Vaccination Passport example

Guide: Vaccination passports & their role in reopening live music

After a year of lockdowns, the live music business still faces as much uncertainty as it did in 2020. One of the solutions under consideration is the use of vaccination passports to make events exclusive to people who have received a vaccination. It’s a seemingly straightforward solution, but politically sensitive and technically complicated. Here’s the MUSIC x analysis, jointly written by Bas Grasmayer and Maarten Walraven.

[Disclaimer: Bas started the daily MUSIC x CORONA newsletter one year ago (now folded into MUSIC x), bringing on Maarten a little while later. Despite having studied Covid-19 and its impact on the music industry daily, we are not policy or public health experts. Furthermore, this is one of the most actively researched topics right now. New insights emerge regularly. Please consult local experts when planning & find the most up to date information.]

What are vaccination passports?

A ‘vaccination passport’ is a government-sanctioned form of evidence that the holder thereof has been vaccinated against Covid-19. The concept started appearing early in the pandemic, for example as part of an ‘immunity passport’ study by German researchers who wanted to find out how lockdown restrictions could be lifted for some people. 

Fast forward to today, plus a five hour flight away, and we find Israel as one of the first countries in the world to use a vaccination passport in order to ease restrictions. The country has already given over half of its population at least one vaccine dose. The plan, called the Green Pass, allows people to visit gyms, hotels, theatres, and concerts by showing a QR code. When scanned, it tells the business whether that person has been vaccinated recently. 

China has launched a similar scheme, which integrates with WeChat and is intended to make international travel possible. The EU will come with a similar proposal this month, dubbed a Digital Green Pass. Now, international governments are opening talks about mutual recognition of each others’ certificates in order to allow a return of unrestricted travel – or at least travel with less limitations.

Travel

This is where the topic of vaccination passports gets hairy. The World Health Organisation has cautioned against such certificates for international travel, due to the still limited global availability of vaccines. This leads to practical and ethical concerns, the latter stemming from the fact that existing inequalities get reinforced and amplified due to the unavailability of vaccines in large, mostly poorer, parts of the world.

This is not the only ethical concern.

Ethics

For a year now, we’ve all craved to ‘get back to normal’. Therefore there are justified concerns that certain vaccination passport schemes may get rushed. This would leave a number of ethical challenges unaddressed:

People who can’t or won’t get vaccinated. Leaving aside that not everyone might be able to get a jab as soon as they want it, there are people who, for health reasons like pregnancy, immunodeficiency, or allergies, can’t get vaccinated. In some places in the world, certain ethnic minorities are vaccine hesitant. That goes not just for developing countries, but even the UK. How is this dealt with? What aspects of public life are they excluded from? What accommodations are made for them? For how long? Can employers require proof of vaccination?

Privacy & security. Throughout the past year, a lot of expertise has been built up around this topic. One of our favourite examples of a privacy-friendly contact tracing app is closecontact, born out of Berlin’s club culture. Unfortunately, there are also examples of security fuck ups, like in The Netherlands where its national ‘municipal health service’ (GGD) had a data leak with millions of data points, which was then sold online (not by hackers, but by call center employees who could export everyone’s private data with a single click). In the same country, a provider of corona tests also had a data leak that exposed thousands of people. So the question is: how do these systems get designed in a way that respect privacy and don’t accidentally end up exposing sensitive information, like medical history, contacts, passport numbers, bank info or social security numbers?

Immunity

The next difficult question is how long immunity actually lasts and how different vaccination passport schemes account for that. The big question since the early days of the pandemic was: can you catch it twice? The answer to that is complicated.

While it is currently uncommon for people to catch Covid-19 twice, it is possible, as scientists in Hong Kong recently confirmed. A key word in the preceding sentence is currently, since it’s not yet known how long immunity lasts which is likely to differ from person to person. It is also unclear whether being protected by antibodies means you can’t harbour and transmit the virus to other people.

Oh, and there are open questions around the various mutations.

That’s all fine & dandy, but…

Yes. The upsides. 

