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Mike Weissman on SoundCloud’s Creator Strategy, Web 3.0, and Building a Music Entertainment Business

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Mike Weissman

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Mike Weissman is the CEO of SoundCloud. He returns to the podcast to talk about the independent artist community, user-centric monetization, and the potential in NFTs and the like in a Web 3.0 era. He then weighs in on the revenue model in relation to the rise of streaming services and on SoundCloud’s progress to becoming a modern music entertainment business.

If you are interested in the future of the music industry, this is the episode for you!

Episode Highlights:

[02:38] The 3 pieces to SoundCloud’s growth and success

[07:55] How fan-powered royalties work and benefit artists

[13:20] What Mike is seeing from major labels

[16:00] The opportunities in Web 3.0 

[19:30] On the $10 all-you-can-consume subscription model

[23:35] SoundCloud’s partnerships and future plans

[26:28] Podcasting versus music streaming versus video

[31:50] On SoundCloud’s international growth

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Watch:

Host: Dan Runcie, @RuncieDan, trapital.co

Guest: Mike Weissman, @mweissman2, SoundCloud

 

Trapital is home for the business of hip-hop. Gain the latest insights from hip-hop’s biggest players by reading Trapital’s free weekly memo

Transcript

Dan: Hey, welcome to the Trapital Podcast. I’m your host and the founder Trapital, Dan Runcie. Today’s guest is Mike Weissman, who is the CEO of SoundCloud.

 

It’s actually Mike’s second time on the podcast. The first time was back in 2019, it was a few months after he was named president of SoundCloud so it’s been great to catch up with him at each stage of the journey, but it’s also been good to check in and hear how things are going with SoundCloud as well because the platform has evolved so much in the time span that Mike has been there.

 

One of the things that SoundCloud has doubled down on is focusing on the artists that are using its platform and providing them with the tools that they need to be able to build their career, release their music, and monetize directly.

 

One of the big initiatives for SoundCloud this year is called fan-powered royalties. You’ll hear all about what that means in this episode but it offers artists the opportunities to monetize directly from the fans and listeners who are streaming their music.

 

We talked to Mike about that decision, everything that went behind it, and how it is the building block for what SoundCloud wants to offer for its artists who can monetize and engage with their fans at all levels of engagement.

 

If you’re interested in the future of the music industry and where things are going, this is gonna be the episode for you because Mike and I talked about the potential with NFTs and other opportunities that are part of the Web 3.0 era of technology and how that applies to so many things that are happening in music right now and how the current business model that has been thriving in the music industry, in the streaming era, the subscriptions, how that $10 all-you-can-eat model is truly limiting in terms of what the potential can be and what Mike sees for the future so it’s really fascinating to talk about that, and, I think, in a lot of ways, that is where things will be heading in the future.

 

This is a fun conversation and I hope you enjoy it. Here’s my chat with Mike Weissman.

 

Interview

 

Dan: All right, we got Mike Weissman back with us today, CEO of SoundCloud. Mike, welcome. It’s great to have you back and I feel like a lot’s changed since the first time you were on the podcast. 

 

You came on in 2019, SoundCloud was in a very different place than it is now, and since, then you’ve had your first profitable quarter, there’s been some big investments as well, and it’s been great to see the trajectory and it would be great to hear from you what would you attribute a lot of that success and change to in the past few years?

 

Mike: Wow. Well, first, thanks for having me on as a second-time guest. I’m honored, still remain a longtime reader, listener to your work, Dan, so appreciate that.

 

I think the continued success of the business is attributed to a couple things. One, it’s we’re always trying to do things differently, trying to innovate where we can, what we call — one of our sort of key tenets at SoundCloud is we try to lead what’s next in music so we’re always thinking about what’s coming around the corner and try to get ourselves there.

 

And then the other one is really focusing on the artists, in particular, the independent artist community and that kinda gives us a path forward where so much of the change in the business is coming out of independent self-releasing musicians doing it themselves and really sort of doubling down on SoundCloud’s differentiator, which is the independent artist community.

 

Dan: Yeah, that independent artist piece has been so huge. The rate of artists releasing and putting their music onto these services has been growing exponentially, even faster than the rate of people listening to more and more music, and I’m sure it’s one of those changes that must make you just pause and be like, “Wow.”

 

There’s a lot of opportunity that comes with that but I’m sure there’s a lot of other thoughts and decisions that come with it as well. What has that piece of it been like? 

