Now that we're a little over a month (!) into lockdown mode, I thought it would be helpful to offer a 30,000-foot view on major changes happening in the music business right now, drawing inspiration from my ongoing book research on music and tech entrepreneurship.
One overarching methodology in my book involves taking popular concepts from the tech world and testing their viability in the context of music, and vice versa. For instance, I’ve written in the past about the messiness of trying to build a “tech adoption lifecycle” for artists, and about whether jazz improvisation is really a helpful blueprint for business strategy.
Today, I want to use this method to address something almost everyone in the music industry is going through right now: Pivoting.
In general, pivoting is the act of changing your strategy or business model from your initial plans, often in response to shifting customer needs or market trends. The phenomenon is commonplace in the tech world, and is how companies like Twitter (which began as a podcast startup) and Slack (which started as a video game) came to be.
But the COVID-19 pandemic has forced a vastly different kind of pivot onto the business world — one triggered not so much by internal, regimented market research, but by a more external and much more sudden upheaval.
No one could have anticipated entire industries across hospitality, travel, real estate, manufacturing and events slowing to a standstill, causing more than 20 million Americans to file for unemployment benefits within one month. In response, several companies have switched gears in record time to meet everyday people’s needs at home — from food wholesalers embracing direct-to-consumer models, to automobile and alcohol companies manufacturing ventilators and hand sanitizer from scratch. If you’re reading this, you’re likely also in the middle of pivoting your own business model or career for 2020 and beyond.
What do these changes look like in music? After monitoring the situation over the past several weeks, I’ve identified five major music-tech pivots happening right now that are impacting all corners of the industry — record labels, publishers, event organizers, merch manufacturers and, of course, artists and fans — and could have far-reaching systemic consequences after the COVID-19 pandemic subsides.
Digital media is becoming a core part of the fan experience, not just a means to an end.
Immersive, at-home video, not lean-back audio, is now the highest source of music consumption growth.
Artists and fans are turning to direct-to-consumer revenue models over third-party aggregation models.
Social isolation has led to a surge in demand for social music tech.
Without touring, digital scarcity could become a financial necessity for music.
Background: The ten types of startup pivots — and the ones that matter most for the music business
In his 2011 book The Lean Startup, entrepreneur and blogger Eric Ries provides an evergreen framework for understanding how and why a startup might want to pivot from its original strategy.
According to Ries, there are ten different kinds of pivots a startup can make throughout its lifetime. At least seven out of those ten are relevant to the music industry right now:
Zoom-in: A single feature of the original product becomes the entirety of a new product.
Zoom-out: The original product becomes just one single feature of a larger new product, because the first product insufficiently addressed customer needs.
Customer need: A startup realizes the problem they’re trying to solve is not important for their target customers, and seeks other adjacent problems that rank higher in importance.
Business architecture: A startup switches between a low-volume/high-margin and high-volume/low-margin business model.
Value capture: A startup changes its monetization model.
Channel: A startup identifies a more effective way to reach its customers.
Tech: A startup uses different technology to deliver the same solution.
Each of the five major music-tech changes maps to one of these kinds of startup pivots.
Before moving on, there are two important notes to keep in mind. One, while pivoting can sometimes come across as disloyalty to one’s original creative vision (especially in music), it is not a marker of failure. Instead, in Ries’ words, pivoting is “a permanent fact of life for any growing business." It signals that a company is willing to build an experience that users actually want. And in this moment, it’s necessary for survival.
Two, pivoting is not the same as outright resetting. Of course, in the midst of this pandemic, it’s hard not to feel like the music business needs to hit the reset button altogether. But in general, pivoting is a much more evolutionary rather than disjointed process, and should be the natural outcome of what Ries calls “validated learning,” or checking your assumptions about your business through frequent user testing. Usually, some part(s) of your hypothesis will be wrong; you learn why, pivot to a different hypothesis and test that again with users; rinse and repeat.
We’re seeing this more methodical approach even now. As Ina Fried writes for Axios, the pivots that companies are making in response to COVID-19 aren’t completely unrelated to their previous business models. Instead, they’re either “trying to do a different version of the same thing that doesn't require in-person meetings,” or “augmenting what the company was doing before with additional offerings that are more relevant in this moment.”
Likewise, the five major pivots happening in music-tech right now aren’t total resets. Instead, they highlight opportunities for small yet powerful tweaks in traditional artist-fan engagement.
PIVOT 1: Digital media is becoming a core part of the fan experience, not just a means to an end.
Pivot type: Zoom-in/zoom-out
To review: A zoom-in pivot takes a single feature of the old product and turns it into the entirety of a new product. A zoom-out pivot makes the old product one single feature of a new, much larger product.
