Tag: music streaming services

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

Posted on | by Bas Grasmayer

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?

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

Posted on | by Bas Grasmayer | 1 Comment on 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).

How the rise of Authorless Music will bring Authorful Music

Posted on | by Bas Grasmayer

Forty thousand. That’s the number of songs being added to Spotify every day. Per year, that’s nearly 15 million. With AI, we are approaching a world where we could easily create 15 million songs per day. Per hour even. What might that look like?

Can music experiences performed by robots be Authorful? (photo: Compressorhead)

The music trend we can most linearly extrapolate into the AI age is that of utilitarian music: instead of putting on an album, we put on workout music playlists, jazz for cooking, coffee time Sunday, music for long drives.

Artists have become good at creating music specifically for contexts like this. It often forms a big consideration in marketing music, but for also the creation process itself. But an artist can’t be everywhere at once. AI can and will be. Meaning that for utilitarian music, artificial intelligence will have an unfair advantage: it can work directly with the listener to shape much more gratifying, functional music experiences.

This will lead to the rise of Authorless Music. Music without a specific author, besides perhaps a company or algorithm name. It may be trained by the music of thousands of artists, but for the listener it will be hard to pinpoint the origins back to all or any of those artists.

Do we want Authorless Music? Well, not necessarily. However if you track music consumption, it becomes obvious that the author of music is not important at all for certain types of music listening. Yet we crave humanity, personality, stories, context.

Those familiar with trend watching and analysis, know to keep their eyes open for counter trends. When more of our time started being spent on social platforms and music became more anonymous due to its abundance, what happened? We started going to festivals in numbers never seen before. So what counters Authorless Music?

The counter trend to Authorless Music is Authorful Music. Although there will be a middle space, for the sake of brevity I’ll contrast the two.

Authorless MusicAuthorful Music
OriginAI-created or obscureHuman-created (ish)
FocusSpecialised in functionSpecialised in meaning
RelationLittle emotional involvementStrong emotional involvement
TraitPersonalizedSocialized

Authorless Music: primarily driven by AI or the listener is unable to tell whether the listed artist is a real person or an algorithm. The music is specifically targeted towards augmenting certain activities, moods, and environments. Due to its obscure origin, the listener has little emotional involvement with the creator (although I’m looking forward to the days where we can see AI-algorithms fan bases argue with each other about who’s the real King / Queen of AI pop). In many cases it will be personalised to the listener’s music taste, environment, weather, mood, etc.

Authorful Music: primarily created and / or performed by tangible people or personalities. It will be focused in shaping meaning, as it is driven by human intent which embeds meaning by default. This type of music will maintain a strong emotional link between artists and their fans, as well as among fans themselves. This music exists in a social way – even music without lyrics, such as rave music, exists in a social context and can communicate that meaning, context, and intention.

With the increasing abundance of music (15 million tracks per year!), the gateway to Authorless Music has been opened. What about Authorful? What experiences will we craft in a mature streaming landscape?

Two important directions to pay attention to:

Socialising music experiences

It’s so easy to make and manipulate music on our smartphones now. Whether it’s music as a standalone or accompanying something on Instagram or TikTok. One reason for this massive amount of music being added to streaming services is because it’s easier than ever to make music. With apps that make it easy for people to jam around with each other, we’ll see a space emerge which produces fun tools and basically treats music as communication. This happens on smartphones but is strongly complemented by the virtual reality and gaming space.

See: JAM, Jambl, Endlesss, Figure, Smule, Pacemaker.

Contextualising music experiences

There is a lot of information around music. What experiences can be created by exposing it? What happens when the listeners start to enter the space between creator and listener and find their own creative place in the music through interaction? (I previously explored this in a piece called The future of music, inspired by a cheap Vietnamese restaurant in Berlin)

Examples of this trend: lyrics annotation community Genius, classical music streaming service IDAGIO, and projects like Song Sommelier.

Special thanks to Data Natives, The Venue Berlin, and Rory Kenny of JAM for an inspiring discussion on AI music recently. You’ve helped inspire some of these thoughts.