We are so close to finally being able to work towards the recovery of so many sectors of our lives and societies. Patience is running thin, especially in countries where many people haven’t been able to count on any significant financial support from employers or governments.

Vaccine passports are happening. They’re already a thing in Israel and China, whereas the EU & many other countries will likely have their own schemes in place by summer. While we depend on our governments for guidance and support, it’s also up to all of us to take responsibility. Governments don’t always act in everyone’s best interest, e.g. in the case of Tanzania, where the government has been falsely claiming they’re Covid-19 free. 

So, don’t be a Villalobos and fly to Zanzibar for a plague rave. If you’re planning a tour in a country where venue wheelchair access isn’t government-mandated, do you just say “too bad” and exclude part of your fanbase? It’s a complicated topic and we don’t intend to put things in black/white terms: there is plenty of room for nuance and hard trade-offs. The point is: our responsibility doesn’t end where the law ends.

The return of live

So what’s next for live music? Are we heading into a period where live concerts and festivals start up with access restricted to those who can prove they have either been vaccinated or have a recent negative test result? It’s not a straightforward decision. In the UK, after the government announced its roadmap towards opening up society after 21 June, Reading & Leeds and Creamfields festivals sold 170k tickets in three days (whether this number includes those tickets punters kept from the previous year is not something we’ve been able to verify through their public statements). The optimism of the UK government’s roadmap isn’t shared across the European continent, let alone the rest of the world. Festivals such as Rock am Ring & Rock im Park in Germany have just been cancelled. Other organizations have moved their festivals to the fall (see: Bonnaroo, Slam Dunk, Aftershock) or are still postponed from 2020 for later this year, such as Wonderfruit. It’s all up in the air, it seems, which is one reason why organisers are keen on certainty and a Covid passport can provide it. 

Responsibility

A concert promoter, festival organiser and even artists themselves work with varying levels of insurances surrounding concerts, festivals, and tours in 2021. Whether any future cancellations are covered by insurance depends on many variables. In one landmark case in the US from last year where the venue The Raven & the Bow took their insurer to court, it seems that the parties worked out their differences outside of the courts. In other words, no precedent has been set there. In countries such as the Netherlands and Germany (but not yet the UK) governments have set up insurance schemes to secure organisations for their losses should they need to cancel because of variants or other unexpected pandemic-related changes. 

Similar to these insurance schemes, putting in place a Covid passport is something that governments will have to take the lead on. Søren Eskilde, of Danish festival Smukfest – due to take place early August – puts it as follows:

“The government has to provide a phased plan with certain criteria that must be met for us to hold a festival. For example, a dialogue about the possibilities of the quick test and what the corona pass will be able to do to get as safe and sound on its feet as possible.”

Similarly, Eric van Eerdenburg, director of Dutch festival Lowlands – scheduled for late August – firmly told NME [ed. note: emphasis ours]: 

“As long as there are restrictions then there will be a need for testing and maybe vaccination passports. It’s not something we’ll push upon the people, but if the government says we have to then we will. We won’t make it up ourselves because it’s a hell of a lot of work. It’s a government that should impose that upon the people.” 

Concert and festival organisers alike have made their day-job out of problem-solving, but they need clear guidance from their governments. If that guidance includes a vaccination passport, organisers will move forward and implement that solution to bring big crowds together. In other words, this means that responsibility for whether big and small music events can go ahead lies squarely with those same governments. Give a mouse a cookie… and they’ll put 50,000 people together in a field. 

Effectiveness, or what’s possible

Will a vaccination passport even be effective when it comes to visiting a concert or festival? Can you completely exclude Covid-19 from your event this summer with rapid testing and vaccination passports? Two questions that probably get two very different answers from the promoters of concerts and organisers of festivals versus the epidemiologists and public health experts. The reason for that lies with the risk involved. Is, to put it bluntly, a little bit of Covid at your event manageable, or a risk that should be completely avoided? There are festivals that aim to go ahead with rapid testing, like Albanian festival Unum which has its government’s blessing, even though there’s the issue of false negatives. Furthermore, talk of variants gets everyone’s hair to stand up on the back of their necks. Especially when it comes to the question of a vaccine’s effectiveness against them. It’s in the nature of a virus to mutate so it makes sense that vaccines will need upgrades in the future in the form of booster shots. But as Dr. Michael Head, Senior Research Fellow in Global Health at the University of Southampton, told NME: “we’d rather that didn’t happen this year and that we could have a bit of time to prepare for that kind of thing.” The message there is clear, do not rush anything this summer, or even this year. There are so many unknowns and to invite those to play havoc would be a bad idea. 