To me, the most obvious example of a zoom-in pivot in the music industry right now is the livestreaming boom.
As I wrote recently, livestreaming used to be considered a supplemental, nice-to-have tool for increasing fan engagement and reach online. It was never intended to replace brick-and-mortar touring; instead, it was a small feature to drive demand and engagement around the core fan experience, which was always the in-person show.
With the touring circuit off the table, livestreaming is no longer a mere feature; for artists and event organizers, it’s now the entire product.
One common example of a zoom-out pivot is the expansion of digital world-building around an artist.
While concept albums have been around for decades, many artists are now going the extra mile in extending their online worlds beyond the confines of a single album, especially without being able to lean on the powerful world-building vehicle of touring. This often takes the form of experimenting with adjacent forms of entertainment, and opening up deeper conversations with fans.
Some examples: Charli XCX is hosting a weekly Zoom conference to update fans, journalists and celebrity friends on the making her quarantine album, how i’m feeling now. Travis Scott announced a new multi-show “concept tour” in Fortnite called Astronomical, in which he will be premiering not only a new single, but also branded outfits and emotes for the Fortnite game. Grimes is developing her own virtual avatar, WarNymph, that will sub in for the real-life artist in select promotional activities. Brick-and-mortar venues like Elsewhere in Brooklyn are partnering with software developers to host virtual festivals in Minecraft.
In summary, the pandemic has forced the music industry to zoom both in and out on digital media. Artists and music companies are zooming in on emerging digital communication channels they neglected or de-prioritized before, and zooming out to expand their understanding of the kinds of fan relationships that are possible to cultivate online in the first place.
Digital media is no longer an advertisement for “the real thing” — it’s the realest thing we have.
PIVOT 2: Immersive, at-home video, not lean-back audio, is the highest source of music consumption growth.
Pivot type: Customer need / Channel
Today, people are consuming way more video and visual media than lean-back audio. According to Nielsen Music/MRC, daily on-demand audio streams have dipped by over 14% year-over-year in recent weeks, whereas daily on-demand video streams were up as much as 20%. Streamlabs reported that time spent on Twitch in March jumped 23% from the month before. Deezer reported a spike in user activity via home devices in March, including on Xbox (+60%), Android TV (+59%), Amazon Alexa (+34%) and Google Assistant (+31%).
These changing consumer needs are driving a wider channel pivot across the music industry. Whereas artists might have previously directed audiences to streaming platforms like Spotify to engage with their music, I’ve noticed more artists are now promoting their livestreams on Twitch, YouTube and Instagram instead. Even if they don't generate revenue, those latter experiences feel more immersive and direct for artists and fans alike.
There’s significant demand for more collaborative or competitive livestreaming formats among artists in particular. Last night’s battle between Teddy Riley and Babyface broke Instagram Live’s audience records, attracting over 510,000 concurrent viewers at its peak.
On the platform level, ticketing and event-discovery apps are pivoting to support online rather than offline shows. Live Nation and Dice have launched dedicated verticals for livestreams (Live From Home and Dice TV). Bandsintown now allows artists to post their upcoming livestreams on the app. In the audio world, the likes of Spotify and Apple Music are pivoting towards home, rather than an on-the-go lifestyle, as the primary context for curation (see screenshots below).
We can also expect collaborations among music, gaming and film studios to ramp up in the coming months as well, through avenues including livestreaming, sync licensing and in-game brand partnerships.
PIVOT 4. Artists and fans are turning to direct-to-consumer revenue models over third-party aggregation models.
Pivot type: Value capture
Many artists are rethinking their monetization strategies entirely, amidst the evaporation of touring income.
In particular, there’s a wider reckoning with how the dominant, aggregation-driven streaming model is unsustainable for most artists, leading to more activity around online channels whose revenue impact for artists is both more direct and more immediate. While audio streaming is convenient, it ranks rather low on these two factors.
The time-old business model of buying music is front and center again. Bandcamp waived its platform fees for 24 hours last month, passing on all revenue to artists. Within that time, fans paid artists $4.3 million, over 15 times Bandcamp's average sales on a Friday. (The company is waiving its fees again on May 1.) Some indie record labels have also seen direct-to-consumer sales increase in recent weeks.
Artists are also experimenting more with other direct-to-fan revenue models beyond streaming, including memberships and flexible payments for shows. Patreon saw a record number of creator sign-ups and above-average pledge activity last month. The livestreaming boom has ushered in a newfound diversity in business models around events — from the traditional ticketed/paywalled model, to the "free-to-play" and "pay-what-you-want" approaches popular in the gaming world.