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The Chris Brown problem on Spotify

Posted on | by Bas Grasmayer

How do we deal with bad players in music when every listen translates to payment?

For a few weeks in a row now, Chris Brown has appeared in my Spotify Release Radar. I’m not sure why, because I don’t follow him, nor do I really listen to similar music, but that’s a different topic.

The issue I have is: I do not want my streams to put money into the pockets of abusers (Chris Brown has a history of violence towards women, and victim-blaming). So that means I can’t really listen to my Release Radar in the background, or most curated playlists for that matter, because I want to make sure Spotify never plays those tracks to me.

I’m singling out Spotify here, because I’m an avid user: basically all streaming services have this problem. I’ve made the case for a global ban button for particular artists before, when I wrote about the Moby problem on Spotify. Basically, in curated environments, it would be nice to give some control back to the user and let them blacklist certain artists they’re not comfortable with.

Not only would this give listeners a more manageable overall experience, but it would also allow people to immediately make sure their money doesn’t go to abusers (and in the aftermath of the Weinstein fallout, surely Hollywood’s revelations will start spreading to the music business too).

But there’s another issue: in the streaming era, how do we listen to controversial artists without sending money their way?

For example, some brutal details around rapper XXXTentacion came out a while ago. He comes across as an abusive monster, and regularly gets into fights with fans. Yet, he’s still very popular. I’m curious why – is the music that good? I opened Spotify to check him out, but stopped myself from hitting the playback button, being aware that listening means money will go towards him (or his label, and seriously, they should do a Netflix and drop this dude + donate profits to causes that help victims / survivors of abuse).

But the ‘Chris Brown problem’ is that dudes like this keep being put into popular playlists, keep appearing in users’ personal playlists through algorithm recommendations. As listeners, we need a way to shield ourselves, and prevent our money from going into the pockets of these people.

If Spotify and other services are serious about their passive ‘lean back’ experience: give us a blacklist button. Let us ban Chris Brown.

Meanwhile one Reddit user has a suggestion for when artists you like collaborate with such people (which I’m sure a lot of readers won’t like):

Comment from discussion Snoop Dogg's new album cover features him standing over Trump's dead body.

What the End of the App Era Means for the Music Business

Posted on | by Bas Grasmayer

The average smartphone user downloads less than 1 app per month, according to comScore. The era of apps is ending, and we’re moving in an era of artificial intelligence interacting with us through messaging apps, chatbots, voice-controlled interfaces, and smart devices.

What happens to music in this context? How do you make sure your music stands out? How do you communicate your brand when the interface goes from visual to conversational? And what strategic opportunities and challenges does the conversational interface present to streaming services?

 

How can we restore music’s status as social glue in the age of streaming?

Posted on | by Bas Grasmayer

The case for a passive discovery mechanism for friends’ playlists on Spotify.

This article started with a tweet on a Saturday evening. Simply put: I wish I had a better interface to discover playlists that are popular among my friends.

Mark Newman rightfully pointed out that Spotify doesn’t show much interest in surfacing user-created playlists. As a matter of fact, they have even been deemphasising them over the years. Instead they opt for sending people to their own playlists. And their priority makes sense. They have to compete with giants like Apple, Google, Amazon: companies that have money to waste, while Spotify has money to raise.

Streaming is going mainstream

I’m sure to most of us it feels like it’s mainstream already. Hear me out.

Spotify, and other streaming services, are now focusing on consumers beyond the early adopter. These are people that are happy listening to the hits from the radio. These are people that like predictable music experiences. And they’re the bulk of the market.

In order to successfully compete for them, streaming services have to deliver very consistent streaming experiences to these people. This comes in the form of speed, functionality, but also content and programming.

User-created playlists fall outside of Spotify‘s editorial guidelines and metrics that they set for their editors, so it makes it unpredictable. Then again, features like Discover Weekly carry some inherent unpredictability with them: it’s what makes them fun and addictive.