Where to draw the line then? It makes sense to think about a couple of things when it comes to events this summer and fall. 

  • Think local, both in terms of line-ups and in terms of visitors. The risks around international travel are greater than those on the national, or even better, regional levels. This also includes the rules around quarantines for artists travelling around, or sudden lockdowns and travel restrictions. 
  • Focus on scientifically backed trials that help set boundaries on how to operate a large event within a pandemic. Remember that trial in Germany and their advice:
    • No full capacity concerts
    • Only seated concerts
    • Increased number of entry points
    • Mask-wearing mandatory
    • Consume food and drinks while seated
    • Adequate ventilation systems (for indoor events)
    • Hygiene stewards to enforce rules
  • In light of the previous point, focus on a steady return to full capacity shows. It’s great to finally be able to put concerts and festivals back on, but they don’t necessarily need to be at full capacity immediately. Let’s wait until, for example, we move from a pandemic to an endemic situation. 
  • Think about hybrid events. Livestreaming is here to stay and offers both a different dynamic and a way to engage a broader geographical audience. One example is Montreux Jazz Festival who are still hoping for a live and in-person festival in July, but have also prepared for the music to stream live and reach people regardless. 

Considering the above three points, a vaccination passport would not make too much of a difference. Of course, if you take a strict policy that only vaccinated people can attend your event, that will exclude a bunch of non-vaccinated people (whether by choice or circumstance). It could be an option this summer, whether it’s one to take is another question. And as shown in the above quotes by festival organisers, the tendency in the industry will be to jump headfirst into problem-solving mode and to get your festival, or concert, up and running with as many visitors as possible. There is a responsibility at the government level to set expectations that are realistic and, preferably, will take into account various scenarios. 

Will an event’s target audience actually be vaccinated by the time planned events occur? Most vaccination schemes are prioritized by age group, so might classical music, the audience of which tends to skew older, be one of the first genres to return to normal? To what degree will we be able to count on international and especially intercontinental travel?

Even with vaccination passports, 2021 is shaping up to be a year with much uncertainty and pioneering.

Photo by Lukas on Unsplash.

Four reflections on SoundCloud’s fan-powered royalties & the flaws of subscription models

SoundCloud is adopting the user-centric payment model, branding it ‘fan-powered royalties‘. I’m a proponent of the system and was even product director at a music streaming service that employed a user-centric model (IDAGIO’s ‘Fair Artist Payout Model’). Yet, recently I wrote a piece in which I worried about fan-powered royalties being a distraction for SoundCloud, so here are four reflections on the latest announcement.

[Out of the loop? Read my primer on user-centric payment models.]

#1 Recalculations of revenue distribution don’t tell the full story

I’ve sat in on more than a few discussions about user-centric payment models. These discussions often cite research papers that compare how the status quo of music revenues would differ in a user-centric model versus pro rata model. While it’s important to use the data at hand, this also causes a bias.

The streaming landscape, including the vast majority of all digital strategy employed by labels & artists, are based on a pro rata model. What types of services would succeed in a user-centric landscape? What type of strategies would emerge?

#2 SoundCloud should consider fan-powered royalties a platform pivot

The way music streaming services function is strongly influenced by their economics (funding models, user payments, rightsholder compensation models).

Music streaming services sell the catalogue to get new subscribers, who are treated as listeners first, fans second. “Music for every moment”: radio stations, curated playlists, autoplay – all ways to stretch people’s listening sessions to get more value out of the service & either subscribe or stay subscribed (or at the very least trigger more ads).

