‘Tarzan Economics’: The good, the bad, and the next vine

Tarzan Economics aims to switch your understanding of the world from thinking about transactions to thinking about consumption. Will Page argues for around 300 pages that we should all be interested in data that explains how people consume instead of data on what transactions they make. This is a question of economics, of course, but also of many other possible subjects such as psychology, neuroscience, and sociology. Page writes well and seems to enjoy making economics something everyone can grasp. Half the time, as a reader, I didn’t even realise he discussed economic concepts until he is well and truly deep into them. One such example is when Page takes several pages to discuss the concept of ‘fair division.’ He talks about himself coming home late and drunk, watching a program on TV called The Mint – It’s a game show with simple background music. The show itself was evidently an awful rip-off for viewers, but so was the music for the wider community of composers. The simple background music earned its composers lots of money due to the broadcaster’s, ITV, blanket license deal with the PRS. Not only does Page explain ‘fair division’ in an easy to grasp example, he also immediately lays bare the crux of Tarzan Economics: something like ‘fair division’ is only fair if the pool of money received gets distributed in a fair way and there’s lots of ways to game the rules. When those rules refuse to bend while consumers have already changed course it’s time to adapt.

The good

There’s a lot to like about Tarzan Economics, and while Page goes through eight principles in the book I think there’s three that really allow us to hone in on the core of the book.

Unintended consequences

Page keeps asking his readers to think about ‘what might have been’ and ‘what are we not seeing’? Every business decision can have unintended consequences and what Tarzan Economics helps you to do is see them before the fact. I think part of this is accepting that at some point, whatever industry you operate in there will be disruption. But more than that, it’s about thinking about data differently. Page gives an example of Abraham Wald, a Hungarian statistician who worked at Columbia University during WWII and aided the war effort as a part of the Statistical Research Group.

[Wald] noticed that when planes returned from their missions, mechanics were putting extra protection on the fleet based on the location of bullet holes. His pivotal thinking was that this wasn’t the right solution, as these planes were successfully making it home despite being hit. The bullet holes that mattered were the one that stopped planes from returning home. The air force needed to focus not on the positive signals, but the negatives. The zeroes, not the ones. (p. 178)

The idea of counting the zeroes as opposed to the ones, or at least acknowledging their existence, is what can help drive us to accept disruption and benefit from it.

Music as the first-mover in digital disruption

Page could write his book because music was the first industry to face digital disruption on an unprecedented scale. In other words, other industries can learn from music what to do, how to make sure that you grab hold of the next vine and let go of the old, crumbling one. Music definitely took hold of the new vine of streaming revenues to pull itself back up again after the old vine of physical CD distribution crumbled. However, it took them close to ten years to do so. Setting the music industry as an example of Tarzan Economics, then, also shows how slow pivoting can be. The music industry’s saviour was the blanket license style solution for copyright that allows streaming services to pool all music together and then charge a set rate for it. The subsequent pool of money that comes out of that is divided up pro-rata, per stream. It sounds fair, but a lot of people think otherwise. What Page suggests is that this method gave an entire industry a way out. But it needed to count the zeroes to get there. Those zeroes were not the illegal downloaders who major labels sued and settled with. They weren’t even the Napsters and Pirate Bays of this world. Instead, the zeroes were the money left on the table by looking at music as a transactional good instead of a service.

Now, this idea isn’t Page’s. The phrase and thinking behind Tarzan Economics goes back to Jim Griffin, former head of digital at Geffen. In his book, Page refers very briefly to hearing Griffin speak in 2009. By then Griffin had talked about the idea of Tarzan Economics for music – i.e. grabbing hold of the streaming vine – for a couple of years. Nor was Griffin alone or the first. Gerd Leonhard and David Kusek were two others who kicked the music industry towards that streaming vine. In their 2005 book The Future of Music, they, together with Susan Gedutis Lindsay, argued for a world without CDs. Music would flow as free as water, paid for bundled up with other services. Going back further still, and predating Napster, Bennett Lincoff is one person who advocated the blanket license model. In the early days of the internet Lincoff wanted to make sure copyright owners would keep getting their dues while their works spread online. Music can certainly be held up as a successful use case for Tarzan Economics. Perhaps it’s because I’m a historian, but it would help the book to contextualise the specific history of its digital disruption a bit more elegantly.