The metrics that a feature like this probably needs to deliver on would look like:

  • Amount of time spent listening to music on Spotify in a specified timeframe (the feature should not lead to less playback);
  • Some kind of retention metric (should lead to a more engaging product, with less people stopping to use it).

Spotify’s friend activity & navigation

I like seeing what my friends are listening to in the right hand bar. Occasionally, but hardly ever, I click on something someone is listening to, and musically stalk my friend.

The reason why I hardly ever tune into my friends that way, and why I think it’s probably not an often-used feature, is because you tend to see it when you’re already listening to something. It’s not really positioned inside the product as a starting point; it’s more of a distraction.

Starting points, in Spotify, are either search or are presented in the left-hand menu. They are your playlists, or the other navigation points, such as podcasts, browse, and Daily Mix.

The prominent placing of Your Daily Mix stands out to me. I find the feature a bit dull and repetitive, but perhaps that’s because I’m on the end of the user spectrum that explores more than returns to the same music. The point is: Spotify gives prominence to an algorithm that generates 5 daily playlists for users. It’s somewhat unpredictable, compared to what they feature in Browse, but it tries to get people into a daily habit, and its prominent placing suggests that this may be working.

What should also be noted is that none of these navigation items include anything social, despite the entire right-hand bar being dedicated to it.

Browse is boring

I’m always disappointed when I open the Browse tab. I never really see anything surprising and I keep seeing the same things over and over, despite not engaging with them.

There are so many super interesting playlists on search, particularly those by third parties, and I need a way to surface them without finding out on curators’ websites, social media, by using search, or by visiting artist profiles.

Your Daily Friend Mix

So, back to my original tweet, and the requirements for getting a social feature to work well:

  • Should lead to people regularly coming back;
  • Should lead to increased playback (or at least no decrease).

What are the constraints?

  • Not enough friends to meaningfully populate an area;
  • Friends don’t listen to playlists;
  • Friends only listen to the same playlists as you;
  • Friends’ tastes are too dissimilar.

The first issue here is already tackled by the way Spotify handles Discover Weekly and its Daily Mixes: if they don’t have enough data on you, they won’t present these features to you. So in short: if there’s not enough useful data to present meaningful results to you, the feature should not be shown.

However for many users there would be meaningful data, so how to make sure that the suggested content is also meaningful?

The UX of recommendations is a big topic, but in simple terms, there should be thresholds and ceilings on similarity:

  • Recommended content should not have a similarity higher than 90% to user’s collection;
  • Recommended content should not have a similarity lower than 10% to user’s collection & listening history.

The recommended content can be playlists made by friends, or ones that friends regularly listen to and / or are subscribed to. The percentages are made-up, and there are a lot more things you could factor in, but this way you make sure that:

  1. Content in the section is interesting, because you’ll discover something new;
  2. And it’s not too random or too far from your taste, so you’ll always find something you’d want to listen to while opening the section.

If that’s taken care of, then people will keep coming back. Why?

Because it’s super fun to discover how your taste overlaps with friends, or to discover new music with friends. I also think such a feature would work better for Spotify‘s demographic than the more active one-on-one music sharing type of functionality (that Spotify removed recently).

Spotify needs a passive way to connect with music through friends

The messaging functionality that Spotify removed showed low engagement. That’s because music one-on-one recommendations are demanding on both sides. Instead, what has shown to work best on big streaming platforms, are lean back experiences. Discover Weekly is an example of that: it’s focused on the result, rather than the action. The action for discovery is exploration: with Discover Weekly, it’s Spotify‘s albums that do most of the exploring for the user.

That’s what the social side of the service needs. The Friend Activity feed is boring. It hardly ever shows something I’d like to listen to, but I do know my friends listen to music I’d be interested in…

What I need is a section that I can go to when I’m looking for something new to listen to, and then shows friends as social proof for that content. It allows me to connect to friends in new ways. Perhaps even strike up a conversation with them on Facebook Messenger.

Which would pair well with Spotify‘s strategy to drive more engagement through Messenger.