In a user-centric model, encouraging high listening diversity runs counter to artists’ interests. If I start a rap career (under an alter ego, to avoid another trademark claim) and I bring a fan to a platform because it’s user-centric, I do not expect that platform to then do everything in its power to make sure that fan listens to many other artists, thus diluting the value I get per fan. Rather, I’d expect the relationship to look a bit more like fan clubs (e.g. some crossover between the Patreon / OnlyFans walled garden model and streaming’s attention diffusion model).

In other words: SoundCloud should follow these fan-powered royalties with feature sets that make the platform more fan-centric.

#3 The flaw is in the subscription model, more so than the remuneration model

60,000 songs are added to Spotify daily. The democratization of music has been great if you think it’s important that more people than ever participate in the creation of recorded music. It’s also creating an increasingly competitive landscape.

What happens when the entire potentially addressable market has been sold streaming subscriptions? The pie stops growing. Long before that, the growth of that pie will slow down much faster than the number of new artists adding their music to services’ catalogues.

Streaming subscriptions are a dead end road. A user-centric model only rewards those artists whose fans don’t listen to a lot of music or are extremely loyal, thus maintaining a high “average listening-share per user“. User-centric models don’t generate more revenue.

One of the most insightful people about this problem, who regularly writes & speaks about it, is Mark Mulligan.

#4 Music streaming services need to become ‘music services’ with revenue models that scale vertically

I’m going to skip over some important nuance:

Streaming is not a feature. Music access wasn’t a problem. Piracy solved that. Legal music access was a problem. Rightsholder remuneration was a problem.

For nuance, read my 2016 piece “Streaming is not the future of the music economy“.

When you look back at the history of streaming services like SoundCloud and Spotify, you find an era with APIs that allowed external developers to tack on all kinds of additional experiences. Much of that has been shuttered (in part due to licensing agreements) and an assumption has emerged that music streaming subscriptions paired with the familiar UX conventions are the definitive model. They’re not.

Music streaming was only supposed to be the base layer. It’s a layer on which we need to build alternative revenue streams that scale vertically. I may be butchering economic terms here, so what I mean with that is this:

Music streaming has done a tremendous job at scaling horizontally: getting millions of people around the world to pay a flat monthly fee of $10, or the local equivalent. It has done a horrible job at scaling vertically: fans with more to spend basically go unmonetized.

Meanwhile, the model for artists still looks the same:

  1. Make great music.
  2. Grow your fan base.
  3. Monetize your most limited resource.

That most limited resource is time. A live show is a limited event. A virtual meet & greet is limited. A livestream is limited. An autographed shirt or record is limited. An NFT is limited.

Streaming services, besides integrating merch, have done very little to create new revenue opportunities for artists. This is a failure of the landscape, rather than specific services. It’s hard to run a music streaming service: the economics are brutal. You have a high burn rate with upfront ‘minimum guarantees’ paid to rightsholders, you need to justify that burn rate to investors with fast growth, so streaming services tend to get locked into a single model.

The first link in this article, about SoundCloud’s fan-powered royalties, goes out to Fred Wilson‘s blog – an investor in SoundCloud. Hopefully it’s a signal of an understanding between SoundCloud’s leadership & investors that the company has to pivot from being a music streaming service, to being a music service that supports fan-centric business models.

That’s essential, because what happens now is that an expectation has been created with artists. They expect fan-powered royalties to work out better for them, but what’s the strategy to grow the pie?

The music companies going remote long-term: database

2020 has turned a surging trend into a global reality: remote work. Spotify, which currently employs around 5,000 people globally, recently committed to staying remote-friendly beyond the pandemic. What other companies in music have the same intention?

View database | Submit a company

Remote work has not taken off in the music business as it has in other industries. This can partially be attributed to some commonly held beliefs, some of which specific to creative industries:

  • “The music business is a people business.”
  • “Real collaboration can only be done in person.”
  • “It’s hard to maintain a coherent team culture remotely.”