Creator-to-distribution chain

Page’s insistence on taking the unintended consequences of decisions into account is the key idea I’ve taken from the book. The most prescient, however, is his thinking around the production chain. Digital disruption means that more and more creators look to retain control of their own creations’ rights. In many industries this complicates often quite simple creator-to-distribution chains. ‘Luckily’ for music, rights organisation throughout this chain has been complex since the early days of recorded music. Page goes back to the example of how the French performance rights collective SACEM found its start. That organisation was also the first to institute the blanket license. It’s importance cannot be overstated for Page:

Blankets hold collectives together, as without them gridlock would cause the market to fall apart. I would be impractical (if not impossible) to find and negotiate with those 4 million songwriters around the world independently, yet a failure to secure a license for all of their songs would create a risk of liability that would make trade unworkable. Having 99.9 percent of all the songs isn’t good enough – the value of the blanket is in the completeness of getting 100 percent coverage – removing risk and increasing convenience. (p. 162-3)

The idea of a collective, however, often finds resistance because so much of our (Western) world is based around independence and do-it-yourself. Again, this is especially prescient in music, but also in the creator economy as a whole. That said, people always tend to be capable of pulling together when they have a common goal. Witness the advent of DAOs or other networks.

Either way, going it alone or going it through a collective, what’s important for Page is that the whole creator-to-distribution chain is under strain. It breaks and mends and weaves new paths from start to finish. The main reason it does this is because of the seemingly endless number of competitors for consumers’ attention. Cutting out your label and distributing your own music works if you are capable of finding a large enough audience to make it pay. Radiohead did it with In Rainbows – and are Page’s key example of successfully going it alone – but they were already a world-famous band with a dedicated following. What’s important though, is how the band leveraged a new tool, distribution via the internet, to circumvent old distribution networks and reach their fans more directly. Technologies, platforms and tools, then, are not what draws a crowd or what gets people to pay attention. They can help to achieve that and it doesn’t matter how those crowds form. There can be a gatekeeper, or not. There can be money involved, or not. There can middlemen, or not. There’s a larger discussion to be had around this topic, but Page simply wants to start by instilling the mindset that creators can be distributors, but also vice versa. And in a digital world where anything goes, swinging with the vines will help keep momentum going, crowds growing and attention piqued.

The bad

There were a couple of instances in the book where I felt Page’s arguments fell a little flat. I’ll dig into a couple here, but before I do let me point out that due to the scope of the book it was difficult for Page to go in depth in all chapters. As he writes himself, each chapter could probably be turned into a book on its own. I’ll try to eschew criticizing the book on this, besides my previous point about the broader context of Tarzan Economics and its origins in music.

Builder-farmer dichotomy

The book gets a bit self-help in the end with the builder-farmer dichotomy, but the intent is good because it allows readers to think about the various stages a company can be in. That said, I don’t feel this dichotomy helps in teaching ourselves to think differently, which is one of the purposes of the book. Take the idea into the context of all musicians now having to basically be entrepreneurs, it could make sense to think of yourself and the potential team you want to build around you in this way. At the start, you – the musician, the creator – are the builder, then you move into the territory where you want to reap the benefits of your building and you have to turn into a farmer. But at that point you are, most likely, not alone. You may have a manager, a label, a booker, a distributor. All of them can be at various stages of their own entrepreneurial development. Some will be builders and some will be farmers, but it’s not like Spotify needing more farmers after its IPO. It’s a musician who will go back to building a new creative work which they will then look to farm. Importantly, most of those musicians won’t turn into a band the size of Radiohead who have the sort of fanbase they can, indeed, farm. Remember, there’s value in thinking small, and that requires a psychological framework that is much more intricate than a macro-scale builder-farmer model.

