✖️ The virtuous, or vicious, cycle of bundling and unbundling in the attention economy
And: What's lost when Sony owns AWAL; A Kanye West fiasco; The difference between Web3 and the metaverse; Major music companies in a race to sign Web3 talent
Wouldn’t you love to be the next Netflix for music? Even though Netflix has last month posted quarterly results that meant the stock is down quite strongly, it’s still a great business that a lot of companies aspire to emulate. Seemingly on their own, the subscription video-on-demand service has upended the traditional pay-TV model. What’s more, they now operate on such scale that everyone who has access to IP in the form of series or films has started their own streaming service. The video streaming pie is massive and Netflix seems a clear long-term beneficiary - and trust me, there’s no such thing as ‘the streaming wars.’ And yet, they don’t turn a profit. But that’s okay, because their value is based on their subscribers and what they’re worth. Which is why those disappointing quarterly results impacted their stock price so heavily. The question looming over Netflix is: is it becoming too expensive - both in marketing terms and content costs - to attract new subscribers and is that cost no longer offset by the lifetime-value of new subscribers? That is, however, not the question I’m specifically interested in here. My question centres on scale and what bundling and unbundling means at various levels of scale and attention for individual musician-creators.
What is a Netflix for music anyway?
So the subscription-based streaming business has become a great economy in the past 15 years. When looking at the music business the obvious first choice of comparison to Netflix is Spotify. And while it’s another thriving subscription business - which again has trouble posting positive results - it’s a very different business because it’s an audio business. This is probably why, even with Spotify going to all audio, instead of just music, recent comparisons bring the streaming service together with platforms like Instagram or TikTok. In a way, Netflix has been a major influence here as well. Netflix CEO Reed Hastings famously said their main competitors aren’t other video services, such as HBO, but instead he brought up things like sleep and Fortnite. This fits neatly into what Spotify is doing with its focus on audio - all these companies vie for our attention, of which we have a limited amount to give in a day. A more diversified offering within a single platform potentially means people spend more of their attention on that platform.
Okay, so if simply having music and a subscription service isn’t enough to become a Netflix for music, what do you need? Video might be a good start. There’s several music-driven video-on-demand services out there and many of them have had the pleasure of being called the ‘Netflix of x’ by one trade publication or another. I’m thinking of services like Stingray Qello and QwestTV. While both are great services where you can enjoy many amazing concerts they simply miss the scale to actually be considered a Netflix for music.
What these two services have done, however, is bring together a great number of videos in one platform. Qello has everything from Queen and Pink Floyd to David Guetta and Adele. Qwest brings together all the jazz, and more, you want from John Coltrane and Ella Fitzgerald to Ibrahim Maalouf and Makaya McCraven. In a way, they’ve seen the unbundling of the pay-TV package and taken it unto themselves to bundle a lot of music together into a single service. This is, of course, very similar to the audio subscription services. In the world of subscriptions, people expect to get everything they need within their subscription. But there’s more to the Netflix model than just bringing great video content together in a single subscription, it’s about grabbing attention and keeping it.
Bundling and unbundling and bundling and unbundling and bundling, creator-style
Within the media world the cycle of unbundling and then bundling again over and over is continuous. At some point, services start competing by offering everything you could ever want within a single subscription. Lots of households all over the world have a broadband-tv-phone subscription all wrapped up in one. Nowadays that also often includes Netflix and Spotify. Major tech companies also tend to bring their various services together in a bundle, just look at Apple One. There’s always a breaking point, however, where the consumer will get lost in the overkill of content at their disposal. This is when niche and highly-curated services start popping up, or when companies start offering consumers to only pay for what they actually use. In the TV world, for example, this leads to a-la-carte TV channel offerings. In streaming this leads to things like Mubi, which simply curates a single new film each day.
There’s a similar thing happening already in the creator economy at large and the impact of this is felt within the music industry specifically. The bundling that I’m talking about here is the bundling of lots of different activities into one single creator’s business model. The ideal of the creator economy is that by simply pursuing your passion you can earn a living. Do you like to travel? People will pay you to create those highly engaging travel videos on Instagram. But it’s not all sunshine, creators burn out on a regular basis, and often at very young ages. They key to preventing that burn out seems to be to diversify your income streams and move away from a dependency on social-media algorithms. So we see famous influencers like Mr. Beast start a hamburger company. In a similar vein, Shelby Church now rents out a house via AirBnB. Both of these examples create passive income for the creator involved.
