Artists Are the Biggest Casualties in the Streaming Wars

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Today's entertainers are leaving money (and data) on the table in their pursuit of more plays on streaming sites. Marketers can learn from their plight.

Drake, the popular Canadian rapper/singer, struck gold in late April when he released his much anticipated fourth studio album, Views. Actually, he struck platinum. Songs from the album have generated some 4 billion streams to date on Apple Music and Spotify alone, to say nothing of other services like Google Play Music,TIDAL, or others.

These are truly staggering, enviable figures. What brand wouldn't want 4 billion eyes on its product? Better question: What brand would want 4 billion eyeballs, but not have any idea who those eyes belong to?

For musicians, album sales have always been the barometer of success. For most of music history, albums were a physical good, like a vinyl record or a CD. Music carried the tangible marketing costs of buying an ad in a magazine, newspaper, or on a billboard. Record labels had a simple formula for how much money a recording artist made for an individual record sale. Artists during these times had little autonomy and control — the collapse of Motown being a particularly dark example of this — but had few options other than to buy into the record label system. It's not like they were going to manufacture their own CDs, and definitely not at any significant scale besides. But the new digital marketplace has upended much of that.

With the move from physical to digital music, and the rise of the internet and social media, musicians now had more and better options for directly reaching their listeners. Things were still far from perfect, though. Much of the recording industry norms and infrastructure lingered in the wake of the broadband internet boom of the early 2000s, so artists still needed help from record labels. Piracy was also a factor during this transitive phase, and the recording industry was slow to respond to the growing trend.

Tempted by a host of legally and ethically gray services starting with Napster, and progressing through Limewire, torrents, and other file share services, consumers decided that music should be free.  A years-long tug of war between consumers and creators ensued, and artists and labels rarely came out on top. It wasn't until the advent of music streaming services that consumers considered parting with a little money for a lot of music.

Streaming emerged as a healthy middle ground, the next and more legitimate phase of digital music. Labels shifted focus from the raw capital that album sales drove, and accelerated efforts to monetize other facets of their artists' brands (something that's been going on for a while, in fact). Digital streams became the new, if imperfect benchmark for success, making it easy for users to access a virtually unlimited amount of songs through subscriptions or through their attention to ads. For artists, the new focus on streams was also a refocus on exposure, not unlike the days when album sales equated commercial success. Except, as mentioned, there is very little money in streaming.

“The core problem is that artists are so focused on bigger, on going up. It feels good, but [isn't] very profitable. The difference between streaming your song on Spotify 100 times and 100 million times is like $100,” explains Nathan Slavik, managing editor of Bittorrent's editorial division, and a renowned music journalist.

Though the figures aren't so stark as that, Spotify is known for paying an average of between $0.006 and $0.0084 per stream.

"The revenue generated for 1,000,000 streams is somewhere between $6,000 and $8,400. 100 million streams would equal out to somewhere between $600,000 and $840,000 for rights holders," says Mark Jourdian, digital marketing manager at Nettwerk Music Group. "Apple, Tidal and Google Music do not provide demographic data about listeners, but Spotify does via their Artist Insights platform. Pandora has a similar platform."

Much of the data Spotify and Pandora provide —which is more than other streaming services, to be fair — serves best to give artists a sense of where their streams come from; data that is indeed helpful for touring, but isn't necessarily marketable in the grand scheme of data and analytics. 

As far as payment per streams goes, the key here is that the owner of the rights to the music gets the check. Historically, artists have struggled to maintain ownership of their music.

This imbalance, compounded on the lopsided arrangements between artists and labels during the transition phase from analogue to digital music, helped drive a new trend of savvy artists flipping the traditional model on its head. Using music to, in essence, market other channels. This is a natural progression really, since artists have always made the most money through extracurricular activities, most notably touring. Only now, they have the opportunity to optimize these efforts through the collection of audience data.

Rapper Lupe Fiasco offered his latest single on his website for free in exchange for an email address.