The company line

Page still tows the Spotify company line, especially the marketing spiel about its origins. Moreover, he seems to tow the big-company line in general. Going back to my previous example of the single artist not benefiting from a dichotomy like builder-farmer all that much, it’s generally hard to see how smaller entities, such as a band but also someone like a small beer brewer or a hat maker, would benefit directly from engaging with Tarzan Economics. Of course, Spotify, and other streaming services, extract a lot of value out of a large group of people. Getting hundreds of millions to pay around a $100 per year on music equates to more value than getting a smaller group, say hundreds of thousands, to pay $50 per month. But it grates that Page doesn’t question Spotify or its model. As a reader, then, you would do well to read something like Spotify Teardown alongside Tarzan Economics. At least then you’ll understand that Spotify isn’t really a music company. They are a platform that makes money by offering music listening in a convenient way. As a platform, it may have offered music labels the tools to swing to the next vine, but that’s about as good it gets. In that sense, it’s more like Page’s final example of Skyscanner, which he lauds for getting smaller airlines growth by appearing on top of their search. It reminds me of Spotify’s growing middle class of 43,000 musicians earning good revenue. If, indeed, musicians need to get listeners’ attention against a vast pool of other attention seekers, then for them it’s time to grab hold of the next vine and let go of the streaming vine. Find your own audience and link them together into your own network.

Wait, is Spotify trying to make all musicians creators?

Most of you will know that it’s Spotify‘s core mission to give a million creative artists the opportunity to live off their art. There’s a couple of narratives around this:

  • It’s a lovely goal, but currently only 7500 artists actually make more than $100k per year. Moreover, this means they won’t reach their goal in this century.
  • Spotify isn’t capable of creating value for the vast majority of musicians, nor can they generate profit through music. Therefore, they focus on audio-first and podcasts because they can create profit through that.

In a recent Means of Creation podcast Spotify’s Chief R&D Officer Gustav Söderström spoke about how all of their creator tools are also aimed at musicians. Let’s unpack what that means and how it can play out.

Audio isn’t one thing

Li Jin starts off with a question aimed at the second narrative I mentioned above. She points out that Spotify’s recent acquisitions and new tools point to podcasters and podcast monetization. Gustav is strong in his response that all of these acquisitions and tools are also done with musicians as part of their thinking. I’m immediately drawn to the oft-mentioned quote by Daniel Ek that musicians should release more music, more regularly. Of course, it’s easy to place these two things side by side. However, if we start to think of musicians as creators, then there might be some truth in the idea of a musician getting value out of a new podcast monetization feature.

Musicians are, in a way, the first creators and, in another way, too bound by their copyright tie-ups to be a creator. For a musicians to truly become a creator means that they need to take ownership of their IP. One way of doing this is by broadening the scope of what that is. The more regular ‘drops’ don’t always need to be finished songs, EPs, or albums. This is sSimilar to how artists who succeed at livestreaming havea regular performance schedule or musicians who have a successful direct-to-fan subscription model create regular content. The former don’t always necessarily livestream fully-fledged concerts, but sometimes just jam or sip tea. The latter do livestreams, offer merch, provide access into their creative process and much more. Similarly, audio isn’t one thing. Currently, for Spotify, it can be live audio in Greenroom, a podcast, a song. And each element can be different things again.

Future audio formats

Before I think about what those different things can be I want to point out that during the podcast Li pointed out that not all creators are the same, they exist on a gradient. In a similar vein, not all fans are the same either.

To accommodate these differences Gustav talks about feedback loops and the importance of having them. They focus on live audio versus time-shifted audio. Both of those seem to focus heavily on podcasting again. A great insight is that looking at the development of live audio has shown that there’s a demand to talk from people (like there was a demand to do video with YouTube and the TikTok or how everyone suddenly became a photographer with Instagram). This demand shows there will be more and more creators as formats change and the friction to create shifts. If we then start to blend the gradients of creators and fans together you can see how tools like Anchor and Greenroom can allow fans to turns into creators.

Yet the same is happening in music with the abundance of creator tools and the changing funnel that creates.