These are all valid concerns. Being remote-friendly requires a shift in workflows to make asynchronous work easier, a shift in management, and a general shift in mindset.

Pros & cons to remote work

Buffer, a social media tool for scheduling posts, has been championing remote-first as a company. As such, they create a yearly ‘State of Remote Work‘ report to research how remote work is developing. Its latest report found that ‘not being able to unplug’ is the biggest concern among remote workers.

Switching off is a notorious topic in music, since it’s all too common for people to work deep into the evenings. I figured the pandemic might play a role in this, due to people being stuck at home and coworking spaces being closed, but people working remotely pre-COVID struggle with this as much as others.

On the flip side, remote work also has benefits. While the below chart focuses on the worker, there are also organisational upsides. Remote work benefits from maintaining workflows in which people won’t get blocked. People have to be able to work asynchronously as much as possible, so they don’t have to wait for people in other timezones or on other schedules.

While you don’t need to work remotely to clean up workflows, the friction might not have been visible to managers since people could resolve blockers by walking over to a desk. As such, remote work brings the benefit of forcing clarity, transparency, and focus to well-performing organisations.

For further reading about the benefits of remote work, I recommend the somewhat hyperbolically titled piece by Nomad List and Remote OK founder Pieter LevelsThe future of remote work: how the greatest human migration in history will happen in the next ten years“.

Remote work discussion (Feb 25 on Clubhouse)

We’ll be going live on Clubhouse on February 25, 8pm CET / 2pm EST to discuss remote work in music. I’m looking forward to hearing from leaders and workers in the music space about their learnings and plans for remote work going forward.

RSVP on LinkedIn | RSVP on Clubhouse

Clubhouse screenshot in the App Store

Clubhouse = podcasts + proximity

If you haven’t spent time on Clubhouse yet, you either didn’t get an invite yet (abundant now, so ask around), are on Android, or understandably chose not to believe the hype.

The new social media kid on the block has seen plenty of long-form analysis, especially considering it’s such a simple app (highly recommended reading: Clubhouse’s Inevitability by Ben Thompson). Its success can be explained by a simple dynamic too.

Clubhouse = podcasts + proximity

The audio part of the app is popular for many of the same reasons that podcasts are popular as a type of on-demand talk radio. They’re informative, entertaining, and people derive comfort from the connection they have with the podcast hosts & guests – or just hearing their voices.

Clubhouse adds a sense of proximity to the podcast effect. Instead of the distant creator-listener relation, listeners are on a more equal footing. Even if Clubhouse has concepts of session hosts, a stage and an audience, at least you’re in the same room. You can directly follow people. You can raise your hand to speak to them. You can connect to them afterwards.

The dynamic feels similar to the early days of Twitter. Suddenly you could use 140 characters to reach out to the world’s top thinkers and artists who had already signed up to the service (an early adopter of both platforms is deadmau5). You’d usually get a reply and sometimes even a follow. It was significantly easier to build up a following in those early days and by having an following early on, you’d automatically grow your following as the platform went through its growth phase and people looked for interesting people to follow.

While FOMO may be the reason why people flock to Clubhouse, proximity is the glue that makes the experience sticky.


👋 You can find me on Twitter and Clubhouse as @basgras.

❤ If you’re on the MUSIC x Patreon, give me a ping. I have a couple of Clubhouse invites to give away and I’d love to have more of the community on there.

👀 Recommended reading: I wrote about the benefits I reaped from being an early adopter of SoundCloud (@bas).

Photo by Dmitry Mashkin on Unsplash

How SoundCloud should tackle fan-artist payments and reconquer lost ground from Bandcamp, Instagram & TikTok

SoundCloud is rumoured to announce new plans to “let fans pay artists directly” which some commentators interpret as the music streaming service exploring user-centric payment systems.

While user-centric payments definitely make the landscape fairer and realign incentives by making sure the money generated by fans of certain artists actually end up in those pockets, it’s definitely not a silver bullet solution to make up for the difference between desired and actual revenue artists receive from streaming services. In other words: for the vast majority of artists, the immediate change in royalties from a shift to user-centric would be negligible.

