Tag: blockchain

The community-owned rave: event organisers as DAOs

Posted on | by Bas Grasmayer

This piece explores the intersection of underground rave culture and Web 3 concepts like decentralized autonomous organisations.

Lately I’ve been thinking about an idea I had pre-pandemic. I wanted to set up a local rave night to fill a gap I perceived in Berlin’s nightlife. I mentally prepared myself to do all the heavy lifting involved in setting up a new club night – something I’d witnessed from friends taxiing artists around, losing money on events, having to staff the entrance, handling logistics, and of course doing the promo. The pandemic put all those ideas on hold and helped generate a new perspective on things.

Goal-oriented

I previously explored what artists’ fanbases can look like as blockchain-based decentralized autonomous organisations (DAOs) – I recommend reading it if you’re not familiar with DAOs. One important aspect for DAOs is that they should have a clear reason to exist, so that people have something clear to organise around and identify new initiatives.

For events, that goal is pretty straightforward: for example to run a number of events per year (e.g. 6, 12, 24) with a clear musical and subcultural footprint (e.g. hyperpop meets queer hardtechno).

There are lots of activities to take care of, such as:

  • Artist bookings
  • Travel & accommodation (unless fully local)
  • Artwork & design
  • Promotion
  • Venue decoration
  • Tickets & admissions

Many of these require funds and when starting out there’s always a risk you won’t break even. DAOs can mitigate that risk and distribute the heavy lifting surrounding these tasks to a passionate community.

Community-owned raves

My first association with the above words would actually be ‘free party’ culture and teknivals of the 90s, as pioneered by Spiral Tribe (artwork above). They would travel country & continent with soundsystems and throw public raves that were free to attend (and usually illegal). The idea was that by being at the rave, you were not just audience, you’re a participant – a similar mindset to Burning Man‘s ethos. The teknival scene still exists today, by the way.

But what would a community-owned rave look like if it could somehow be formalized?

  • Persistent community. Most events have an audience that reconvenes and persists through brief gatherings. Part of the audience will be ‘regulars’ and part will be newcomers. It can be hard to know which part is which and to really feel connected. By making sure the community is organised outside of the context of the occasional event, the community can exist in a persistent state and experience connectedness daily. (see also: Why local is the answer to a future of new normals)
  • Shared outcome ownership. The community puts together the events. This may be a representative democratic process, where people get elected to a board or special crews, e.g. for artist selection, brand and artwork, and perhaps various ongoing activities like music releases, mixtapes and podcasts, meetups, listening sessions, etc. This way the output and outcome is a collective responsibility.
  • Tokenized. Participants should be rewarded. Most underground events don’t make a lot of money, and don’t have a goal to make lots of cash, so rewards for contributions could come in the form of tokens which give people the ability to participate in the governance of the DAO or get access to other perks. Event tickets could represent a token, which gives you a way to essentially peg token prices to fiat money and automatically make attendees community members (I’d make sure to only sell 1 per person though – maybe translating actual attendance to tokens, rather than just holding the ticket. I’d also carefully think through the implications of attendance always representing 1 token).
  • Proposals & voting. People can submit proposals for artists, event decoration, and peripheral activities. They can request budgets in the form of tokens which they can hold (for governance or to let them accrue value) or cash out in order to finance their activity.

The exact mechanics would depend a lot on the community and what it wants to incentivise. For example, in some contexts you might want to encourage people to spread the word by sharing photos of the events, but some events might enforce strict no-photos rules so that people can be themselves without the pressures of being seen on social media (or worst case: becoming a meme).

Not public, not private, but community events

One example of how this might work can be gleaned from the Friends With Benefits (FWB) DAO, which is a creative community that requires people to buy $FWB tokens in order to participate. It then rewards tokens, as described in the bullet points above, for certain activities. While I personally would avoid throwing up high economic barriers to participatio, for the sake of inclusivity (which is also why many events in Berlin have flexible entrance prices, e.g. minimum 5, but 10 if you can afford it), FWB has been able to create an economic space where members can reward each other with tokens that can be cashed out in order to finance projects. (I don’t mean to imply FWB in general is not inclusive – it’s just a general concern I have with regards to onboarding people into tokenized communities)

This has translated into a real-life event in Miami recently, with DJs like Yves Tumor and Jubilee, that you could only attend if you held a certain number of tokens. For those from out of town, the community created a city guide which can be unlocked in exchange for tokens. It’s an excellent example of how communities can create value for other members either through direct activities (events) or peripheral (guides) and how that value can then flow around the community. All of this didn’t exist a year ago, so what they’ve been able to achieve and fund is incredible.