Slide from Mark Mulligan’s keynote at Music Tectonics 2020

What you see here is changing friction ranging from production to distribution. Of those 60,000 daily uploaded tracks, I would happily bet that most are home-recorded instead of created and mastered in purpose-built studios. When musician and fan get together, and whether that’s through Spotify’s tools or something like Patreon, and start to create feedback loops the lines start to blur between creator and fan. Moreover, as they get together artist and fans, or simply fans amongst each other, new audio formats can and will create new formats along the way.

Business models and monetization

Whenever talk turns to Spotify and business models there’s a handbreak moment. Should the company not simply pay more to artists. Of course, it’s more complicated than that. On the one hand, Spotify exists to create value for its shareholders. On the other hand, there’s a line of thought that they can only continue to grow that revenue if they also succeed at creating value for their creators. Content is still king. By claiming that musicians are also creators, what Spotify seems to be doing is pulling those musicians into their ring of creating value through IP and ownership. This has two major benefits:

  1. If IP ownership stays with the creators who then monetize through Spotify, the company has diminishing revenue splits with the major labels
  2. If IP ownership stays with the creators they retain control of what they can do with their music/audio

Spotify’s open platform

Spotify is vocal against Apple‘s walled garden approach. Now, through it’s Open Access Platform they seem to put their money where their mouth is, at least for podcasters. But considering the above, the creators that Open Access is for also include musicians. What it might take, is a shift in format, a different type of audio IP that musicians can start to create, perhaps even with their fans.

Throughout the podcast Gustav keeps reiterating how Spotify kind of wants to be an audio browser. In their ideal world their icon is what you tap or click when you want audio, in the broadest sense of that term. By making the platform behind that browser open (and there’s a similar feeling here that I get with Epic’s vision and design), they allow creators to take their music – if they own the copyright to it – and spread it out while having various monetization strategies ranging from ads to subscriptions and royalties.

Abundance versus scarcity

Spotify’s business model, and that of the recorded music industry in general, is all about abundance. We expect all music ever created to be available for a small monthly subscription fee. Yet, there are opportunities abound to create scarcity. From exclusive subscription models to NFTs, there’s plenty to optimize. In the end, it’s all about price discrimination and there’s two ways to do that.

  1. Bundling brings together all music into a single subscription. Bundling often has a negative connotation, but it allows maximization of revenues by letting people pay small amounts for many things with a single fee.
  2. Unbundling then allows maximization of revenues for a single asset or service. There can be a negative connotation here too, for example the unbundling of the hook from the song through new formats such as TikTok videos.

Going back to those gradients of fans and creators, it’s important to focus your strategy when it comes to price discrimination. Spotify has achieved massive scale through its bundled offer. Now, creators can use that scale to offer unbundled access to anything ranging from a live audio chat to paid subscription. The latter assumes that platforms like Patreon will also integrate with Open Access, but I feel that will happen.

Another benefit of unbundling is that it creates scarcity, the value of which has shown in the recent music NFT boom. Perhaps more interesting than the sheer value of scarcity, what the blockchain allows is for cooperation. In other words, many of the things discussed above could easily be transposed to blockchain-based solutions and protocols. While Gustav expressed personal enthusiasm about this prospect – he talked about it in the form of cooperation on a non-trust platform – he did not indicate any movement in this space from Spotify.

In sum

While Spotify remains beholden to the major labels, their sheer scale now allows them to experiment without immediate fear of upsetting their main partners. At the same time, it still seems that if they want to turn a profit they will need to continue to work on ways to diminish their revenue share to those major rights holders. It looks like they want to do this by creating an open platform where creators can keep their own IP and monetize it. At first glance, this seems like a move designed for audio creators only, but Spotify seems adament that musicians should be part of that group. The crude reading of that is that it’s a play to help reduce their dependancy on the major labels by getting to deal with more, and smaller, IP owners. The positive reading is that this is another opportunity for musicians to move away from the old-school music industry and step into a world where they do, indeed, retain full ownership of their work and the accompanying copyrights.

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Communities exchange value, or how no artist should care how much YouTube pays the industry

Music rights holders get paid astonishing amounts of money, but most artists cannot make a living from their art. All the major DSPs love throwing around the big numbers they pay out to ‘the industry.’ Yet, most artists cannot rely on them to put food on their plate. There are, however, many methods that allow musicians to step away from over-reliance on big tech companies or major labels. Most of them involve community, and more specifically community-building.