Chance the Rapper, a notoriously independent artist who has refused to sign with a record label, has become a champion of creative and commercial ownership by, ironically, giving his music away for free. He, like many artists, makes his money from touring and selling merchandise, except he does so sans record contract, so he collects the bulk of the profits from these sales.

Similarly, british rock band Radiohead — storied critics of the label system, and constant tinkerers of new forms of distribution — have been pioneers in procuring data. The band released its seventh album, In Rainbows, on its website with a pay-what-you want option. While Radiohead did end up making a lot of money through album sales, the more important long-term value was the millions of email addresses and hundreds of thousands of mailing addresses the band collected through its webstore. Someone who purchased the album (or even got it for free) had now signed up to receive promotional messages from the band, and any solo work from any of its members.

This level of access to customers is what will keep acts like Radiohead, Chance, and Lupe relevant to their audiences, and above all, profitable.

“Having specific data on 100 people is far more valuable than having millions of streams or album sales with no idea who [those people] are,” Slavik says.

Drake is doing a lot of things right, but he's missing this staple of a modern musician: an email signup. True, the canadian rapper is positively raking it in from the billions streams his music generates, but he's likely not getting any actionable data about  his streaming audience, and therefore has no way to market directly to his most ravenous listeners.  On his site, Drake asks you to connect with him on Twitter, Facebook, and Instagram — all rented audiences. There is no way to exchange an email address for access to something of value.

As is the case for many businesses, social is ill served as anything other than a tool to drive sharing and brand reinforcement for entertainers. For musicians, the channel ultimately serves to drive traffic (and data) to the streaming platforms, not the artists. The fact that many entertainers tend to have massive social media followings doesn't matter if they can't drive them to actions.

“Social media can give the illusion that you're connecting with people, but it really does a terrible job at reaching people physically,” Slavik says.

Building the Infrastructure

Musicians are increasingly embarking on a journey many marketers are already familiar with: leveraging their audience by directly selling merchandise and, by proxy, taking steps to establish ownership of that audience through email signups and SMS, in some cases; a strategy that was unthinkable, or at least mostly untenable years ago.

And, perhaps unsurprisingly, many former musicians are the ones driving the infrastructure to capitalize on the direct relationship with fans.

Ryan Leslie has had a modest career as an R&B singer. But his bigger mark on the industry may be when he founded Disruptive Multimedia in 2014, a startup focused on (as its name implies) disrupting modern media. The company's premier product, SuperPhone, is a SMS CRM solution that facilitates much of what this article argues for: direct connections between artists and their most ardent fans. The platform is still in its beta phase, but has attracted investors like Ben Horowitz, and some 2,700 artist clients according to TechCrunch.

These clients use SuperPhone in much the same way that many marketers use email newsletter signups. Entertainers set up a SuperPhone phone number, and capture the data of any fan that texts or calls it, thereby gaining direct access to those fans.

Similarly, former Blink 182 guitarist Tom DeLonge started ModLife in 2007 as a way for bands to better monetize things like tour posters, VIP tickets, and exclusive versions of albums. His new company, To the Stars, does the same thing for a limited number of bands.

These are models that many artists are excited about. They represent artists taking a pivotal first step to gaining more agency in the recording industry dynamics. But the strategies behind SuperPhone and To the Stars are woefully uncommon.

“More artists are thinking about audience data [this] way, but most still aren't. Especially if they're signed to a major label, because they feel like all of that is taken care of. So many artists don't think of themselves as businesses, and if they do it's in much more general respects,” Slavik says. “But any business, whether it's Pepsi or Coke or Starbucks, or a local deli, wants to know who their customers are and how to reach them. I've talked to so many artists and [this] is not really on their radar at all.”

Even if something like SuperPhone catches on, the data-oriented strategy that drives it isn't really present in any other musicians' marketing. Of the artists that have lead generation strategies in place, few are doing much in the way of lead nurturing. Fewer still have their own version of a SuperPhone-esque CRM solution to store that data. Many have their heads in the right place, but there's a lot of work to be done.