Stronger together

Many events already function as decentralized autonomous organisations in informal ways. Connecting it to the Web3 allows the community to persist across the metaverse and leverage NFTs, communal creation, and channel the unique talents of all involved.

It gives a certain predictability too. If you have a big community around your event, it can be tough picking artists for your line-up, since you only have so much time per night, which means not everyone will get to play. If the community becomes self-sustaining and energized, it should be easy for the organisation to make a risk assessment and set up more event nights.

It could even extend its footprint, so that people in other cities can set up local chapters under the same brand. Over time, the DAO becomes representative of a subculture and may see artist exchanges and people traveling to each other’s cities to meet community members there and experience the local chapter’s events. At scale, the DAO and the new subculture might become synonymous, though it’s also possible to think small and keep it to a small, local community of fans & friends.

The choice is yours – and theirs.

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Decentraland

The Decentralized Autonomous “1,000 True Fan” Organisation

Posted on | by Bas Grasmayer | 1 Comment on The Decentralized Autonomous “1,000 True Fan” Organisation

Decentralized ownership registries helped enable digital art’s NFT boom of the past year. Next, blockchain, the distributed ledger technology, will underpin fanbases and the way artists build careers, teams, and engage with industry infrastructure.

Can you put a fanbase on the blockchain? Here’s what it could look like.

Decentralized Autonomous Organisations (DAOs)

If you spend some time in Web3 circles, you will encounter the term DAO. It refers to organisations that utilize blockchains’ distributed nature and (often) smart contract functionality in order to govern themselves.

These organisations are grassroots, meaning that there’s no central leadership and the members of the organisation decide what things they want to incentivize, and what rules they want to create. They allow people to pool funds, govern those funds and use them to coordinate or incentivize communal efforts and contributions. 

At this point there are way too many DAOs to give a comprehensive overview and they come in many forms. For example, Stake Capital’s StakeDAO allows its members to earn stakeholder revenue share for their participation, for instance by supporting the Discovery and Creator nodes Stake Capital runs for the Audius network, a decentralized music streaming platform. Another well-known DAO, with the stated aim to push culture forward, is Friends With Benefits ($FWB) which requires new members to invest into the DAO by buying membership tokens, so that the community is invested in itself (you can read more about how they govern these funds here and what types of things you might expect in the community here). MetaCartel is a community of people that funds “post-hackathon” projects through grants. Decentraland, pictured above, is a game akin to Roblox and Second Life, but is governed by a DAO.

The Mint Fund, which was founded to fund underrepresented creators’ NFT minting costs, aims to become an “artist-owned curation DAO”. Mat Dryhurst (@) suggested a decentralised structure for SoundCloud in 2017, when people feared the company was running out of time (and cash) as it let go a large chunk of its staff. Back then the concept was novel, but it’s quickly becoming mainstream.

There are even tools like Aragon, Colony, and DAOhaus that make it relatively easy to set up a DAO in which the community participates in the ownership and governance of what’s created through the sum of their work, contribution, and participation.

Image via aforementioned Aragon.

The Decentralized Autonomous Artist

Not everyone’s music will drive millions of streams, not everyone is able to tour constantly, not everyone will go viral… but the one strategy that I feel almost any artist can apply is that of building a community of fans that can sustain you (sometimes referred to as “1,000 true fans”). There’s benefits to thinking small.

How can a fan community contribute to an artist’s success? Well, it depends on the artist, but they can financially sustain the artist through various types of patronage, they can amplify what an artist is doing by increasing their reach and leveraging network effects, but there are also other types of contributions that may be framed as collaborations, fan art, or other. In fact, when the community includes the artist and ‘artist team’ (ie. the business roles surrounding an artist), you can disintegrate some of those roles and place the associated activities inside the community through incentive structures.

What if the BTS Army was a DAO allowing people to either purchase or earn $BTS tokens in order to unlock various types of experiences and opportunities that are completely fan-organised? BTS wouldn’t even have to play a role in the DAO, though if what the DAO is doing is sufficiently valuable (which it would be), it may decide to let people trade $BTS tokens for tickets to concerts, livestreams, merch, or NFT collectibles. BTS can then choose to sell those tokens for fiat money (e.g. dollars or won) and cash out or retain $BTS and take a more active role in the DAO (token holders are often rewarded with increased influence in the governance of the DAO, corresponding to the amount of tokens they hold).