The big girls

So YouTube paid out $4 billion to music rights holders in 2020 and Spotify, by Music Ally’s calculations paid out more than $5 billion in the same period. In the US, in the first 6 months of 2020, the biggest streaming services together made up more than 85% of total revenues for recorded music. And during the recent DCMS hearings on the streaming economy in the UK, YouTube defended itself by stating that “record labels agree that it is possible we will become the music industry’s number one source of revenue by 2025.” That seems to be a good thing for YouTube more than anyone else as it probably means that even more than 2 billion people will be coming to the service “to experience music each month.”

A major argument that came out of those same DCMS hearings was to ‘simply’ grow the overall pie being paid out by the streaming services. BPI‘s Geoff Taylor, for example put forth that “[t]he total amount coming into the industry should be substantially higher and that would benefit everybody in the chain.” During the hearings, a counterargument surfaced, through BMG, that “the status quo gives the impression it was designed for the convenience of industry players, rather than with a view to the perceptions of artists and fans.” BMG used this point to set up their defence of user-centric payment systems. However, it also paves the way for another argument altogether, something BMG hinted at too in further evidence they presented: the importance of monetizing the artist-fan relationship more directly. And that should be done by building a community.

Focus on community

We’re not new to the idea of community as an important element in artists building out a living for themselves. Just last Tuesday Bas argued that “the one strategy that I feel almost any artist can apply is that of building a community of fans that can sustain you.” This related to DAOs and in my own article about why fans should want to buy NFTs one of the key arguments was that these tokens represent an opportunity for two-way communication between artist and fan. But there’s more to community-building than future-forward web3 technologies. What first of all needs to happen is a shift in mindset. One of the things that struck me in a recent podcast recording for The Daily Indie[in Dutch] is that so few artists actually experimented with building community during the pandemic.

Of course, Patreon, OnlyFans and their like saw fast growth during the pandemic. All the musicians who set up a subscription model or turned to monetize their livestreaming efforts did an amazing job. But for each one of those, there’s plenty others who still rely on their single-single-album release strategy. Why not flip it around? Take Dutch artist POSTIE who is social media first and recorded music second. He posts a video every Sunday and then after a while releases those songs as an album. Another way of putting this is that he doesn’t use social media to drive streams, but streaming services to drive followers.

Image by Alina Grubnyak via Unsplash

The community builders

Let me highlight two people who give some excellent advice on community building. First up is Anna Grigoryan, who writes a newsletter called Community Weekly in which she presents and explains tools to build community. My favorite advice of hers is to find your community mission. That’s where it starts. With the question of who you’re doing what you’re doing for. And then following that question with how you add value for those people. I would also add, that quickly after that, you should ask how your fans, your community, can add value for you. Anna is also very open about her own struggles in building a community around her newsletter. I find this very helpful when thinking about the communities I’m involved with for example.

This is where my next community builder comes in: Jen Lee. I came across her as the community manager from the Means of Creation fans Discord. First thing that happened when I joined the group was that I got a personal note welcoming me and encouraging me to post in a channel. She’s just been interviewed by Peter Yang and that message to me is pure strategy. In the interview Jen puts forward the following idea:

Like building a product, an online community needs to:

1. Exceed user expectations by personally welcoming new members.

2. Overcome the cold start problem by seeding the community with great content.

3. Deliver great UX by focusing the conversation on a few channels.

From these two community builders you have the starting gear to step into the studio. Whether you’ll focus on one of the subcriptions services (Patreon, OnlyFans, etc.), one of the social media (IG TikTok, etc.), the community platforms (Discord, Geneva, etc.), or turn your hand to web3 protocols (DAOs, NFTs, etc.) the basics are the same.

The Call-to-action

It’s as simple and easy as can be:

  • If you’re an artist start experimenting with community building. Do it now and be open with and towards your fans for feedback and interaction.
  • If you’re not an artist yourself, you’ll know them. Help them out by giving them these building blocks.