21st Century Artist: Nipsey Hussle

Many artists have adopted data-based direct selling approaches, but few have done so on a level that matches that of California rapper Nipsey Hussle.

In October 2013, Hussle, born Ermias Asghedom, released Crenshaw, his eighth official mixtape. Mixtapes have historically functioned as promotional products for hip-hop artists. For a number of reasons ranging from sample clearance issues to turbulence at the record label, rappers usually release mixtapes digitally for free. Even if the artist releases the tape on their own website, these mixtapes proliferate around the web so rapidly that it's impossible to track the commercial impact of the records.

Keeping to tradition, Hussle released Crenshaw for free online. However, he also launched the Proud2Pay campaign, an initiative designed to galvanize Hussle's biggest fans by offering them a $100 physical copy of the mixtape. Fans who purchased the tape were rewarded with a host of incentives, including access to a recording session for Hussle's forthcoming studio album, VIP tickets to a local show, a personal phone call from Hussle, and merchandise in the mail. Hussle and his team gained valuable data on each individual who bought the record, and maintained a database of buyers. Hussle set up a pop-up shop in L.A. to sell the 1,000 CDs he and his team pressed. The mixtape sold out within 24 hours, with Jay Z himself placing an order for 100 copies.

Billboard Magazine likened the campaign to a kickstarter, saying Proud2Pay represented a new patron model for artists. Hussle told Billboard:

"As an artist, a lot of times you're asked to sacrifice the integrity of your art for commercial interests, because you want to try and sell as much as possible," Hussle told Billboard. "By marking the price up, we're expecting to sell a lot fewer units, but we know we're selling to people who are already super-engaged. We don't have to reinvent the wheel or think too much about what we do. We just have to make sure not to stray from the course that we're already on."

The stakes of art for its own sake

“On some level, it's inherently ridiculous to expect an artist to be an amazing business person,” Slavik says. He sites Jay Z as the rare unicorn entertainer, one who has a natural affinity for crafting great works of creativity, while also having a solid command of business and marketing. Jay Z not only enjoys similar commercial and critical success as Drake or Taylor Swift, he also took the ownership of his music a step further by launching his own streaming platform.

Though it's clearly not winning the streaming wars, TIDAL still sports some 3 million subscribers, all of whom ostensibly generate reams of data for the company. TIDAL didn't respond to our request for comment, but it's unlikely that the service is any more forthcoming with data on its users than its competitors. Even if TIDAL does share some of its data, the fundamental point remains: Artists are jockeying for popularity on platforms they have little or no equity in. Even in the case of TIDAL, which dishes small ownership of the company to artists on the platform, most musicians still have no effective systems or strategies in place to capture and monetize their most passionate and engaged fans.

Streaming services have no reason to tip their hands here. Just as Facebook ultimately owns all the insight on its users, and Google alone has the keys to its search algorithms and parameters, Spotify, Apple Music, TIDAL, and Google Play Music are supremely unlikely to disperse relevant audience data to those who need it most, artists. Even if they wanted to do so, the legal ramifications of such a breach of privacy would be severe.

What streaming services can do, however, is function as discovery tools to help listeners find new artists. In many ways, this is already the case. TIDAL is famous for its discovery functions, and Spotify's continuous forays into machine learning are generating millions of streams for musicians though the platform's playlists."

"It's those millions of plays that help artists sell concert tickets and eventually have fans who will [buy] $100 mix CDs on a street corner in LA," Jourdian says.

But in the long term, the ultimate responsibility for developing a data strategy falls to artists. 

Acts like Chance the Rapper and Lupe Fiasco are well on their way to achieving truly direct connections with listeners. Others, like Nipsey Hussle, Radiohead, and Ryan Leslie are very well ahead of the curve, and could one day serve as inspiration (or a partner) to marketers across industries. But the majority of musical acts must soon reckon with the fact that creating art is just the beginning of monetizing their audience. Longevity lies in data.

*This article was updated to clarify the per-stream rates Spotify offers, and to introduce Jourdian's counter argument that streaming services are working as discovery platforms.*

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