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Streaming Will Never Be The Savior Of The Music Economy

1 (1)While many are predicting that streaming will be the future of the music economy, the fact that services like Spotify and Apple Music typically only engage users at a base level and usually fail to effectively monetize them bodes poorly for streaming, suggesting it's not a business model to be relied on.


By Bas Grasmayer, from the MUSIC x TECH x FUTURE weekly mailing

Let’s get rid of the idea that streaming is going to ‘save’ the music business - whatever that even means. Startups rely on early adopters to conquer newly created markets. They rely on promising a better tomorrow, a better way to do things, a better world. In an uncertain age, we love to drink that startup juice and revel in entrepreneurs’ near-utopic visions.The truth is, no one company can provide a 'fix’ for the complexity that our networked society provides. It requires an intricate ecosystem of companies, products and features. So let’s explore where things should move beyond the streaming layer.

Streaming as the base layer

Music streaming services undoubtedly have a role in the new music economy and a very important one at that. They create a foundation of data, artist-fan connections and make sure that even consumers that are not willing to spend a dime on music are somehow monetised.

The interaction layer

On top of the streaming layer comes interaction. This role is currently, unfortunately, best fulfilled by non-music platforms, such as Facebook, Twitter, Instagram, Snapchat, and perhaps YouTube. Apple Music gave it a shot with Connect, but it hasn’t made a dent. These are places where you collect your following and are able to communicate to them and with them. Communicating with, can be as simple as retweeting fans’ fan art, or reposting their selfies with them rocking your apparel on Instagram. It’s about uniting your tribe, your 1,000 True Fans. It can go much further than that - and never underestimate the power of an engaging newsletter…

The bespoke monetization layer

To use some startup terminology, the product-market fit that many musicians have is, excuse my French, shitty. Releasing products at a defined price point with no concern of whether people are actually willing to pay for them is something that only makes sense in the music industry. Marketing hero Seth Godin has a great article about erosion in the paid media pyramid. In it, he talks about the business of free, mass, limited and bespoke products and services.

In music, monetization of 'free’ and mass are covered by the streaming layer (incl. iTunes, Bandcamp and other digital shops). The interaction layer forms the foundation of another monetization layer: that of the limited and the bespoke goods and services. These are usually high margin goods and are very rewarding for both maker and fan, whether they are first row tickets to your show (limited), or a custom made painting by your favourite drummer (bespoke). With the increasing convenience at which limited and bespoke digital experiences can be offered, such as video conferences, special interactive features in album-apps, or in the not-so-far future, custom virtual reality experiences, there should be a lot of development in this layer in the coming years. This is where the future of the music economy lies.

You’re probably thinking “I’m hungry” or “hey wait, this layer already exists and platforms like Kickstarter, PledgeMusic and Patreon are great examples of them!” And you’re right. This is not where the problem is.

The disconnect

The problem is that there is currently a great disconnect between these layers. The platforms that facilitate the free and mass behaviour, don’t really provide good ways to interact, nor do they integrate well with the existing platforms artists actually use to connect with fans. This needs to be solved either through collaboration with existing platforms or by experimenting with new features that don’t exactly replicate what other platforms are already being used for.

The disconnect between the interaction and bespoke layer are easier to overcome, but it would be great if the latter flowed from the former more fluidly. For instance, if you’re on Twitter and do a weekly Periscope session for your fans, it would be great if you could add a “pay what you want” option to let fans enter the stream. The options are limitless and if you’re (managing) an artist who’s already got their 1,000 True Fans united and wants to do something cool in this area, get in touch and let’s do something fun.

What causes the disconnect? It might well be the mix of startup expectations of hockeystick growth and the difficulty to get new models for music consumption licensed. We need entrepreneurs who can convince VCs to choose for sustainability, and huge copyright holders (large labels) to take a more progressive approach to innovation, despite all their efforts in recent years. Look at the contrast between Bandcamp & Soundcloud. One is profitable, sustainable, and the other has opted for the VC route.

Could Google / YouTube be best positioned to bridge the gaps between layers?

I’ve said it before: YouTube is a hybrid social network and content platform. It provides an excellent place to not only place your music, but also connect directly to your fans. With their acquisition of BandPage, a great example of an interaction & monetization layer startup, they can now build a perfect bridge from the streaming layer, through the interaction layer, to the bespoke layer. 

And YouTube’s bridge will be one that doesn’t just apply for musicians, but for any type of creator, from travel vloggers, to gamers, to animators.

Keep your eyes on YouTube.

Keep your eyes on YouTube.

Keep your eyes on YouTube.