✘ Revenue splits and revenue shares. What's actually fair? And who decides this?
And: Nintendo streams two concerts - Animal Crossing & Splatoon 3; Spotify's obfuscation of music; The new-found power of sync licensing; Onchain music as an obsession
A couple of weeks ago, Twitch announced how it’s cutting its revenue share from a 70/30 to a standard 50/50 across the platform for its creators. The platform had quite a bit of backlash, both on Twitter and in tech media - with The Verge headlining that the company has lost its soul. Twitch’s line is that they offer more diversified routes to revenue for creators - read ads. And the counterargument is basic and strong - without the creators nothing happens on Twitch. This got me thinking about revenue shares in a broader entertainment setting. In music, we’ve just had the bodacious case of Four Tet vs Domino Records. In case you missed it, this is the short version:
in 2001 Four Tet signed with Domino with an 18% royalty rate for sales of records in a pretty standard for the time life-of-copyright deal
in August 2021 Four Tet sued Domino for damages of ₤70k and a 50% rate on streaming royalties, because a stream is a stream and not a sale
in November 2021 Domino removes the three albums Four Tet released through them from all DSPs
in June 2022 Domino settles with Four Tet and recognizes the 50% royalty rate on streaming and downloads - in other words, streaming is a license instead of a sale as vinyl, CDs, cassettes are.
Unlike the Twitch creators, Four Tet is overjoyed to get a 50/50 rate on his streaming royalties. Of course, I’m kind of comparing apples and oranges here, because the label is actually the one who has a relationship with, for example, Spotify as the master rightsholders of these three Four Tet records from the early 2000s. And Spotify shares roughly 70% of its overall revenues with rightsholders (so including the master recording owner, the publishers, the songwriter). That’s that 70/30 split again. And yet, these apples and oranges blend together as well.
Let’s look at some other examples, too. Let’s call the first one the pears, or the game developers on third-party platforms. First up is Roblox, a platform we all know from the many concerts and music events that take place there. But it’s also a massive platform for developers who create worlds in Roblox and earn revenue through them by players interacting there.
Here, it’s suddenly the other way around with the developer - the creator - getting almost 30%, the platform getting close to 47% and the stores getting close to 24% of all revenues. In other words, the simple act of allowing a large audience access to an app gets almost the same share of a single Dollar, Euro, etc. as those developing the worlds that make that app interesting. It’s good to note that Roblox stands out here, as the blog on Konvoy makes clear:
“This $0.29 is significantly worse than Steam ($0.70-$0.75), Epic ($0.88), GOG ($0.70), Google ($0.70-$0.85), and Apple ($0.70).”
The other gaming platforms, then, are back at that 70/30 share. Is that really so common then? There’s other examples, of course, such as the almost funny Mr. 15% for agents in various sports. But when it comes to a very broadly defined creator it seems that 70/30 is an established split.
So much for the pears, what about the Web3 - let’s call these the tangerines? And why is music different? Let’s go back to the classic music business stuff. Remember when Kanye dropped his contracts on Twitter? Similar to Four Tet, he was basically trying to get his copyrights back on his first albums, but the label - UMG by then - wouldn’t sell. Unlike Four Tet, an artist the size of Kanye was on a pretty sweet deal for his later records. Big advances and from the original 14% royalty rate, he went all the way up to 22%. He wasn’t bad off, but he didn’t own the rights to his first five records and he wanted that, too.
Kanye was doing better than most other artists with his 22% royalty rate, but it still pales in comparison to these other creator platforms. Newer music platforms like Bandcamp also go into a vastly different direction. They take 15% on digital sales and 10% on physical sales. They’re basically a sales platform, but we can ask if a label is that many percentage more than that nowadays.
When we then move into the Web3, it becomes even starker. The biggest NFT platform, OpenSea, takes 2,5%. Rarible, another marketplace, also takes 2,5%. Not everyone is the same though and SuperRare takes 15% on primary sales, for example. Nobody in this ecosystem, though, gets near the 30% mark, let alone 50% or 80%. Of course, we’ve had - up until recently - very high transaction fees for simply doing stuff on the Ethereum blockchain. These gas fees went high and wild, but a combination of the bear market with the optionality of Layer-2 blockchains have brought that down.
