trusted – as a matter of fact, one survey found all of them are distrusted.

Hardship

The world faces a lot of challenges – its primary challenge being climate change. As we brace ourselves for decades of significant hardships, we’ll have to find meaning and support from communities.

We have done little to mitigate climate change, which will not just affect temperatures & weather, but trigger conflict around the world. Consider this, from a piece titled “2011 Food Price Spikes Helped Trigger Arab Spring, Researchers Say”:

“Extreme drought triggered wildfires and destroyed one-third of the country’s wheat harvest. Russia refused to export the rest of its harvest. Markets panicked and food prices shot up.”

(h/t Michail aka Opium Hum for sharing)

Infrastructure & access to water are now primary targets in wars: early in the Ukraine war, Russia destroyed a dam in order to get fresh water to Crimea, which Putin had occupied since 2014.

That is only the most recent example. There have been countless other examples. For example, some researchers believe the conflict in Syria was catalysed by climate change.

In the face of hardship, communities have to learn to organise themselves to demand political change and action and to create resilience in the face of adversity.

Privacy

People don’t trust the platforms with their data. This has led governments like the EU to create vast data protection frameworks which include the right to ‘data portability’ which means people should be able to claim their data & transfer it to another operator. The trend is pointing towards users owning their own data which sets platforms up to have to cater to users for permission to look at their data, no longer being able to play the extractive data mining role they have been. We’re still far removed from that though. Zero-knowledge proof cryptography is the tech trend to keep an eye on here, because it can enable a lot of these user-autonomous ideals that have lied at the core of cyberculture since the early days.

For further reading, check out Maarten’s speculative piece about a music service based on zero-knowledge proof.

Web3 economics

Lastly, I think the type of economics introduced by the creator economy and web3-dynamics can make a big impact. It’s now so easy to give a community real stake in its collective output, which means that people who have never been able to participate in open source dynamics can now do so.

Open source has meant creating software together with communities and making the software free to use by all. If there are disagreements, communities fork and create alternate versions of the software. I’m not well-read enough about the subject to understand why open source contribution has been so normal for so many developers, but the concept hasn’t taken off much beyond tech despite significant efforts (e.g. Creative Commons). What may play into it is that tech and the skills associated are easier to monetize, which makes money less scarce and allows one to free up time. If startup salaries are anything to go by a programmer may make double, triple or more than a graphic design artist.

Now, it’s easier to apply open source dynamics to non-technical projects, make the work available publicly and still capture a financial upside, so that all the contributors can be compensated and incentivized to keep contributing or scale up their commitments.

For artists, it allows them to stop thinking about games of scale that leverage the social media dynamics of the 2010s and instead double down on the community dynamics of the 2020s.

For further reading, explore the Twitter thread linked below or read Thinking small: a meditation on scale vs success for artists.

If you hate how small your streaming royalties are: good. It should piss you off. Your art is valuable.

Find the people who value it. Build community. Build your future together with them. Leverage network together

Don't let the industry structures determine what your future is

— Bas Grasmayer (@basgras) March 17, 2022