Since it can all be logged to a blockchain, much of this experience becomes portable beyond any specific platform, allowing the fanbase to organise itself wherever it prefers. This way experiences can travel beyond the walled gardens of Facebook, Apple, or virtual platforms and into the so-called metaverse in which the DAO and its members own their data and collect the value from it. Work is also being done on making various blockchains more interoperable, so things will be less locked into blockchain ecosystems than they are now.

Instead of communicating with an audience as followers on a social media platform owned by others, you can involve them directly in the organisation of your fan experience in a transparent, open, grassroots way through DAOs. The bonus: community ownership. We’ve seen countless artists open up Discords and other types of communities next to their social media presence – what we’ll see next is the Web3 version of this: decentralized autonomous fan organisations.

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A mode of growth: NFTs, ownership, copyrights, blockchains

Posted on | by Maarten Walraven-Freeling | 2 Comments on A mode of growth: NFTs, ownership, copyrights, blockchains

Earlier this year, when music NFTs entered hype-stage, one of the promises was a fairer distribution of revenues to artists. The hype came from big sales with 3LAU, Grimes, and even Kings of Leon. However, none of those NFT auctions actually included ownership. The best known example of copyright exchanging hands as part of an NFT sale was with Jacques Greene, and he actually had to sidestep the NFT to make that happen. At that point, I became skeptical of the role NFTs could play in broadening the possibilities for artists to earn revenues or broaden their income streams. Of course, as part of a smart contract attached to the NFT a certain percentage of future sales can revert back to the original creator of the NFT (which isn’t even necessarily the artist). That’s great, and I can see the benefits in that. Every time an NFT gets resold, the original creator keeps getting a kickback. Assuming the asset appreciates in value over time, that’s a good deal. And yet, that’s just one small piece of the copyright puzzle. What can NFTs, and blockchains more generally, mean to different copyrights? We enter a world controlled by collective management organizations (CMOs), and those have their own set of important problems.

Simply put NFTs offer two roads, a two-pronged fork if you will, to advance discussions about copyright and improve the way artists benefit and earn revenue from their work:

  1. A world without copyright as we know it. No CMOs. Instead, everything is organized through blockchains. I’ll explain why this is a realistic possibility by drawing on the theories of economist Carlota Perez.
  2. A world where NFTs and blockchains get incorporated into the existing copyright structures. For this we need metadata and the first indicators are out there that this will be developed.

Blockchain-controlled copyright

Imagine a world that has done away with traditional financial systems and which has instead replaced those with decentralized financial systems based around blockchains. This is a world where, for example, the Ethereum blockchain has fulfilled its potential, where it has become a store upon which and through which people build applications and provide access to them. The revolution of the blockchain and the associated NFT has reached both maturity and mainstream. If we look at Carlota Perez’s theory of how technological revolutions happen we’re at an interesting juncture right now. Looking at blockchain through Perez’s wave of surges [also related to the Gartner Hype Cycle], there’s the explosive growth surge, which characterizes itself by opportunity, innovation and new modes of behavior. In this surge, there’s a need for new infrastructure and for shifts in paradigms. In this phase there’s a lot of speculation which in turn drives the economic growth of the new technology. In a sense, blockchain has been through this phase, while as a smaller-scale technology NFTs are right on top of this surge.

The second phase Perez describes is the golden age. This is where the boom becomes long-lasting and where we can speak of a mode of growth. Perez characterizes this as follows:

“each technological revolution brings with it, not only a full revamping of the productive structure but eventually also a transformation of the institutions of governance, of society and even of ideologies and culture.”

Carlota Perez, Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages (2004), p.31

Interestingly, Perez published her book on this idea shortly after the ‘dot-com bubble’ burst. This bursting bubble and the subsequent long-lasting boom of internet culture, finance, and governance is part of a trend that occurs every 50 to 60 years according to Perez. If we see ‘blockchain’ as the next, or current, mode of growth, this cycle is quickening. And to understand the realistic nature of a near future regulated through blockchains we do need to see this revolution as a mode of growth. When it comes to copyright, though, we are at the very early stages of creating new infrastructure. In the intro I mentioned the Jacques Greene NFT which included the publishing rights to the underlying song. While Greene organized this transaction outside of the NFT, Bluebox is looking to incorporate various aspects of copyright into the NFT smart contract. The idea behind Bluebox is to create 100 NFTs per song, each representing 1% of the underlying copyrights. The artist can then decide how many of these NFTs and thus how much of their intellectual property they want to sell. In the same breadth, any fan, or investor, can decide to become owner of one to several percent of a song. Bluebox is built on the R3 Corda network and currently is a kind of walled garden. In other words, it has the ability to both sell the copyright and organize the flow of royalties, as per Lee Parsons, CEO of Ditto and co-founder of Bluebox, in MBW last month.

