THE MUSIC BUSINESS X THE CREATOR ECONOMY
Navigating the Winds of Change in an Established Industry
“I skate to where the puck is going to be, not where it has been”
Wayne Gretzky
Happy Friday!
One of the biggest challenges I’ve had in my career is trying to educate people in the music business on the opportunities and things that need to change. I’ve often felt like Kanye (shoutout my June babies) in his Joe Rogan interview where he spoke about the difficulties of innovating the fashion industry, and wanting to make shoes with no laces - when shoes with laces make so much money; or how Kodak was the first company to make digital cameras, but they didn’t push the technology because their business model was built around cameras with film.
That’s the dilemma .
People and companies often don’t want to make necessary changes because the status quo is comfortable.. but here’s the thing, if you don’t disrupt yourself - life will disrupt you. Change waits on no one.
For my fellow business nerds, here’s a YouTube talk by the late business consultant, Clayton Christensen - who wrote the book ‘The Innovator’s Dilemma’ which goes into more detail on this subject.
Music and the Creator Economy
The focus of this article is the opportunities facing the music business in the so-called ‘Creator Economy’.
In the record, ‘What’s Free’, by Meek Mill, Rick Ross, and Jay Z, Jay z raps, “Ain’t got a billion streams, got a billion dollars. Inflating numbers like we ‘posed to be happy about this”.
To me, this bar reveals a recurring disconnect between the current economic state of the music industry; and the, often outsized, overarching business aims of artists (recording artists, songwriters, producers and their teams).
The question becomes - “how do artists balance the recorded music industry, as it is, with what they would like it to see in their careers?” See, it’s easy to complain or criticize; but criticism doesn’t create. Technology has leveled the playing field across industries; and has made it harder for certain professionals to succeed - while making the industry more efficient. As a former private - practicing music law attorney, I felt this as well. The sheer amount of information, templates, and advancements in technology has put pressure on many music lawyers – requiring them to innovate and provide more value in exchange for the fees they charge clients.
Don’t front, you know most artists don’t like paying lawyers.
I believe the same forward thinking is necessary for recording artists and their teams.
Streaming Dollars
You’ve heard the stats and the refrains, “there’s no money in streaming!” - and while there is some truth there for many, maybe even most artists - the reality, as always, is a bit more complicated than that. Depending on a variety of factor such as: the particular streaming service, geographic location of listeners, service business model (premium vs. freemium), and total listener count - the (per stream) streaming royalty rate may vary anywhere between $0.0033 and $0.013. Now, that may not seem like much to many; but it’s important to note that the recorded music industry rewards volume.
It’s all about market share.
For instance, the recorded music industry revenue generated $12.4 billion (in the US), and just under $26 billion (globally), in 2021 – with the major record labels receiving 71.1% of recorded music industry revenues. Point being, for record labels and high-streaming artists, there is money in streaming; but what about everyone else? Or what about artists who have higher aspirations than simply streaming dollars?
“Ya’ll running to the major label like you think they gonna save you – who you think that is, Clark Kent?”
Chamillionaire, ‘Been Broke’
That’s no shade against the labels, but the truth is that for most artists – you will not get EVERYTHING you need from the major label system. Record labels are there to provide a very specific service (marketing, distribution, A&R; etc.); they cannot do everything for an artist – so as creators, artists must think bigger. And there’s currently a huge opportunity for artists in the ‘Creator Economy’.
What is the Creator Economy?
The ‘Creator Economy’ is a shorthand for the economic space enabling creators to earn a living from social media, e-courses, subscription platforms, Web 3 products and technologies - among other platforms enabling a direct economic relationship between creators, entrepreneurs, and their consumer base(s). Some value the Creator Economy as being worth anywhere between $20 billion and $100 billion.
The truth is many recording artists are already instinctively aware of the ‘Creator Economy’ and the social media and subscription based platforms within it (here’s a good article that breaks it down); but I think one thing that’s often missing when I speak to artists is a shift of paradigm - or as Steve Jobs said, the need to “think different”.
Let’s think about it.