 

Mike: It’s been phenomenal and astronomical growth for us, and I say it’s like attributed to probably a handful of things. I mean, one is you have — creating music or sort of before the song is made, producing music right now, the cost to produce music has come way down.

 

You know, you have digital tools, things like Splice, the production software suites you can use, that used to be a really heavy effort to get in the studio.

 

The second thing alongside of that is COVID really brought a lot of musicians home to start making music again and that, alongside the ability to make music effectively in the cloud, creates a lot more music being made.

 

The third thing is then alongside of that is, you know, the idea of these independent self-releasing artists being the fastest growing part of the music ecosystem just all coincides with the first two pieces and it kinda creates an explosion of creativity and distribution.

 

We’re seeing on SoundCloud, they give you a stat, we added nearly an entire Spotify in terms of the number of tracks to our catalog at SoundCloud over the past year. So, the rate of music being uploaded, and since we’re user generated, we accept a lot more tracks being uploaded, is shocking in a lot of ways.

 

And the last thing I would add is the notion of essentially artists being independent has become very powerful, right? It’s not something, you know, where independent kind of in the past used to be niche. If you’re an independent artist, you’ve got control over sort of your masters, you’re distributing yourselves, you know where to go from social media for promotion and audience development. 

 

So, and you hear a lot of the major stars like Kanye and, you know, obviously, Taylor Swift saying something about that too but all of those things kinda combine, kinda create a perfect storm for the independent artist.

 

Dan: Yeah, I’m sure that’s created a lot of opportunity for you all, given the amount of tools that creators want and what you can create for them through the platform. And with that, I know that you have your two sides of your business, you have the creator side and you have the listener side.

 

It’ll be great to hear more about how each of those are doing individually. I know we talked a little bit about it but let’s start with the listener side. How has that been? How has that side of the business been going?

 

Mike: It’s good, and the first thing is we’re actually calling it — it’s fans, not listeners. So we’re really doubling down on the notion of fandom versus just people coming to access a catalog of music.

 

I mean, a lot of the other streaming services, you can log in, search, discover, hit a playlist, listen to any track you want and it’s incredible. 

 

But we’re really doubling down on SoundCloud is really talking about the fan and the fandom aspect. So we’ve continued to build that business. Our traffic is strong, revenues have been growing really nicely throughout the last two years, and we’ve also started to shift the model towards something we call fan-powered royalties, which some other people in the past have called user-centric monetization, user-centric royalties, and that’s really allowing us, and I can explain more how it works, connecting the fan and the artist directly so that someone’s listening behavior actually affects the revenue an artist is receiving. 

 

And then the second part of our business, which fits very nicely into that, is actually we call it — it’s a creator business and that has both kind of a couple components. There’s software products for musicians to upload and share their music and find fans. We offer now distribution from SoundCloud into all the other streaming services.

 

And then, at the very sort of highest level of that, we’re starting to work directly with talent as well. And we have some big plans along all three of those parts from both software to helping artists distribute their music to us kind of in some ways potentially building our own roster. 

 

Dan: Let’s go back to the fan-powered royalties piece for a second because that was a huge announcement that you all had made this year and I think it sparked a reminder for a lot of people, because a lot of people thought that if you are listening to an artist on a streaming service, they are gonna be the ones that are getting the revenue from that, and that’s not necessarily the case. And for most streaming services, that isn’t the case. You all launched fan-powered royalties, that’s an opportunity for the listeners themselves to contribute directly to the revenue that the artist is making.

 

And when you made the announcement, there were a number of case studies that you had shared about some artists and what differences it can make for them before and after.

 

And now that we’re a few months in, it would be great to hear how it’s been going, what are some key learnings and insights, and what do you see for the future of the program?

 

Mike: Right, so we have fan-powered royalties turned on for, let’s say, a large portion of our creators, not everyone. So major labels, a lot of independent labels are not yet participating. But for artists that we have in our program, we’re able to directly connect someone’s listening to their revenue participation. 

 

And you’d assume most streaming services work this way but they don’t. It’s actually complicated formulas and correlating information and listening, times shared, and so it actually becomes less directly connected. 

 

So we made that connection so it’s a direct stream between what I listened to, when I listen to an artist, my money goes to that artist.

 

You know, we launched this in April so we have about four or five — actually about four months of information on it so far and our initial thinking on how it would work is actually holding really true. 

 

And the main thesis is any artist has people who come to listen to their music or wanna discover that artist. They’ve also got people who come in by and listen to their music through a playlist or through a recommendation, but they don’t really know that artist yet. 