Furthermore, it’s complex to negotiate, as SoundCloud’s VP of content partnerships Raoul Chatterjee pointed out during a recent session of the UK streaming inquiries:

“The whole investigation into user-centric is a very detailed and complex investigation that needs to be taken. It’s one potential path we’re exploring… and it would require industry-wide conversations and support to be impactful.”

SoundCloud is doing ok (especially compared to a few years ago), is reporting growing revenues, but it’s losing relevance. SoundCloud does not have time for lengthy negotiations. As a platform, they’ve lost their footing at the center of music subcultures and the longer it takes for SoundCloud to regain its position, the harder it will become.

Keep the lawyers at the (virtual) negotiation tables, but in the meantime, claw your way back.

SoundCloud’s relative interest over time based on Google searches.

Instagram, Bandcamp, and the post-Covid landscape

Two questions.

Firstly, where do music scenes go to connect to stay connected with each other in 2021? I’ve argued that Instagram has usurped community building from SoundCloud. Of course it should be noted that TikTok is playing an increasingly important role there, especially for certain genres. To a lesser degree, groups on Facebook, Telegram, and Discord form places for people to share their latest tracks, get feedback, find people to do collabs or exchange remixes with, etc. As such, they’re also great places for fans to keep track of the latest developments in music.

Secondly, where did musicians turn when they struggled to make ends meet with just the income from Spotify, Apple Music, YouTube, etc.? They turned to Bandcamp in a massive way. SoundCloud, with its creator-centric roots, wasn’t well-positioned yet to accommodate these artists, because what it offers artists hasn’t changed much from its early beginnings. In 2020, being creator-centric meant helping creators make money – and SoundCloud didn’t have much to offer beyond what it offered artists since the service’s early days. That is: a place to upload your music and present it to other people. That addresses a pre-2015~ market need: making music easy to access. Access has been solved. Monetization hasn’t.

Another place that made music easy to access, YouTube, has been SoundCloud’s most important competitor. YouTube, since its early days, has offered social functionality similar to SoundCloud’s, in that one can follow creators (once innovative! Spotify only launched this 4+ years after launch), comment on tracks, and see other users’ profiles.

By 2021, YouTube’s suite has evolved to include membership clubs with monthly fees, monetization through content identification, and livestream monetization through social features that make fans more visible in the chat (similar to Twitch).

This is the landscape SoundCloud must address & find relevancy in.

(more about this landscape in my piece for Water & Music about the rise of the fan-centric music streaming service (paywall))

The social opportunity

SoundCloud was strongest when it catered to its early adopter users or users who exhibit that type of behaviour. Behaviour commonly associated with early adopter users is word of mouth, being a power user, and a willingness to overlook certain flaws as long as the product delivers exceedingly well on its core value proposition. These users are not well-addressed, since the value proposition has diluted over time in order to target wider audiences (e.g. through its Spotify-like subscription service). SoundCloud has made some great initiatives to woo creators in recent years, but the unifying aspect for all users on the platform is its listening experience – and that’s a social one.

People go to SoundCloud to discover new music. To find what’s ‘Next Up’ before it’s uploaded anywhere else. If you’re into a particular type of music, you’ll follow many of the same artists as other fans of that music and you’ll see some of those fans appear in the timeline comments on tracks.

Timed comments on Masayoshi Iimori’s track Alcohol.

On profiles, which have the same feature sets for fans and for artists, this social functionality is also present by displaying who someone follows and is followed by, as well as any tracks they’ve liked and comments they’ve left. For users who don’t upload any music, the main profile real estate consists of reposted tracks (similar to a Twitter user who only retweets). All of that is social.

Do the majority of users explicitly engage in social behaviour on the platform? Unlikely and it’s probable that a small minority of users create most of the (visible) activity, as on Twitter. SoundCloud is a community product where a minority of users create the value that the majority of users get off of the platform. Unlike Spotify, which tries to help users get as much value out of the catalogue as possible, SoundCloud should focus on the value users can get out of communities and the artist-fan relationship.

