📺 TikTok Killed the Video Star
How the Creator-First Economy is Shifting Paradigms in Music Discovery & Distribution
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Introduction: Paradigm Shift
I spent the better part of my weekend on TikTok. I've been reluctant to download the notoriously addictive app for exactly that reason. But I figured now that I'm a respected tech commentator (LOL), it was time to get my hands dirty and do some first-hand reporting on the experience inside the content rabbit hole.
During this marathon TikTok binge, I encountered a lizard therapist, shrimp raves, and trick shot compilations (I'm not sure if this says more about me or the app itself). The one consistent thread, despite the wide variety of content, was music. Each and every video has a soundtrack, original or otherwise, and the ease of creating reactions, duets, or remixes makes for a content machine.
Contrary to what the title implies, the focus of this article isn't really TikTok. I'm planning to write about streaming. More specifically, streaming music. But streaming has become a catch-all phrase for virtually any content type. And in a way, it's a misnomer. It would be like replacing the word "Music" with "MTV" in 90's — conflating the content with the distribution channel. That said, the cultural and technological tailwinds that resulted from streaming, stemmed directly from the music industry. Which makes it a fairly compelling case study for the creator economy writ large. Today, we'll run through streaming technology's impact on the music industry, it's business model and the French startups that have positioned themselves center stage.
We should probably start by outlining the music business and see where the algorithm takes us...
Do you Believe in Life After Streams? *Cher Voice*
When I talk about the entertainment industry, I find it difficult to communicate in terms of product, distribution, and bottom line. Often it feels disparate from traditional "business" (although anyone who works in "the biz" will tell you otherwise). Despite the fact that music and entertainment involves taste, subjectivity and artistic license, there has always been an aspect related to profit. Today's entertainment industry is heavily influenced (and influenceable) by technology. The strategy and tactics to build a successful artistic brand are vastly different and highly dynamic. Music and technology have always had an interdependent relationship, each, in turn, driving how the other adapts.
I'm lucky to know a few people on the inside. For example, my sister works at a major label intermediating partnerships with her artists and the streaming services who play a key role in distributing their music. When I visit her, I tend to hear terms like placement and activation campaigns in reference to the various marketing strategies that lead to visibility, streams and ultimately profit. Earlier this week, I spoke to one of my best friends, Abhi Kanakadandila, who's a musical artist himself but perhaps more relevant to today's piece has recently launched a modern music label and management company called D36. As a former finance major, he helped elucidate the business frameworks behind the music.
According to Abhi, there are four main "services" a label provides:
Artists & Repertoire (Finding Talent, Recording)
Content (Videos, Album Art, Narrative)
Marketing (Digital, Physical, Partnerships)
Funding (a 4th axis that plays a role in the prior three)
The economics for artists has always been tough (there's a reason the term starving artist exists). Which is why historically, launching someone's career was a massive financial undertaking. As such, labels have always served as gatekeepers to stardom, carefully selecting talent, nurturing said talent, leveraging relationships for distribution & marketing and handling the legal and administrative side of the business. These are all value-added services, but there were some downsides. Namely, due to the economics, these services were bundled which doesn't always work out financially in favor of the artist. But on top of that, there was limited bandwidth (on the airwaves, in physical record shops) which led to homogeneity on the radio and lack of opportunity for genuinely talented artists. The technological landscape has changed that by disarticulating the aforementioned services and drastically reducing the barriers to entry around cost and distribution. While the major labels remain a popular path to mainstream success, the digitization of the music industry, coupled with algorithmic discovery and sophisticated analytics has opened the door to a new type of label.
Believe is a French record label and music distributor, but if you peek behind the curtain, it's a tech company in disguise. In essence, they built a digital-native services product, used it to launch a successful label, then productized their technology for other labels and artists to leverage. In 2015, they acquired Tunecore, a US-based distribution company that is now positioned as a DIY platform for indie artists to publish their music on digital storefronts and apps like TikTok, commission-free.
Believe hasn't completely disaggregated from the major label approach, but they have removed friction for independent artists and labels alike. As with most tech products, there's a fine balance between a point solution (one that solves a single problem) and the infamous all-in-one toolkit (which either has a watered down version of everything or is simply too complex for a casual user to embrace). It's important to keep in mind that royalties serve as one of many revenue streams in the music business. They tend to be the most reliable and predictable assets an artist can have (which is why labels treat them like financial instruments) but in a world with highly accurate listener/fan data, other revenue channels like merchandise, concert tickets, access to a community/perks and brand partnerships can offer equal or more value to an artist. With platforms galore, the key for both independent and major artists is minimizing take rate while optimizing for product, distribution, & discovery.
Before we look to the future, let's review how these factors have evolved in our recent history.
Pirates, Popstars & Python (How did we get here?)
The 80s and 90s witnessed two critical changes. The first was a technological transformation that impacted distribution. The second was cultural change (supported through technology) that revolutionized discovery and audience engagement. MTV was the dominant discovery platform; meanwhile, peer-to-peer music pirating sites like Napster gave a free alternative leading to a severe decline in CD and record purchases. In reaction, artists focused on hit singles with supporting video content to ensure visibility and increased live concerts as world tours became a primary revenue stream.
