Spotify’s monetization misstep with its new fundraising feature

(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 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.