As the Corda network opens up to more public blockchains, such as Ethereum, it will be interesting to see if, and how, there can be a mix of NFTs from one blockchain-based marketplace to the next. It’s important, however, that there’s an example of what it means for copyrights to be organized through a decentralized database. It’s one step towards a better infrastructure, more inclusive governance and a more artist-driven royalty structure.

The need for Metadata

I get that a fully-fledged decentralized system for copyrights might seem far away, even if we see the current NFT hype as a small part of the boom of blockchain. So what would it mean for NFTs to be incorporated into current structures and systems? Most importantly, this would require metadata. And this recent announcement from OpenSea made me hopeful that this isn’t actually too far away from happening.

First and foremost, this new set of metadata allows NFT creators to make much more dynamic digital assets. However, the addition of more metadata fields within the code of the NFT also opens up a route for tokens to be matched with broader copyrights and licensing organizations. I recently wrote about how certain independent management entities (IMEs) are working with blockchains to prevent unallocated royalties. If we take this use of blockchains one step further we can envision a shared database of contracts that will allow songs to be tracked throughout its various usages: in-store, through DSPs, sync, remix, etc., etc. Somewhere there needs to be a piece of metadata that is shareable and verifiable each time a song is used.

Some IP lawyers have argued that to allow security in this chain of sharing and verification only the original copyright owner – they of the intellectual property (IP) – should be allowed to mint an NFT. So far, however, NFTs are closer to other collectibles and, for example, photos. Both of those allow someone who doesn’t own the IP to create a variation of it, like a card or a print, and earn revenues from this. This is one reason why music-related NFTs haven’t yet included transfers of copyright ownership. Music is already made available as a digital copy and has a set of complicated rights attached to it to make sure that rights owners get paid when one of those digital copies is used.

Which brings me back to the issue of the metadata. Tracking a digital copy is difficult, especially if not all elements where its used work on the blockchain. This is why Bluebox works so far, because it operates as a walled garden where it can control and track and verify. A next step could be to move music-related NFTs into a license such as the one attached to Cryptokitties. Dapper Labs introduced the NFT license which allows owners of to “commercialize your own merchandise, provided that you aren’t earning more than $100,000 in revenue each year from doing so.” While this sounds good, much of it rests on using other marketplaces that can “cryptographically verify that you are the owner.” And while this Dapper Labs NFT License allows some form of monetization through merchandise, when we look at YellowHeart’s, the marketplace known for the Kings of Leon and XXXtentacion NFT sales, terms of service simply do not allow for commercial use outside of reselling the NFT through a marketplace that allows for cryptographical verification.

If, then, the fully decentralized system for copyrights rests on the broader adoption of blockchains into the world of financial transactions, or even see it supplant those centralized world, it might be easier to find ways to track copyrights through metadata attached to smart contracts related to NFTs. If we look at Perez’s lifecycle of a technological revolution again, we can imagine further integration into the existing infrastructure for copyright management in the second phase.

Perez, Technological Revolutions, p. 30

Supplanting the current ecosystem of copyright management will not follow until the blockchain revolution is towards the end of phase three. At that point, the full spectrum of the market will have adopted the technology and that will allow tracking of IP and allocation of royalties wherever that IP is used. There is no walled garden, instead there is full interoperability. For now, though, we need to be happy that we can look at integrating metadata into any future NFT sale that will allow it to be tracked within the current system, which is organized by CMOs and challenged by IMEs. The latter will prove essential in the adoption and integration of the metadata. They will also help push innovations in the infrastructure necessary to help rights owners follow usage and chase revenues.