On the one hand there seems to be a tendency for a platform in the broader creator economy to use a 70/30 split in the favour of the creator. On the other hand, it’s always the platform that seems to determine that rate. In the Web3, we see something totally different, partially because platforms tend to be less opaque than in the previous Internets. On top of that, if a platform like OpenSea can get away with 2,5% and even a Bandcamp only takes 15%. One major difference, perhaps, with a platform like Twitch is that they also need to maintain their service for everyone who uses it for free - both creators and viewers. Or, another way to look at this is by saying that it’s really difficult to run an ad-driven business at scale while it’s perhaps easier to run a transactional business at a smaller scale.
But back to the point of who decides the split. If we take a step back and look at it from a distance, the Web3 offers two main advantages:
The ability for creators to influence or set their own rates - thinking about secondary markets here, too
A much less opaque structure, due to the open nature of the blockchain, thus allowing creators to control how they share and sell their work and steer away from anyone who uses a prohibitively high rev share rate.
A final note, here, about data. With all the major platforms that we know so well - from Roblox to Twitch to Bandcamp - it’s the platform that owns the users’ data. In the Web3, this is different. We all own our own data and it’s this provenance that forms the basis of vastly different relationships between artist and fan, creator and supporter, craftsperson and buyer.
🎧 Spotify keeps making it harder for me to listen to music (Russell Brandom)
“[T]here’s a business logic behind what Spotify is doing. There are only so many people who will pay $10 a month to stream music, so if the business is going to keep growing, it needs to find new things to sell. Rather than start from scratch in the podcast and audiobook business, Spotify decided to leverage the 433 million people using its music app, figuring that if even a fraction of them converted, it would kick-start the new ventures.”
✘ And don’t forget it’s also a different revenue model for Spotify which also immediately means that they will have less ‘listening time’ to distribute to music.
🎮 Nintendo is streaming two concerts from Japan this weekend (Chris Scullion)
“The first concert will be the DJ KK Paradise Mix, based on music from Animal Crossing and its music-loving dog KK Slider. This will then be followed by a Splatoon 3 concert, based on the music of the in-game band Deep Cut. Nintendo’s Japanese description for the event states that “the characters DJ KK and Deep Cut that appear in the game will perform” during the show, though it isn’t yet clear how this will be achieved.”
✘ This is quite something, as Nintendo is notorious for not pushing the music from their games out at all beyond the games themselves.
💎 Future Tape Wants to Make Onchain Music an Object of Obsession (Zora)
“The idea is that with Zora’s backing, Future Tape can create a universal standard for music NFTs from any platform or blockchain. The app was born from the simple desire to make onchain music easier to listen to on a phone, but also the more ambitious bid to pool together content from each of these platforms while playing to the strengths of each. Rather than optimize for casual listening, Future Tape is built around making music feel like an object worth obsessing over.”
✘ Basically, it’s a player that aims to achieve the same thing music in the Web3 should be all about - extra feeling for the music.
🆙 Music Synch Revenue Is Growing Faster Than Ever (Glenn Peoples)
“Film and TV deserve most of the credit for synch’s recent upswing, though. And as the streaming wars between Netflix, HBO Max, Disney+, Peacock, Paramount+, Hulu caused a boom in original content … What labels are earning from synch could be even greater than what the RIAA reported. A source familiar with how these revenue streams are classified says artist performances on Roblox don't count toward synch revenues but licensing revenues for games like Grand Theft Auto do.”
Check the full RIAA mid-year report here.
🌅 Syncing or Rising? How Synchronization Fees Are Evolving (Eamonn Forde)
“At the top end, there can be phenomenal sums to be made from syncs which can then have a profound impact on streaming income. Yet there are concerns that, further down the pecking order, sync fees are being frozen or reduced, with the deal terms simultaneously being extended so that syncs are working through longer terms and across more platforms for the same (or even less) money.”
✘ There’s an argument that sync rights will present themselves as the biggest opportunity for the music industry in the coming years. Basically, the metaverse is a place where audio will be brought together with visual every step of the way. It’ll be interesting to see how the copyright deals and laws develop to keep up (or not).
My colleague Carina created a playlist with all the amazing music that the orchestras we work with over at Symphony will be performing in our Symphony Night Live productions. If you think you might like classical music, this is a great playlist to get to know more. And if you would like to help me out by trying out our platform, shoot me message.