Together, we can make sure that the focus of the music industry starts to inch away from the shouting big numbers and boasting massive usage stats. Instead, we’ll focus on creating communities where artists and fans exchange value.

Does Apple’s lossless streaming move impair fairer subscription prices?

Apple just announced they’ll be launching spatial and lossless audio, at no extra cost, to all Apple Music subscribers starting in June. Seemingly in response, Amazon announced that they’ll be folding their lossless quality tier into the standard Amazon Music subscription tier. Lossless quality music is $9.99 now.

Amazon & Apple are not music companies

Neither Amazon nor Apple need to make money with their music businesses. They utilize these aspects for greater ecosystem tie-in and can afford to use music as a loss leader. Not even considering Apple’s iPhone, App Store or MacBook business… Apple’s revenue for their Airpods equals the revenue of Spotify, Twitter, Snap, and Shopify combined (2019).

AirPods make more money than Spotify, Twitter, Snap, and Shopify combined

Another analyst puts the 2019 revenue for Airpods at $7.5 billion, rather than $12 billion. Still enormous. Airpods are becoming a platform. With its iTunes Store it sought to get more people on the iPod, which created a consumer lock-in that extended to the iPhone and the App Store. Steve Jobs‘ deal terms for iTunes also had a profound effect on the economics of music – laying the foundation for many of today’s discussions.

Unit Sales Out of the Gate (Above Avalon)

Lossless as a loss leader

Unless Apple and Amazon signed some very unique deals with labels, lossless streaming comes at a higher price than standard quality. That means that for now, Apple and Amazon are deciding to eat the cost in order to tie more people into their ecosystems. Amazon was previously criticized for this in 2011, subsidizing Lady Gaga‘s album sales of Born This Way by discounting it to $0.99:

“The digital retailer used the album as a loss leader to promote their Cloud Drive storage service and paid Gaga’s label full wholesale price for each album sold.”

Apple has been taking aim at Spotify since the launch of Apple Music. That started with rhetoric around how human curation is better than algorithms. More recently it took the form of a letter to artists about Apple Music’s royalty rates. Spotify’s antitrust complaints in the EU about Apple’s App Store practices means Apple faces fines as high as $27 billion. Spotify announced they have a lossless tier coming up later this year. Most people assumed this would come at an extra cost. Apple’s decision to use their $200B war chest to eat the cost of lossless quality audio is very much a move against Spotify.

Growing the pie – undermined?

Spotify had the courage to move first and start increasing prices of its existing tiers. Streaming subscription prices have long been stuck at the same price, losing 26% of value due to inflation. The market has become mature enough to raise prices and that’s something that needs to be normalized in a way similar to Netflix’ price hikes.

Cover image for Here’s How Spotify Can Fix Its Songwriter Woes (Hint: It’s All About Pricing)

Apple & Amazon’s strategy puts that at risk. Two questions to ponder: is music currently sustainable with so many companies relying on revenues from streaming services that are making a loss and are subsidized by tech giants or investors? Can this digital music landscape be sustainable without asking consumers for a fairer price?

Music Ally‘s Stuart Dredge has an optimistic take:

“Perhaps hi-res music’s true value in streaming will be to enable the big DSPs to charge all their subscribers another dollar or two a month, rather than just to persuade a small fraction of them to pay five dollars more a month. If that strategy pays off, today’s news will have been a positive moment indeed.”

I’m less optimistic and think that if this was the strategy, they would have paired the news with a price hike. This is about ecosystem tie-in and hitting Spotify where it hurts in a way that’s likely to impair efforts to normalize fairer subscription pricing.

Why Twitter is better positioned for tipping musicians than streaming services like Spotify and SoundCloud

Twitter just launched a new tip jar feature with greater potential for musicians than those launched on popular streaming services such as Spotify and SoundCloud last year.

A new tip jar

Twitter started rolling out its new tip jar functionality last week. The functionality, which for now is only available to a limited group of creators, allows people to add Bandcamp, Cash App, Patreon, PayPal and Venmo to their profiles via a new button on their profiles. It’s a bit like a ‘link in bio’, but specifically for payments.