Some time after

By looking at blockchains as a technological revolution in the sense of economist Carlota Perez I was able to position NFTs as still an early new product as part of phase one. In itself, NFTs are seeing their own little boom-bust-plateau cycle. In the broader scheme of the revolution NFTs will allow – some time after – to first see an integration with existing copyright structures and then a completely new system: a world without copyright. The former will help artists and rights holders to better track and monetize their assets through the inclusion of metadata that is accepted and verifiable by an increasingly broader set of organizations. The latter currently seems like a blue-sky-idea but actually runs parallel to the future as a decentralized database where copyright might not exist anymore and instead a different type of royalty structure has emerged. This structure should be more artist-driven as it puts more power into the hands of the original owner of the IP owing to the fact that they can always maintain control of how much of their IP they sell off in the first place. Whole new markets will evolve from this, but looking at Perez’s cycle this is still a couple of decades away. In the meantime, it’s important to question the ownership structures related to NFTs as this goes through its own hype phase.

Web3, the internet of value, and concerning barriers to participation

Posted on | by Bas Grasmayer

The current NFT furor is partially fueled by early crypto buyers converting virtual money into something that might retain value better: art. This has been the case pre-Bitcoin, as this BBC article from 2017 about traditional art investments points out well:

“As art has no correlation to the stock market, it means paintings can go up in value even when the market crashes, making it a good diversification for an investment portfolio.”

One of the reasons why people are excited about blockchain is the fact that it allows for further decentralization of the web. Whereas the ‘web 2.0’ focused on feeds, social data, APIs and ultimately led to the creation of mega-platforms, discussions around the current ‘Web3’ tend to focus more on protocols, not platforms. That’s exciting, because we’re discussing the building blocks of the next generation of connected applications and their infrastructure.

One of the concepts the Web3 enables is the ‘internet of value‘: an internet where anything of value, from money to intellectual property, can travel as fast as information itself. Currently, transactions of money often flow slowly since they move through centralized bodies (hello, last year’s royalties) and that’s exactly where technologists hope to reduce friction.

This is also why there’s so much talk about trust. Systems, and the networks that support them, need to carry a certain legitimacy for people to adopt them.

One of the most exciting developments in the internet of value, and one that may shape fan culture for the next generation, is that of social tokens. Oversimplifcation: a creator of music sells ‘tokens’ to a community of fans, in order for those fans to unlock perks. These tokens become more valuable as the creator becomes more successful. If you thought BTS fans were everywhere already: just imagine a scenario where they’re holding tokens and the more popular BTS get, the more valuable their tokens get.1

Here’s my concern, though:

Many of these communities (and economies) are currently designed in a way that you have to buy yourself in by converting cryptocurrency into tokens or earn your way in by creating value for the wider network. The latter phenomenon can be seen in ad-free free-to-play games like those of Supercell, where the majority of users create valuable context for a small minority of users to spend their money. After decades of creating value on other people’s platforms and then having to pay to reach your own audience (e.g. Facebook), the token model is a very welcome change – but how do we make it inclusive?

Not everyone is able to buy themselves in early. While it’s true that you don’t always have to buy yourself in, e.g. in the case of Audius airdropping tokens to its users, the amount of effort required to earn your way in later on may increase with the value of tokens. Yet it’s not exactly about effort.

The goal is typically to make sure that those that provide an adequate amount of value to the network or platform get a token, so they can share in the overall value of the network. Kind of like getting a share in Facebook for posting cat pictures that get tons of likes (or your own music). However it’s not just a share: tokens often represent access. Access to communities, access to voting on the future of the network, access to features or perks, etc.

Tracking value

For the sake of inclusivity, it’s crucial that such systems accurately track and compensate value creation. But value is abstract, as anyone familiar with discussions about the value and price of music will know. Unfortunately, many systems are set up with the assumption that all value will be fairly compensated. While I admire the idealism and drive behind them, it does mean that people will be left out – either because they can’t afford to buy themselves in, or because they don’t get awarded a token for the value they create. For example, the person posting cat photos in the above example might get a token, but the people who took those photos don’t get anything.

The NFT market currently also has this problem, with minting fees being a barrier to entry to many artists who can’t afford it. This is an issue that’s being addressed, but for the time being it can be prohibitively expensive to mint NFTs on some of the more popular blockchains like Ethereum. Meanwhile, the Mint Fund is a great example of an initiative that helps artists fund their NFTs, placing emphasis on the underrepresented.

Without taking these exclusionary issues into consideration when designing systems, we risk the next generation of internet culture to be one of currency and speculation. An internet where people with less money (fiat or crypto) get locked out or have less power over the platforms they use, despite perhaps creating more value that can’t be translated into currency.