In a way these creators create a bundle of engagement for their fans. We see something similar with Ye and his Donda2 stem player. My problem with all three of these examples is that these creators had massive followings before they diversified their offerings. A 1% conversion of millions of people is still a lot of people. Over at Trapital, Dan Runcie has a great critique of this exact tension of scale in the direct-to-consumer business. In a way, these influencers even resemble Netflix, because they already had a massive database of US customers who they knew loved to watch long-form video content. When they moved into streaming, all Netflix had to do was convert these people into using their broadband connection instead of the US Postal Service to watch what they wanted.
Early versus later stage artists’ bundling
There is, however, another tension at play here and that’s the one between the stress on the individual who needs to bundle a number of activities to get people’s attention and the individual who can bundle towards a diversity of offerings to decrease stress. In other words, bundling for some early-stage music creators adds a load of responsibility onto their shoulders to engage their fans through a number of channels and with continuous output of content. At the same time, bundling for later-stage music creators can allow them to focus their attention on what brings them the most value, both economically and artistically.
In a way, then, the current conundrum that Netflix faces in terms of subscriber acquisition and life-time value of those subscribers and how to balance that versus their overall expenditure is the question I’m putting in the context of the musician-creator. Being the Netflix for music might just mean that at any scale you face the same path as the streaming giant:
find lots of customers fast;
make sure they have content to stick around for; and
create ways to distinguish yourself from your competition
The first part is tough because once you’ve made your music you need to find people to listen to it. It’s not so much a question of ‘if nobody hears your music does it really exist?’ but more a question of ‘if you can’t find anyone to listen to your music can you afford to give it a second/third/fourth go?’ So if you get through that, that’s when the really tough part starts. This is where a musician needs to do the equivalent of Netflix spending billions of Dollars to find those series and films people will keep their subscription for. This involves questions like:
will you focus on fostering a community?;
what kind of content are your fans interested in?;
how much of yourself are you willing to put into this world?'; and
which channels and platforms, and how many, will you put your effort into?
This second stage is where the bundling is hard and takes up energy. Get through that, however, and it might be that you don’t go the Netflix way of hitting poor quarterly results in terms of new subscribers. Instead, artists might be able to push into new avenues that allow them to shift the focus away from pure content creation. Here, bundling is about creating different revenue streams for and through the fans gathered around an artist. These fans don’t have to number the follower counts of a Mr. Beast or Ye, it’s fully possible to find 100 or 1000 fans who will like an artist and the way they distinguish themselves from all those other creators. At that point, bundling and then unbundling activities can become a virtuous cycle. Before that point, however, it’s very much a vicious cycle that asks of the broader music ecosystem to protect the musician-creators that are in the middle of that vortex.
😟 What's Lost If Sony Owns AWAL (David Turner)
“My skepticism of music distribution, as a business model, is that unless it’s operating at a massive scale, it’ll always face unshakable competition from deeper-pocketed major labels who aren’t running on a thinning pool of venture capital money. Sony’s purchase of AWAL won’t jack up the price of your Spotify subscription but it further limits the music on Spotify, or any other major streaming platform, only being distributed or signed by Sony, Warner, or Universal.”
🙊 “Plagued with Sound Issues, Kanye West’s Donda 2 Listening Event in Miami Was a Star-Studded Fiasco (Celia Almeida)
“One has to question when the fans in the stands, the journalists covering his every media manipulation, and the collaborators who show up for him will quit rubbernecking, grab a bucket, and put out the flames.”
🤹♀️ The Important Difference Between Web3 And The Metaverse (Bernard Marr)
“Perhaps most obviously, cryptocurrencies could form the foundations of economic and monetary systems in the metaverse. If the metaverse is a digital equivalent of the real world, then it’s pretty likely that people are going to want to shop, earn money and establish businesses there.”
⏩ A Regulator Asks My Advice on Blockchains for Musicians (Ted Gioia)
“My dream is a system of forms and disclosures—with simple boilerplate language—that a musician can read and sign before selling tokens to a fan. It shouldn't take more than 30-60 minutes to do all this. The fan would also receive a disclosure, preferably something in easy-to-understand language that fits on a single page—maybe like the terms and conditions when you sign up on a new web platform.”
🏁 The major music companies are in a race to hire the best Web3 talent – before media’s biggest companies beat them to it (Murray Stassen)
Facebook, Disney, Spotify and indeed YouTube’s Web3 plans tie into the wider tech, media and entertainment business’s current fascination with virtual worlds, goods, properties and characters … This is particularly true in the music business, where the earning potential from metaverse projects and associated Web3 categories like NFTs and crypto is getting too significant for most artists and the three major music companies to ignore.”
This is the kind of music I need more of in my life. It may have taken two years to create these five tracks, but it’s so good. Every beat is perfectly positioned. Every melody floats around and envelops the lyrics just the way it should. And MATTIE’s voice is poignant, present, and powerful.