In previous years, the music industry didn't focus on these models because they took the album-tour cycle for granted. One silver lining of our unfortunate present is that the music industry could emerge with a more diverse and sustainable foundation for a thriving digital economy beyond streaming, which I think is long overdue.
PIVOT: Social isolation has led to a surge in demand for social music tech.
Pivot type: Tech
To review: A tech pivot involves a startup using different tech to deliver the same solution.
In the context of music, what is that “solution,” that sign of success? I would argue it’s not a concrete object or metric, but rather a more abstract feeling. The solution in music is almost always a spiritual, emotional and memorable experience for the fan, and a stronger bond not only between artists and fans, but also between fans and each other.
One of the most effective “technologies” to deliver this solution is a live show. In fact, it's so effective that building its best digital substitute is still anyone's game.
On the listening side, it's unfortunate that many lean-back music streaming services like Spotify have become less social over time, because now is a better time than ever for a social listening app like now-defunct Turntable.fm to come back to life. In fact, several people in my social network have shared links in recent weeks to apps like JQBX, plug.dj and Stationhead that offer outlets for shared, remote listening, often through integrations with users’ existing streaming subscriptions. Spotify has also reportedly been testing in-app social features again, including a shared queue.
On the video and event side, as previously discussed, livestreaming is booming as a temporary, social substitute for the concertgoing experience. But the social experience can sometimes seem clunky — either due to an overly simplified interface with few choices for interaction beyond contributing to a stream of unfiltered comments (Instagram and Facebook Live), or due to the inherent limitations in trying to host an art event using software built for corporate communication (e.g. Zoom nightclubs).
In my view, Twitch remains the market leader in terms of enabling artists to build deeper, more custom social experiences around their streams — such as running a Discord server exclusively for paying channel subscribers, or designing chat emotes that only subscribers can access. I foresee incumbent social platforms like Instagram building more in the direction of these multilevel livestreaming experiences, especially as the livestreaming landscape becomes ever noisier and artists look to align with the platforms that will help them stand out the most.
PIVOT 5. Without touring, digital scarcity could become a financial necessity for music.
Pivot type: Business architecture
This pivot is the most early-stage out of the whole list, and could also be the most transformative.
Touring remains an important revenue stream for the music industry because it's a form of physical scarcity: A touring artist might appear in your city only once or twice in a year, to give a performance that will never happen again and is nearly impossible to repeat or replicate. Depending on an artist’s level of fame, admissions to these scarce experiences can cost up to thousands of dollars for fans who are willing to pay for VIP treatment.
In contrast, many people have the expectation that online content is free and ubiquitous — i.e. not scarce. Hence the COVID-19 pandemic has forced many artists to shift, with no advance notice, from a low-volume, high-margin model of physical scarcity to a high-volume, low-margin model of digital ubiquity. Under pressure, several artists are now releasing more content at a faster pace than before (livestreaming being a prime example), but aren't getting compensated as much to do so as they would have on tour.
Embracing forms of digital rather than physical scarcity could potentially help close this value gap for artists, and create the foundation for a more sustainable digital music economy.
The last time I heard people discussing “digital scarcity” for art was at the peak of blockchain hype (~2015—2018) — due to the power of the technology to verify ownership mathematically, as well as offer more transaction transparency. Much of this discussion took place in the worlds of fashion and fine art: Startups like DADA.nyc auctioned off limited editions of digital artworks that were identified and tracked on a decentralized ledger, while companies like The Fabricant and Carlings developed digital-only luxury clothing (no blockchain involved).
We're still in the early days for digital scarcity in music, which have mostly taken the form of digital analogs of physically scarce goods and experiences. For instance, a small but growing number of artists are charging admission for exclusive livestreams, through platforms like Stageit and Crowdcast.
Warner Music Group's investment in CryptoKitties creator Dapper Labs in September 2019 also hinted at the potential for limited-edition digital merch and collectibles for artists.
As Jeff Bronikowski, former svp of business development at Warner Music Group (now Global Head of Strategic Music Initiatives at Apple), told Forbes at the time of the announcement: “When I was in college, you’d walk into someone’s room and you’d see 200 CDs and you would say, ‘That guy’s a big music fan.’ And now you just see somebody with a music subscription service and some playlists. We think that as people spend more time crafting their persona in the digital realm, digital goods and collectibles is a great way to express that fandom.”
Growing these models of digital scarcity in the music industry is not so much a technical issue as it is a cultural issue. In a world like the one we have today, live shows practically don’t exist, and digital ubiquity is not making up properly for lost value. Correcting for that gap through purely digital means would require a major shift in our thinking — namely, that we stop taking the ubiquity of digital music as given.