That’s possibly still a step up from the internet of extractive megaplatforms like Facebook. Plus, if a platform or community decides that’s actually the way they want to work, that’s fine. However, there are a lot of instances where this is not an explicit decision, but rather something that’s believed will be resolved in the future through improvements in technology.

We messed this up with the web 2.0, where the promise was an interoperable internet, but we ended up with an internet where a few platforms extract value from everyone at the cost of privacy and the value of content. 20 years later, we have another shot at this. Let’s get it right this time. From the start.

Photo by Max Böhme on Unsplash.

1 It’s not always a good idea to create extrinsic motivators for behaviour that is already the result of strong intrinsic motivation.

Music NFTs: why buy them?

Posted on | by Maarten Walraven-Freeling

The more I read and hear about NFTs the more sense it makes to me for artists to get in on the act and find a new way to broaden their revenues (here’s how artists can go about creating and selling an NFT). But what about the buyer’s perspective? Why should they get in on it too? Is it about having a collectible, a one-of-a-kind? Is it just about supporting a specific artist? Or, is it an investment? Moreover, and this is the focus of this article, what’s the potential for artist-fan relations in light of the functionalities and possibilities of the blockchain?

Screenshot of audiovisual NFT by Teebs & Yuma Kishi on Foundation

The buyer’s value

Just one month ago Bas spoke about NFTs in the context of Mike Shinoda‘s first sale. In that article he argued that buyers step into this world because they’re building a world, a metaverse. In that metaverse, we need items that will help us showcase our identities. An NFT is one way of expressing identity and there is value in that. Similarly, in her The state of music NFTs [paywall] article from 14 January, Cherie Hu argues that one way to look at the tokens is as a form of rare digital merch. This, again, relates to confirming your identity, this time as a fan. Continuing along those lines, Hu asserts in a follow up article [paywall] that we shouldn’t even be paying that much attention to the crazy bids driving the hype through auctions but on the potential of selling multiple NFTs at a fixed price point. That’s what will allow artists to tie their fans to them and open up new fan-to-artist interactions.

The buyer’s value, then, is much closer to what happens with certain membership platforms. One example is Hanging Out With Audiphiles, Jamie Lidell‘s podcast, which has a Patreon where he shares the sounds he makes for each episode. His patrons can then make music with those audiofiles. An alternative would be to mint each sound file as an NFT and in that sense give some extra ownership to those ‘superfans’. Even more exciting is when the NFT ownership provides access to more than just, in this example, the sound file. The NFT can then come with special access to the artist (kind of similar to 3Lau‘s recent auction where the highest bidder gets creative direction on a new song by the DJ).

From membership to equity

In a world where what’s called the creator, or passion, economy is growing the distance between artist and fan is shrinking at a similar pace. Livestreaming during the pandemic has provided access to artists in their private spaces and often without lights and make-up. Similarly, services like Cameo and Clubhouse allow the type of interaction between artists and fans that was often unthinkable just a few years ago. With greater access to your favorite artists through a variety of social media and the ability to support those artists directly through membership platforms the logical next step is to consider the artist as something you can have equity in. Jess Sloss from Seed Club explained this idea to Colin and Samir:

Viewed simply, this just looks like moving from paying a monthly subscription to support an artist to buying NFTs with the same result. Where this evolves, however, is when FTs come into play. Once an artists gets their own token, they can start playing around with various layers of access. Because this token represents real value – for example on the Ethereum blockchain, but there might be more potential with something like Polkadot – the investment changes. The point of a membership is that you can cancel it at any given time. Conversely, the only way to get rid of the equity you buy into an artist is by selling it. In other words, to shift it to another fan.

From equity to growing revenues together

There’s a bunch of start-ups working in what Rolling Stone dubbed ‘equity crowdfunding‘ back in 2019. The idea, roughly, is that based on future streaming royalties, fans can invest in their favorite artists to help them create new music. By investing in an NFT or, for example, a social token, the fan engages in the potential for revenue growth. Whether this is through a resale factor, which usually holds a percentage for the artist in the smart contract, or through a secondary right attached to the token (see Jacques Greene‘s publishing rights).

Besides the artist and the fan, there’s also a space here for the developer. As Bas argued in his article on NFTs, we should view the whole blockchain experience as a metaverse in itself. As artists and fans find their ways to connect within that metaverse, there’s also a lot to be gained by the developers that pave the roads that allows those connections to grow. Where these three levels find each other, is where we will see the most growth in this world. What’s more, those types of collaboration will hopefully advance mainstream adoption both for fans and artists throughout this year.