The 2000s introduced an alternative to pirating that offered ownership (and a sense of integrity) without imposing the burden of the bundle (akin to the “Cable TV” model, a physical album required you to purchase every song, even the ones you don't listen to). At the same time, ad-powered "internet radio" (like Pandora) and early streaming providers like Spotify & Deezer (#FrenchTech!) came onto the scene to offer yet another alternative to ownership without compromising on artist remuneration (*we'll come back to this). To add fuel to this fire, Social Media changed consumer habits around discovery, sharing and content consumption (Facebook, Youtube, Twitter) which once again had an impact on marketing, audience development, and content formats.
The 2010's is by far and away the landmark decade for change in the industry. Offerings across social media, music streaming services and content creation capabilities exploded. Social media went from a niche, user-generated content play to a mandatory marketing channel for almost every business. Perhaps especially so for the entertainment industry. Notably, TikTok serves as a powerful discovery engine for both fans and A&R. But the ability to market through the tool is unpredictable, an algorithm that seems to be calibrated to authenticity.
So what's the lesson here? Artists adapt to the medium and new media formats give room for the next generation. An era like the 90s with a single point of discovery, highly engineered pop and peak levels of music piracy gave rise to a slightly less centralized era for discovery and an opportunity for niche genres to come to the forefront.
What we talk about when we talk about streaming...
"Streaming music, or more accurately streaming audio, is a way of delivering sound — including music — without requiring you to download files from the internet. Music services like Spotify, Pandora, and Apple Music use this method to provide songs that can be enjoyed on all types of devices."
Streaming is the most recent delivery mechanism for music thanks to a confluence of high bandwidth data networks, cloud computing, and the mobile everything nature of the past decade. It feels like commonplace now, but it wasn't always an inevitability. iTunes, for example, originally charged for individual tracks and Netflix famously pivoted from shipping DVDs to your house to serving endless content over the internet. But streaming hasn't only changed the way we consume music, it's changed the music industry as a whole.
Fundamentally, streaming (a stand in for technological advances) has driven change across Product, Distribution and Discovery. These factors are highly interdependent, in the sense that new distribution and discovery can influence a product (i.e. the music itself), or at least the product that rises to the top. Generally speaking, the technology vector points towards decentralization, independence, and abundance, a trend I think we can agree has taken hold in music today. But with change comes resistance from the old guard. Simultaneously, new norms are established by emerging super powers. More than ever, artists have the ability to be discovered and to identify and play to their audience; nevertheless, the promise of sustainable income through streaming alone remains elusive for the vast majority. This isn't so much a new phenomenon, but a conflict with the promise of streaming and the end result.
This quote from Jason Hirschorn, CEO of REDEF, on the diminishing power of labels, is quite telling:
Labels are still important – and by far the best pathway to mainstream success – but their role in the music value chain is continually diminishing and is significantly less essential than it was even ten years ago:
Physical distribution, including manufacturing, fulfillment, logistics, etc., remains valuable, but its importance is in terminal decline
Social media, social music networks and direct-to-fan engagement are slowly disintermediating the A&R process and chipping away at corporate mass marketing campaigns and radio promotional activities
Falling equipment costs means many artists now use or own private recording studios
The concert industry has also become exceptionally streamlined, bearing little resemblance to the hyper-fragmented roadshows of the 70s and 80s
But the rise of streaming hasn't provided the abundance of financial opportunity it once promised for independent creators. Oddly enough, part of the problem seems due to existing terms with legacy labels.
But the streaming services themselves have architected a payout methodology that's worth examining as well. Lots of research has already been conducted and several organizations are pushing for user-centric as opposed to market-centric payment schemes.
My hunch, is that even with modifications in payouts, we will still see frustrations from the rising creator class. Which is why new and emerging channels for revenue will be a critical lever for growth.
The 11th Dimension
Enough about the past. Let's look towards the future, shall we? I discovered a platform called Stage11 that aims to "reimagine music for the metaverse." If you've been following along, you'll know I wrote a piece on the metaverse in which I talked about Travis Scott performing a live show inside Fortnite. Despite some technical limitations (and enormous computing power), it was a smash hit, so it's no wonder companies are cropping up to improve the experience. I was curious, so I reached out to the Stage11 team.
So without any exclusive access, I'll have to make some educated guesses on what they're cooking up. From what I can tell, they appear to be fusing gaming technology with their expertise in live performance to deliver synthetic, virtual experiences unlike anything you could imagine IRL. They work directly with artists to build a digital avatar (using the techniques a basketball player might when syncing their movements for NBA 2K). Here's Snoop Dogg, an early adopter, hooked up to the requisite devices and his resulting digital avatar. Remember how hyped people were when Tupac came back from the dead onstage at Coachella as a hologram? I can only imagine the applications here with a fully digitized, global star for 1:1 interactions and unique concert experiences.
In a blog post from the founder, it becomes clear that the future they envision involves radically new artist/fan interactions and will be powered by web3 infrastructure, that is to say, tokenized and highly participatory.
"Stage11 will harness gaming technology to deliver music experiences that are cinematic, playable and social. Audiences will be able to explore the creative minds of their favourite artists and live inside their favourite songs, to get closer than ever to the musicians they love. They will discover interactive NFT collectibles which they can use to create unique content—alone or collaboratively with friends—reimagining iconic performances and even placing themselves onstage alongside their favourite artists."
— Jonathan Belelo, Founder & CEO
In a world where artists are minting NFTs of their music (see: 3Lau) to share ownership and royalties with their fans and major hits are generated through algorithmic discovery, dance challenges and remix culture (see: Savage on TikTok), it's only logical that the next level of proximity will involve interaction and connection via the metaverse.