Why tip jars ‘failed’ on streaming services

Streaming platforms are not creator services. They focus on monetizing the catalogue-listener relation through ads and subscriptions rather than the artist-fan relation. That means the user experience on streaming services is geared towards what people expect in exchange for their payment: quick access to the music they know, new music, and being able to find ‘music for every moment’.

I’m not entirely sure how these services defined success for the donation feature, but especially Spotify needed a PR win over the past year, so I’m interpreting their silence over the feature as an indication that nothing significant is happening through there. As a matter of fact, it seems that in its newly designed desktop profiles, the feature has been quietly removed. For reference, compare Marshmello‘s profile on mobile and the new desktop UI.

Why Twitter is better positioned for tipping

Social media is where people connect to artists. You may listen to dozens of artists per month, even hundreds, but the commitment of a social media follow is something reserved for those you actually care about. Social media is primarily about what’s new and while you can scroll back into someone’s history, it’s a secondary use case when compared to seeing months or years-old ‘content’ appear on playlists.

Through social media, it’s easier than on streaming services to stay connected with people and introduce them to new ways to support you. By creating a Tip Jar that also includes things like Bandcamp and Patreon, Twitter is reducing the distance between a person being interested in something and actually purchasing it. Any friction in that journey causes drop-offs along the way, so any reduction of friction or journey length translates to real money for creators (see also: merch integrations in (live)streaming platforms).

Expect others to follow suit

The type of direct monetization offered through Twitter’s Tip Jar is part of a wider trend that can also be seen in livestreaming services, the surging popularity of Patreon and OnlyFans, Clubhouse‘s tipping feature, and even the donation buttons in music streaming services.

Twitter will not be the last service this year to roll out more monetization options.

Streaming services: it’s time for Two-Factor Authentication

Scams, fraud, bots and theft: the ugly side of streaming provides a stark contrast to that beautiful feeling of having the world’s recorded music at your fingertips.

What is Two-Factor Authentication (2FA)

You are already using 2FA. Certain accounts, like Google, Facebook, or Apple, require multiple forms of authentication in order to sign in from a new device. This often works by verifying it’s you from another device, or by entering a code sent to your phone number, email address, or generated in an authenticator app.

It adds a layer of security to accounts that makes it hard to get in with just the username and password.

Why don’t streaming services use 2FA?

Popular streaming services like Spotify and Netflix famously don’t use 2FA, although the latter has recently started running tests with it, presumably to tackle account sharing. The reason for not implementing 2FA? Likely because it doesn’t help growth and in fact may hamper conversion rates.

Jorge Castro on developer community dev.to sums it up well through this fictional conversation:

  • Developers: We want to implement 2FA in our platform.
  • Netflix executes: Ok, and how much will it cost us?
  • Developers: Around two months.
  • Netflix executives: Ok, and it will increase the number of viewers?
  • Developers: Well, not really. It is about security.
  • Netflix executives: So, it will not increase the number of viewers but it could be a burden for some customers and it could decrease the number of viewers.
  • Developers: Yes, but it could be optional.
  • Netflix executives: So optional, an option that it plays against the number of viewers and it will cost us time (and money). Sorry but no.
  • Developers: But the security.
  • Netflix executives: We already invested in our security. If our customers have trouble then we could reset its password. It’s their responsibility, not ours.

However building in a little more friction could be beneficial to all… and tackle certain types of fraud more efficiently than a switch to user-centric streaming payments might.

Black market for streaming service accounts

For years, there has been a thriving market for streaming service accounts, with Spotify accounts selling for under a dollar. Many though not all of these are hacked. It’s so common that people commenting on their hackers’ music tastes has become somewhat of a meme and a quick search on Twitter pulls up countless examples.

Vietnamese blogs speculate that black market accounts are what led to Spotify and Netflix halting their free trial offers in the country last year.

This is not an issue that is exclusive to Spotify and Netflix, but there’s a high availability of examples since they are two of the most popular entertainment services without 2FA.

Fake plays, scams, and fraud

Just like it’s possible to buy ‘fake followers’ on social media, it’s possible to buy fake plays for streaming services. Jacking up the numbers can help to game the recommendation algorithm and build fake legitimacy for those looking closely at big numbers (but perhaps not closely enough).