Lessons from gaming

This is not dissimilar to what fueled the success of games like Farmville or Clash of Clans. In free-to-play games, the majority of users will never spend any money. Instead, they create value for the ecosystem, so that a minority of users becomes willing to spend (big).

In order to leverage these dynamics, and create revenue for artists, SoundCloud must double down on social. How?

  • Step 1: Leaderboards on tracks and profiles. Show off the top fans of tracks and artists. Dedicated fans will want to earn their spot as the top fan. It’s not just fans: if you’re part of a certain music scene and want to make sure you’re ‘seen’, you’ll play new tracks on repeat, so you appear on the leaderboards on day 1. (just imagine K-pop stans, if you find it hard to imagine how fan communities would approach these types of dynamics)

    This functionality already exists inside the stats dashboards artists have access to. All SoundCloud needs to do is make leaderboards visible on the various pages and perhaps create a setting so people can exclude themselves from public leaderboards.
Screenshot of the top listeners of a particular track in a 7-day time period (stats dashboard).
  • Step 2: Track and profile pages as real estate. Leaderboards create social competition and a way for fans to earn status. Now comes the monetization: let fans pay to claim pages in a non-obtrusive way, similar to how YouTube’s Super Chat feature lets you claim visibility in a chat during a livestream. You could let artists set prices or create some type of market dynamic for this.
  • Step 3: Place activity & payment on the same currency. As in gaming, certain users will spend more time creating value through activity and other users will fuel the economy through payments. By creating an on-platform currency, SoundCloud could reward active users with tokens that accrue value as people purchase tokens to spend on the platform with ‘real money’.

The tokens could then help artists mint their work as NFTs and create a more sophisticated dynamic for ‘tracks as real estate’. Basically, artists could earn money from playback, from selling tracks as NFTs, and by making commissions off of people speculating and reselling music NFTs (a commission percentage can be defined in the smart contracts associated with an NFT). From here, SoundCloud could come to function more as a protocol and create a metaverse-friendly version of its other early value proposition: music playback that embeds everywhere. This time with music as a vanity item that all can enjoy, but can only be owned by one person at a time while always staying associated with the creator – even when NFT ownership transfers from one person to another.

As the user-facing part of the platform shifts towards creating more value from the artist-fan relationship and the activity inside fan communities, subcultures, and scenes, lawyers can negotiate with industry gatekeepers to change royalty administration to a user-centric model.

Some of the above is actually what the Audius protocol is trying to accomplish. You could also go a lot further than what I’ve described, as Audius intends and as Mat Dryhurst explored in his essay SoundCrowd: Tokenizing & Collectivizing Soundcloud. Long term blockchain visions aside, for 2021, being a creator-centric company means being a company that helps monetize, so SoundCloud must focus on the short term and employ an “opportunities multiply as they are seized” type of strategy. That means: not standing still to evaluate distant forks in the road, because what you do along the way will determine the paths you can take from that fork.

User-centric is too slow for SoundCloud

Is user-centric streaming the right thing to do? Yes. Will it help SoundCloud in the short term? No, because artists will not see significant enough returns in order for them to drive more traffic to the platform.

How can SoundCloud be as significant to artists as Bandcamp was in 2020?

SoundCloud must emphasize its community nature, since that’s how the type of value can be created that part of its core users will pay for. That won’t be most of the audience that SoundCloud has been marketing its music streaming subscription to (which can’t beat catalog-centric Spotify or value gap YouTube).

The platform must be selective about what type of behaviour it wants to cater to and the value it can create out of that. For that, it makes sense to use its DNA as a social music platform – something that Spotify, Apple (through Ping & Connect), and others have not been able to figure out. It needs to focus on the users that can amplify community excitement around significant monetization functionality and help make SoundCloud as culturally relevant as it was half a decade ago.

Signed,

A long term SoundCloud user with a 3-letter username: Bas (and more recently Viva Bas Vegas).

Mike Shinoda auction on Zora

NFTs are blockchain’s hottest new use case for music. They should not come as a surprise.