We already know that tens of thousands of songs are uploaded to streaming services every day; and we already (should) know that major record labels spend as high as a third of their annual budgets on breaking new artists. We also know the shelf-life of most recording artists is de minimis. So, my question is how can artists increase their odds? One answer is by taking advantage of the tools presented in todays ‘Creator Economy’.
In 2021, venture capital firms invested $939 million in ‘Creator Economy’ startups. Existing platforms like Instagram are leaning into the ‘Creator Economy’ and enabling features such as “direct subscriptions” to further allow creators to monetize their platforms. In my opinion, there aren’t many creators who are more well-positioned than recording artists to benefit from this trend; but it starts by looking at themselves as more than simply “recording artists”, “songwriters”, or “music producers”.
We have to get back to the days of ‘Motown’ where the craft of being an artist was professionalized, and the whole performance experience was prioritized. It’s true, once you start thinking along these lines – you’re getting into management and label territory; and sometimes, you can’t do everything and you need a team (depending on your stature) to delegate; but, to balance this, as Jay Z said, “the greatest trick the music industry pulled was it convinced artist that they couldn’t be artists and make money”.
One obvious example of artists who have capitalized on the ‘Creator Economy’ is the ‘Versuz’ platform which was acquired by Triller Network; but another, easily google-able and down to earth example, is the hundreds of writers, artists, and creators who make five, six, and seven figures from platforms like Substack and Patreon. Most of this, I believe, comes down to personalized creativity and imagination - taking the available tools – and creating something different. If it was easy, everyone would do it. If everyone saw the vision, no one would be visionary.
Personally, I imagine a world where it becomes normalized for all recording artists, songwriters, and producers to have ancillary media platforms which supplement their traditional “music industry” routine (studio sessions, tours, music videos drops; etc.). These ancillary media platforms could be subscription-based platforms which give fans insight into the day-to-day life of artists, such as: providing behind the scenes looks at studio and writing sessions, exclusive tour content, unreleased music, accompanying podcasts, personalized messages (photos, journal updates, fan-artist live sessions – in addition to integrations with text messaging capabilities). The opportunity is endless.
Now, someone may say, “isn’t that what social media and platforms like YouTube are for?”
Well, for those artists who actually post on social media - yes - but show me your financial statement from those platforms.
Men Lie, Women Lie… Numbers Don’t
Now, let me show you what a direct subscription relationship with your fans might look like.
Let’s say you’re an artist with 1m followers on Instagram, and only 1% of those are hardcore fans - and would be willing to subscribe to receive monthly exclusive content from you, and you decide to set your monthly fee at just $6 a month, then that looks like this -
1% of 1m = 10,000
10,000 x $6 = $60,000 / month
$60,000 x 12 = $720,000 a year
Let’s say you only have 1,000 hardcore fans and you decide to set the monthly subscription fee at $10:
1,000 x $10 = $10,000
$10,000 x 12 = $120,000 a year
That’s the opportunity which I’m speaking to.
Again, someone may say – “I’m an independent artist; I don’t have the bandwidth to record, write, network, promote myself, AND set up a media platform and consistently produce content – and I also don’t have the money to pay someone else to do it”.
Well, you’re in luck – platforms like Stir allow creators to split payments between artist / creator teams. So theoretically, you could set up an LLC / S Corp to own and control your media / subscription platform; and then draft a profit share agreement with certain members of your team solely for revenues generated by that platform. That way, if the opportunity is compelling enough, you can acquire team members for no to low cost.
Regardless of what you may think of him, we all saw Da Baby’s meteoric rise, which was in large part due to his consistent output of content. Content is simply important in today’s day and age for most creators. Even Kendrick Lamar had to flood the market with verses and videos before he could go ghost on us.
I’m not saying it’s easy, that everyone will fit neatly into what I’ve described, that every artist, writer, or producer will make 6 figures from operating as a media company; or that every artist will even succeed in the music business - but we can either complain about the wind, sit on our hands waiting for it to change; or we can adjust our sails.
I don’t know about you, but I’m sailing!
Elijah Adefope is a media, entertainment, and technology consultant and attorney. He is Lead Counsel at Substack, a media technology platform for creatives, and has written two books on the music and sports industries. He lives in Atlanta, Georgia and can be reached on LinkedIn or at elijah@thrivesportsent.com