In short, NFTs are one logical next step in a world where the interaction and proximity between artist and fan respectively grows and shrinks and moves towards levels resembling collaboration.

How SoundCloud should tackle fan-artist payments and reconquer lost ground from Bandcamp, Instagram & TikTok

Posted on | by Bas Grasmayer | 1 Comment on How SoundCloud should tackle fan-artist payments and reconquer lost ground from Bandcamp, Instagram & TikTok

SoundCloud is rumoured to announce new plans to “let fans pay artists directly” which some commentators interpret as the music streaming service exploring user-centric payment systems.

While user-centric payments definitely make the landscape fairer and realign incentives by making sure the money generated by fans of certain artists actually end up in those pockets, it’s definitely not a silver bullet solution to make up for the difference between desired and actual revenue artists receive from streaming services. In other words: for the vast majority of artists, the immediate change in royalties from a shift to user-centric would be negligible.

Furthermore, it’s complex to negotiate, as SoundCloud’s VP of content partnerships Raoul Chatterjee pointed out during a recent session of the UK streaming inquiries:

“The whole investigation into user-centric is a very detailed and complex investigation that needs to be taken. It’s one potential path we’re exploring… and it would require industry-wide conversations and support to be impactful.”

SoundCloud is doing ok (especially compared to a few years ago), is reporting growing revenues, but it’s losing relevance. SoundCloud does not have time for lengthy negotiations. As a platform, they’ve lost their footing at the center of music subcultures and the longer it takes for SoundCloud to regain its position, the harder it will become.

Keep the lawyers at the (virtual) negotiation tables, but in the meantime, claw your way back.

SoundCloud’s relative interest over time based on Google searches.

Instagram, Bandcamp, and the post-Covid landscape

Two questions.

Firstly, where do music scenes go to connect to stay connected with each other in 2021? I’ve argued that Instagram has usurped community building from SoundCloud. Of course it should be noted that TikTok is playing an increasingly important role there, especially for certain genres. To a lesser degree, groups on Facebook, Telegram, and Discord form places for people to share their latest tracks, get feedback, find people to do collabs or exchange remixes with, etc. As such, they’re also great places for fans to keep track of the latest developments in music.

Secondly, where did musicians turn when they struggled to make ends meet with just the income from Spotify, Apple Music, YouTube, etc.? They turned to Bandcamp in a massive way. SoundCloud, with its creator-centric roots, wasn’t well-positioned yet to accommodate these artists, because what it offers artists hasn’t changed much from its early beginnings. In 2020, being creator-centric meant helping creators make money – and SoundCloud didn’t have much to offer beyond what it offered artists since the service’s early days. That is: a place to upload your music and present it to other people. That addresses a pre-2015~ market need: making music easy to access. Access has been solved. Monetization hasn’t.

Another place that made music easy to access, YouTube, has been SoundCloud’s most important competitor. YouTube, since its early days, has offered social functionality similar to SoundCloud’s, in that one can follow creators (once innovative! Spotify only launched this 4+ years after launch), comment on tracks, and see other users’ profiles.

By 2021, YouTube’s suite has evolved to include membership clubs with monthly fees, monetization through content identification, and livestream monetization through social features that make fans more visible in the chat (similar to Twitch).

This is the landscape SoundCloud must address & find relevancy in.

(more about this landscape in my piece for Water & Music about the rise of the fan-centric music streaming service (paywall))

The social opportunity

SoundCloud was strongest when it catered to its early adopter users or users who exhibit that type of behaviour. Behaviour commonly associated with early adopter users is word of mouth, being a power user, and a willingness to overlook certain flaws as long as the product delivers exceedingly well on its core value proposition. These users are not well-addressed, since the value proposition has diluted over time in order to target wider audiences (e.g. through its Spotify-like subscription service). SoundCloud has made some great initiatives to woo creators in recent years, but the unifying aspect for all users on the platform is its listening experience – and that’s a social one.

People go to SoundCloud to discover new music. To find what’s ‘Next Up’ before it’s uploaded anywhere else. If you’re into a particular type of music, you’ll follow many of the same artists as other fans of that music and you’ll see some of those fans appear in the timeline comments on tracks.

Timed comments on Masayoshi Iimori’s track Alcohol.

On profiles, which have the same feature sets for fans and for artists, this social functionality is also present by displaying who someone follows and is followed by, as well as any tracks they’ve liked and comments they’ve left. For users who don’t upload any music, the main profile real estate consists of reposted tracks (similar to a Twitter user who only retweets). All of that is social.

