Category: Monetization

(This was originally published as a section in today’s Monetizing Media newsletter. Sign up here.)

Hi everyone – Last week, Spotify added a feature called Artist Fundraising Pick for artists to add a fundraising links to their profile. It’s done in partnership with Cash App, GoFundMe, and Paypal.me so when a user clicks it, they are redirected to one of those apps to send money or to the website of one of the charities participating in Spotify’s Music Relief project.

Efforts to direct money to those who need it during a crisis like this are laudable. That said, I think the execution here is poorly thought through.

First: it combines charitable fundraising and tipping money to the artist in the same feature. If an artist is using this to accept money to themselves they look like a) they’re stealing from a charity that could’ve received it, b) they’re a charity case begging for your help.

The latter connotation is why Patreon has struggled so much to get musicians in the core music industry — those who are big stars or aiming to become one — onto its platform. It framed itself too much as a resource to support talented starving artists and so successful ones don’t want to associate. A year ago, when I extensively researched Patreon for a 25,000 word series about the company, artist managers and label execs were consistent is saying it’s bad branding for a rising star musician to use Patreon. (The company is trying to address this but the stigma remains.)

Second: it hurts the opportunity to bring the tipping business model to Western music. Introducing tipping as a charity feature on Spotify will contribute to a stigma that is harder to get past if it wants to introduce tipping as a normal way for fans to compensate artists. And it should want to do that. Tipping musicians is standard on music streaming platforms in Asia (esp. China) and generates billions. It has recently become mainstream in the West within the context of esports: tipping is common on Twitch in addition to YouTube Gaming and Facebook Gaming.

Spotify is eagerly hunting for new revenue streams that aren’t tied to licensing content from record labels. Figuring out the right product approach to make tipping artists normal within Spotify — as an act of showing fandom not providing charity — would be a big win. Like other platforms, it could take a % cut of that money. It already has credit cards linked to the accounts of its 124m paying subscribers and I believe tipping an artist would likely be a direct transaction separate from the royalty collection process. This would also do more to help all recording artists (from super stars to small indies bands) earn more money.

Third: the third-party apps. The partnership with payment apps primarily used to send money between friends is odd, and is perhaps tied to regulation of Spotify not being an approved payment processor.

Creating a behavior of tipping artists you like isn’t likely to occur through the same apps you use to reimburse friends for pizza. Directing potential tippers to a separate app they need to create a new account with benefit those third-party apps more than Spotify.

What Spotify should have done: create a feature for artists to link to their favorite charity website and encourage donations. Separately, focus on developing a tipping feature that keeps payment within Spotify and leans on Spotify already having your credit card on file, even if the timeline to roll that out is longer.

(This was originally published as a section of today’s Monetizing Media newsletter)

This crisis is an opportunity for the music industry
Music has been hard hit by Covid-19 because live events comprise such a large proportion of artist earnings. But working from home is forcing artists and their teams to confront how under-developed their business is in engaging core fans online and monetizing them through more than just concert and merch sales.

Music has largely ignored longtime best practices for e-commerce and media brands like capturing customer contact info and engaging those customers with newsletters (targeted by customer segment) to pull them farther down the sales funnel. There’s very little action beyond posts on social media to buy concert tickets or listen to new music (and marketing campaigns by labels and concert promoters to the same effect).

Monetizing an online audience should be a higher priority for artists/managers regardless of this crisis, since concerts are constrained by geography, time/date, and frequency of when they occur in a given locale. The industry is bad at price discrimination outside of ticket sales, offering ways for devoted fans to pay for additional access or benefits.

Last summer, Cherie Hu and I analyzed the websites of 57 top recording artists across genres and subscribed to all their newsletters for 3.5 months. (Our data is here) Five didn’t have newsletters, 27 never sent a newsletter, and only 5 sent more than 10 emails. More importantly, only 3 artists newsletters were normally written in first person and only 2 sent newsletters that weren’t entirely transactional (George Ezra and Nick Cave). Nearly every single newsletter for every artist just blasts out advertisements to buy merch or concert tickets. They are spam even to devoted fans, offering less substance that what is already gained from following the artist on Instagram.

Only 2 artists — Justin Timberlake and Luke Bryan — had calls to action on their websites to join paid memberships for exclusive content and other benefits. (In both cases they were the 4th-ranked calls to action on their websites, after CTAs to listen to music, follow on social media, etc.)

Managers usually give the artist’s website and newsletter to their record label to manage, viewing it as generic marketing work. Managers I’ve spoken to have highlighted that artists typically have a social media addiction with a compulsion to see how many likes and celebrity comments their posts get relative to others’ so they don’t want to create content elsewhere. And from the manager’s standpoint, the opportunity cost of time spent creating content off social media isn’t worth the comparable money gained from focusing on growing social media followers (that impacts endorsement deals, etc.). It’s all top of funnel growth.

Artists don’t even control the ability to reach their existing social followers: algorithms de-prioritize artist’s posts in the newsfeeds of followers who haven’t been highly engaged. Artists have no CRM of their fanbase, knowing who has bought merch, paid for concert tickets, paid for VIP passes, etc.

The Covid-19 crisis has shown that if you take away in-person concerts, artists are doing very little to monetize their core fans. The rise of free performances on Instagram Live has engaged artists in thinking about their digital product offerings more seriously than before. What is a compelling virtual concert and how much would fans who can’t make it to real-world concerts pay for the experience?

I predict this temporary exercise in contemplating a digital-only business model will have a lasting impact in 3 areas:

1. Virtual events – producing ticketed, online concerts and other special events for fans (not mere live-streams of in-person concerts). Unlike a normal tour, this will be about one show that is its own unique production, making it a pop culture moment (a live experience to attend with friends) that’s worth paying for. Ticketing platforms like Veeps are providing infrastructure for this already, plus there’s the emerging trend of concerts within the virtual worlds of games.
2. Owning the audience – whether through newsletters or SMS models like Community, actually having fans contact info will be recognized as important to cost-effectively drive them to digital events. Newsletters and SMS enable artists to segment fans, sending spending opportunities to super fans who want them without promoting them to other fans. (The growing # of celebs making huge $ through co-founding consumer product brands will only accelerate this realization.)
3. Memberships – an effective way to engage many devoted fans will be through memberships that offer some mix of exclusive content, virtual concert attendance, and other benefits for a few bucks per month or year. This hasn’t been tried very effectively yet in music. While Patreon is viewed as panhandling, white-label solutions like TopFan are growing and social platforms like Facebook, YouTube, and Twitch are bringing membership and tipping models into the mainstream.