Creator economy and music nfts

Creating a successful subscription requires you to commit to a constant flux of content and experiences for your fans. Artists are already producing music, recording it, promoting it and touring. Now they were being told they needed to create new exclusive paywalled content monthly for their fans, which is a lot of work by itself.

Going through the top music creators on Patreon (excluding YouTubers) you'll find out that most of the top artists haven't been posting content in months, which makes it hard for a fan to justify their subscription.

Pricing can be daunting for creators. How much am I valued? How much is my art valued? If I price my subscription too high I might leave a lot of people out but if I price it too low I might not capture the value that some superfans are willing to pay.

Price discovery in this setup is very slow and probably makes it hard to find the top points of your curve. Does it make sense to charge $10k for a Patreon subscription? What if a fan is willing to pay for it? And if so, does it make sense to pay 5% to Patreon?

Tipping and donations are another common approach to capture the top parts of this curve, but in this model what are fans tipping for? Does it make sense to tip an artist for a song? Artists don't want to feel like you are making them a donation, they've worked hard for fans to enjoy their music and they just want to be fairly rewarded, not "tipped". Fans also don't want to treat artists like charities.

Centralized digital assets are also another alternative, things like stickers and badges, but the assets themselves can only be used inside the same platform. If I have a superfan sticker on YouTube I can only use it on YouTube's comments and chat section. It might be a nice flex that makes superfans feel special, but is that enough to capture the top parts of this curve?

Fan clubs become exclusive per platform (e.g., Billie Eilish has its fan club only on Spotify but Justin Bieber has its fan club only on YouTube Music).

In this scenario, fans need to subscribe to Spotify to be a fan of Billie Eilish but also to YouTube Music to be a fan of Justin Bieber, which is quite a terrible experience. As a platform, this is also terrible since you are fighting for exclusives, your margins go lower and lower to a point where you can't even justify why you were implementing this approach the first time.

Every artist has a fan club on every platform. This is also pretty bad for fans and artists since some platforms will provide unique experiences that others don't.

This scenario leads to all platforms having to copy each other's features and looking pretty much the same because of the poor interoperability of the system. It stalls innovation and shifts each platform to focus on building general features instead of adding up to the overall ecosystem with their unique strengths.

As a superfan who is part of a fan club I want to be able to watch an exclusive video from my favorite artist regardless of the platform, not based on if the platform considers me a fan or not. I've already proven my "fandom" on Spotify, why can't YouTube recognize that?

Not being able to recognize a fan outside of the platform they use, locks artists and fans into that same platform. Artists are hence restricted by the features that the platform provides and forced to accept the percentages they charge to be able to engage with their fans.

For some reason we've normalized this dynamic. Platforms talk about connecting artists and fans but they've become the sole gate-keepers of their relationship. An artist can't message their top fans on Spotify or Apple Music; they don't even know who they are.

Who can blame platforms? They are incentivized to do so. The more control they have, the more essential they become to artists and more leverage they have to decide how much their cut should be.

NFTs are way more efficient at discovering and capturing the top parts of an artists' curve.

Let's imagine a third scenario where as an artist I don't need to create a fan club on any of these platforms but I can simply create my own fan club where NFTs are the membership cards to be a part of it. Anyone who owns one of my NFTs will get access to exclusive experiences, meet and greets, and will be part of my inner circle.

Pricing becomes more interesting since NFTs allow for a richer price discovery. Making NFTs scarce and tradeable means fans need to buy their membership from someone else and therefore need to offer enough money for someone else to sell. Even better, NFTs enable royalties, which means that for every trade of these NFTs that helps the price being discovered, the artist will take a cut.

If there is a lot of demand for being part of those top superfans, the price will go up, discovering a higher price that a fixed price subscription wouldn't have been able to discover.

While speculation is a common argument against web3, I believe it can also be a positive thing. Speculators take the risk of discovering the price for a specific asset. If a speculator buys an NFT and tries to sell for a high price, the artist also benefits through royalties.

An important role that music streaming services can play is helping artists give the early NFTs to true fans that have proven to stream and share the music of an artist. If true fans are the ones to get the first NFTs, they can decide if they want to sell or not.

Ideally we want fans to be rewarded for price discovery, not speculators, so that is why it's important that platforms play their role helping artists identify their top fans through some kind of proof of streaming.

This is a new very interesting paradigm. Instead of selling new NFTs directly to new members, artists can give those NFTs to their early supporters for them to discover the price and be rewarded for their early support.

With NFTs, platforms wouldn't need to build their own fan clubs. Artists could simply create their NFTs as memberships to their fan club, and platforms could simply plug into these by enabling fans to connect their wallets and therefore give them access to exclusive experiences based on if they own or not a specific NFT.

Here, platforms don't need to copy each other to create a full fledged fan club, but only focus on their differentiators and innovations that make sense for their product.

Composability could also work the other way, where platforms could give rewards as NFTs that artists could also leverage. For instance, being in the top 1% streamers of an artist on Spotify could give you access to a unique "proof of streams" NFT that artists could then use to create unique discounts to their top fans on other platforms like Ticketmaster or their own Shopify store.

Not only platforms, but pretty much anyone could leverage artist NFTs. As a brand I could offer discounts or exclusive products to top fans of a specific artist. Since these holders are spending hundreds of dollars on artist experiences, I can probably assume they have acquisition power therefore being a great target for me to offer them discounts that incentivize them buying in my store. In the meantime, the utility of the artist's NFT increases without them having to do anything.

A question that comes up is why would platforms even think of going down that path. They are giving away control and potential revenue. Why would Spotify help identify superfans on their platforms making it easier for other platforms to target them?

I believe the question is not why would Spotify open up, but more, what happens if they don't and competing platforms do? What happens if YouTube Music starts opening up and Spotify stays closed?

YouTube Music would be offering an ecosystem that is way more friendly to the artist. An ecosystem where anyone would be able to build on top of. Artists would be more incentivized to drive their audiences to the platforms that have more friendly terms for them therefore driving attention away from Spotify.

What happens if NFTs start becoming a bigger part of the artists' revenue pie? Streaming is already a very small part of the pie, if it keeps becoming smaller and artists start making way more money through focusing on their superfans it might arrive to a point where it doesn't make sense anymore to charge for streaming music.

If my main source of revenue is to monetize the top fans, I want to make sure my music goes viral and becomes as famous as possible. For that to happen people need free access to music, more listeners, more potential fans which means more potential superfans which means a higher price for my NFTs.

If streaming music becomes free, what would Spotify make money from? Ads? Other competing platforms like Apple Music might offer an ads free service since Apple's core business is not Apple Music but selling iPhones. What's Spotify's position then?

Can Spotify shift to a business model that can profit from NFTs? I do believe so. Spotify has probably one of the best recommendations and curation teams out there. They are well positioned to become the best platform to help artists identify and find new superfans. Spotify can potentially become the core marketplace for music NFTs.

This past January OpenSea recorded a monthly trading volume of nearly $5 billion. It's still soon, but what do we think the trading volume for music NFTs could be in 5-10 years from now? Is Spotify's opportunity as a music NFTs marketplace bigger than selling ads and $10 a month subscriptions?