Do the majority of users explicitly engage in social behaviour on the platform? Unlikely and it’s probable that a small minority of users create most of the (visible) activity, as on Twitter. SoundCloud is a community product where a minority of users create the value that the majority of users get off of the platform. Unlike Spotify, which tries to help users get as much value out of the catalogue as possible, SoundCloud should focus on the value users can get out of communities and the artist-fan relationship.

Lessons from gaming

This is not dissimilar to what fueled the success of games like Farmville or Clash of Clans. In free-to-play games, the majority of users will never spend any money. Instead, they create value for the ecosystem, so that a minority of users becomes willing to spend (big).

In order to leverage these dynamics, and create revenue for artists, SoundCloud must double down on social. How?

  • Step 1: Leaderboards on tracks and profiles. Show off the top fans of tracks and artists. Dedicated fans will want to earn their spot as the top fan. It’s not just fans: if you’re part of a certain music scene and want to make sure you’re ‘seen’, you’ll play new tracks on repeat, so you appear on the leaderboards on day 1. (just imagine K-pop stans, if you find it hard to imagine how fan communities would approach these types of dynamics)

    This functionality already exists inside the stats dashboards artists have access to. All SoundCloud needs to do is make leaderboards visible on the various pages and perhaps create a setting so people can exclude themselves from public leaderboards.
Screenshot of the top listeners of a particular track in a 7-day time period (stats dashboard).
  • Step 2: Track and profile pages as real estate. Leaderboards create social competition and a way for fans to earn status. Now comes the monetization: let fans pay to claim pages in a non-obtrusive way, similar to how YouTube’s Super Chat feature lets you claim visibility in a chat during a livestream. You could let artists set prices or create some type of market dynamic for this.
  • Step 3: Place activity & payment on the same currency. As in gaming, certain users will spend more time creating value through activity and other users will fuel the economy through payments. By creating an on-platform currency, SoundCloud could reward active users with tokens that accrue value as people purchase tokens to spend on the platform with ‘real money’.

The tokens could then help artists mint their work as NFTs and create a more sophisticated dynamic for ‘tracks as real estate’. Basically, artists could earn money from playback, from selling tracks as NFTs, and by making commissions off of people speculating and reselling music NFTs (a commission percentage can be defined in the smart contracts associated with an NFT). From here, SoundCloud could come to function more as a protocol and create a metaverse-friendly version of its other early value proposition: music playback that embeds everywhere. This time with music as a vanity item that all can enjoy, but can only be owned by one person at a time while always staying associated with the creator – even when NFT ownership transfers from one person to another.

As the user-facing part of the platform shifts towards creating more value from the artist-fan relationship and the activity inside fan communities, subcultures, and scenes, lawyers can negotiate with industry gatekeepers to change royalty administration to a user-centric model.

Some of the above is actually what the Audius protocol is trying to accomplish. You could also go a lot further than what I’ve described, as Audius intends and as Mat Dryhurst explored in his essay SoundCrowd: Tokenizing & Collectivizing Soundcloud. Long term blockchain visions aside, for 2021, being a creator-centric company means being a company that helps monetize, so SoundCloud must focus on the short term and employ an “opportunities multiply as they are seized” type of strategy. That means: not standing still to evaluate distant forks in the road, because what you do along the way will determine the paths you can take from that fork.

User-centric is too slow for SoundCloud

Is user-centric streaming the right thing to do? Yes. Will it help SoundCloud in the short term? No, because artists will not see significant enough returns in order for them to drive more traffic to the platform.

How can SoundCloud be as significant to artists as Bandcamp was in 2020?

SoundCloud must emphasize its community nature, since that’s how the type of value can be created that part of its core users will pay for. That won’t be most of the audience that SoundCloud has been marketing its music streaming subscription to (which can’t beat catalog-centric Spotify or value gap YouTube).

The platform must be selective about what type of behaviour it wants to cater to and the value it can create out of that. For that, it makes sense to use its DNA as a social music platform – something that Spotify, Apple (through Ping & Connect), and others have not been able to figure out. It needs to focus on the users that can amplify community excitement around significant monetization functionality and help make SoundCloud as culturally relevant as it was half a decade ago.

Signed,

A long term SoundCloud user with a 3-letter username: Bas (and more recently Viva Bas Vegas).