Who cares if that is what someone wants to do? Well, everyone should, because it eats away at the pool of money distributed to all artists. Hackers have been gaming this system openly since at least 2013 in order to generate revenue.

An article by William Bedell from 2015 explains how he was able to do the same. At the time, not only did Spotify not use 2FA:

“There wasn’t even a CAPTCHA or email verification when creating accounts.”

Image by William Bedell.

The lack of better security leads to these types of fraud having to be traced & fixed retroactively, which often leads to streaming services taking music with fake plays down. That sounds good, but there are two issues: 1) we don’t know what percentage of fraud goes undetected, and 2) this opens up an attack vector (want your competitor’s music taken down? Just boost it with fake streams).

Audius (primer article), a new streaming platform and protocol that awards people tokens (called $AUDIO) based on their participation, is also running into this issue. Bots are used on the platform to game the system and get music into the charts. This messes with the platform’s weekly reward system, as WeirdCityRecords on Reddit points out:

“Curators have been robbed by bot users almost every week since the rewards inception (not only in terms of $audio but engagement being buried below bots), and now with a song being clearly botted to #1, it seems like this week 1 artist or possibly more will be deprived as well.”

The track accused of being ‘botted’ to the top outperforms the #2 by over 14 times, despite the artist and account being new to the platform and seemingly not having a significant presence on other music platforms.

Two-factor authentication would make it a lot harder to create loads of accounts like in the examples above, especially if you limit to 1 account per phone number.

Report fraud

Recently, I became familiar with another scam. Unfortunately that was due to falling victim to it on Spotify, though it may also exist on other platforms.

Botnets get employed to report people’s playlists for inappropriate content. This results in the playlist title and description being taken down. Bada-bing bada-boom: it is now easier to be the #1 search result for those same terms on Spotify.

As soon as I reported the erroneous report to Spotify and had them restore the playlist title and description, the botnet took it down again. This repeated half a dozen times over 2 weeks with my playlist existing without a title or description for the majority of the time.

I’m not alone in this and have found various playlists that also seem to be suffering from this issue (click here for an example if you’re curious about Romanian Manele music and here for GTA’s excellent soundtrack). This thread in Spotify’s support forums has other users reporting the issue.

The attack seems to have ended, but I almost gave up restoring my playlist every time it got taken down (I did consider writing a script that would auto-reply to Spotify’s takedown emails, though).

Since playlists are user-generated content, Spotify needs some type of system to deal with reports and make sure content that goes against the terms & conditions is taken down. After the 5th time my playlist got taken down and I asked if they could protect my playlist from the next auto-takedown, I got this answer:

“All user-created content can be reported, and while it may be possible that a report is invalid, all such reports need to go through our official report channel so we can handle them properly.”

So that’s a no. This means that anyone building playlists on Spotify with an unverified account can fall victim to this. Sure, the reporting account may get banned, but if it’s a botnet targeting you that doesn’t matter. That’s problematic, because unlike my hobbyist playlist with 100 followers, there are curation brands and artists with playlists that depend heavily on Spotify. They’re all exposed to this type of attack that seems to rely on either hacked accounts or easily-created free accounts.

Investment without security

People around the world are putting hours of effort into their streaming accounts: building playlists, followings, brands and in some cases companies using their presence. They’re exposed to insecurity.

Even accounts on platforms with better security get hacked, e.g. to misuse the trust someone has built up and run a cryptocurrency scam on followers (as fellow music-tech writer Cherie Hu recently became a victim of on Twitter, which besides Audius and the report fraud above was my third prompt for writing this piece).

Even if a streaming service can reinstate an account after a hack: the hack can damage your brand, e.g. if the hacker changes playlist titles and imagery to something offensive or scams, or just makes it impossible for you to keep running your playlist brand due to repeated reporting. If you enjoy services’ algorithmic recommendations, a hacker’s temporary account takeover can mess that up for you also.

Two-factor authentication is a basic standard for security. Maybe it’s time for streaming services to give it some priority and prevent fraud, scams, and theft.