Linkin Park‘s Mike Shinoda just sold a digital piece of art for $30.000 and took to Twitter explaining some of this thoughts in a thread:

“Even if I upload the full version of the contained song to DSPs worldwide (which I can still do), i would never get even close to $10k, after fees by DSPs, label, marketing, etc.”

The ownership of this piece of art is tracked through a non-fungible token on a blockchain. Blockchains are commonly used as distributed ledgers: databases operated by networks of users, like Ethereum. They keep records of any changes to the ledger and can track things like ownership of tokens or cryptocurrency, e.g. Bitcoin.

But so what if a piece of art is recorded into a distributed database? Why the hype?

The current cultural moment is strongly influenced by the pandemic. Artists saw a big drop in income. Streaming revenue isn’t cutting it for most. So the big experimentation began. Artists searched for revenue through things like livestreaming, fan clubs, ticketed virtual meet & greets, online courses, and NFT auctions…

Why are people buying content that can easily be duplicated?

Many a music industry conference panel has bemoaned the fact that people are willing to buy a cup of coffee or bottle of water, but won’t spend that money on a download and instead chose to pirate it (in the days long before Spotify counted 150M paying subscribers). Two decades later and many of the same philosophical debates about the price and value of music continue. Meanwhile, gaming, an industry that faced the same piracy issues as the music industry, pragmatically pioneered ways to get people to pay for completely virtual items.

Gaming gave the ownership of virtual items a valuable context. People who spent many hours a week inside games would find value in virtual real estate or vanity items that translates into real world currency. This is not something recent. In 2013, someone paid $38,000 for an in-game item in Dota2 – an item which doesn’t improve a player’s performance, but just makes them look cooler. In 2010, virtual real estate by the name of Club Neverdie in online game Entropia sold for $635,000.

Now, ten years later, we’re seeing the same dynamic emerge for music. Owning an NFT doesn’t necessarily mean that nobody else can enjoy the work of art associated with the token, much like with physical art that’s exhibited. With the emerging metaverse, some are expecting NFTs to become its property rights.

NFT x Metaverse

The idea of the metaverse essentially boils down to a virtual shared space. One prominent example of this concept is Roblox, which is a gaming platform in which people can build their own experiences that are all interconnected through Roblox’ economy (its currency being Robux). Another is Fortnite, which has some of the ingredients already, but hasn’t yet developed a marketplace with low barriers to entry like Roblox has. Despite that, one of the best primers on the topic of the metaverse is the below interview with Tim Sweeney, CEO of Epic Games, which owns Fortnite.

It’s the convergence of various pandemic-accelerated trends (VR / XR, virtual economies, crypto) and the expectations of people in these domains that is currently driving NFT art’s success stories ($750,000 CryptoPunk sale, Panther Modern‘s $666 sale, virtual critters for $100,000 a piece). If you want to know what the future holds, look at what the smartest people in the room are doing, because they’ll be the ones building that future.

12 years after the initial release of Bitcoin and the world’s introduction to blockchain, crypto is starting to emerge as an anticipated layer of connectivity for transactions occurring in the metaverse. With a market cap higher than Facebook at the time of writing, Bitcoin has made many early adopters very rich (as have other cryptocurrencies). Besides figuring out how to build an infrastructure in which they can effectively use their blockchain-riches, we’re seeing this money flow into other spaces, like art (and soon Tesla).

Simplified: to understand some of NFTs’ success, you should look at the crypto space as a metaverse without an interface that looks like a video game. The participants of that space are still players: they’re building their own world, their own infrastructure. They care about what they look like in that world, just like how people in virtual worlds care enough about their looks that they’re willing to buy in-game currencies like Robux (to the sum of billions of USD in 2020). Owning art is cool – it gives you standing in your micro-community which is part of larger meta-communities (e.g. a gaming clan is a community inside the community of one server of a game, which is a community inside the global player-base of that game).

And sure, there’s altruism too, because it’s cool to support art. However counting on altruism tends to spawn panel discussions to compare bottles of water to digital art. Focus on non-altruistic value.

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