 

And then you’ve got fans. And the fans are the ones that are unable to really contribute to an artist today directly. And so, the way our model works is actually shifts the royalties into more and more artists with deeper fan bases.

 

So, to give you a few stats, when we’re looking at the payouts that we’re making on the fan-powered royalty basis, 80 percent of the payouts are coming from about 20 percent of the fans and so you’re able to now actually see, if you’re an artist and you’re logged in, you’re able to soon see like, “Oh, I know who those 20 percent are. Those are my true fans. The other folks are just kind of experimenting and listening to my music a little bit.”

 

Dan: Yeah, that makes sense. And I’m sure that there’s a lot of artists that are seeing these results, hearing these results, and they may have established themselves on another service already and this will incentivize them to come and join yours, but if they join, that means that you’ll also have their fans joining as well.

 

Mike: Yeah. I mean, we’ve seen gen— on average, I mean, there’s even more powerful stats. On average, artists that are participating are seeing 55 percent lift in their revenue overall so a massive uptick in revenue.

 

And we’ve seen artists, about 25 percent lift in overall number of artists participating since we announced it too so we’re seeing more artists come in and each incremental artist makes more money, and it really does work.

 

If you’ve got a dedicated fan base, I mean, one of the things that always sort of — one of the key things that kinda irks me about streaming right now is if I’m a fan and I wanna spend $50 on listening to either Dan’s music, I can’t. I’m not gonna go buy Amazon and Apple and Spotify.

 

And so, you’re kinda limited because there are all sorts of complimentary services. But if I have money to spend, I should be able to participate with that artist. Now, I can buy merch or things but it’s not directly around the music itself. 

 

And so we’re trying to flip that on its head and actually say there’s a pathway for those fans to really engage directly with that artist.

 

Dan: Let’s talk a bit more about that pathway because I feel like that is the next step beyond fan-powered royalties, just what you’re doing.

 

Artists create so much power and interest with consumers. I think we’ve seen it at the highest levels with folks like Kanye or Rihanna or Jay-Z and the businesses that they’ve been able to create, but I think a lot of this is also true for artists that aren’t at their level as well. 

 

And what this platform allows them to do is what does it look like to create an opportunity for the artist to develop that stack, develop that suite of services, and how SoundCloud could be a platform to help make that happen?

 

Mike: It is 100 percent a stepping stone. So, when now you know if you’ve got a thousand people listen to your music and a hundred of them are fans, we can give you the information and say, “Who are those hundred fans I have? Oh, wait a minute, I know who those hundred fans are, I can now speak to them directly. And if I can speak to them directly, maybe I can get paid by them directly.” 

 

And then that opens up a whole new sort of way that artists and fans can engage. And then, you know, ultimately, it leads you down into Web 3.0 and blockchain and all the things that you’re sort of able to sort of create once you have that direct connection.

 

And that’s why it becomes a stepping stone. It also allows the artist to really market differently too. You know, most artists right now are putting on pre-save links through listen to my track when it comes out on Spotify, trying to get yourself into a playlist, but if I know I can point towards a service or to services that have a direct fan base and I know who those fans are and they’re gonna listen to me and I know how to engage them, changes the dynamic differently too.

 

Dan: And this is something that we’ve seen a lot in gaming and gaming has truly led the way on this from an industry perspective. And I think, in many ways, music is getting there. 

 

And it’s ironic because I feel like music is often the medium that leads the way in terms of technology evolutions but gaming has been at the forefront of this and I think we’ve continued to see gaming be at the forefront when we think about the potential of the next generation of technology, whether it’s NFTs or crypto or other things related to Web 3.0 opportunities.

 

I think that indie artists will be much more on the forefront of pushing a lot of these opportunities, but I’m curious to hear what you think about major label artists, because you did mention that the labels themselves may be a bit more hesitant to some of these things. So, what do you think that will look like and what do you think may drive some of that hesitancy?

 

Mike: I think it’s one is it’s a different system. So anything different, you have to sort of make sure you prove out that it works. We’re doing so. We’ve had various conversation with major labels, large independent labels. Very healthy conversations.

 

But, any time you introduce something new into an established industry, there’s initially met with either interest or skepticism. We’ve kind of been met with both.

 

Now, we’re able to do it because, unlike other streaming services, we have a unique base of artists that we have a direct relationship with. But, over time, we are definitely eager to expand this because, you know, it doesn’t really matter in a lot of ways whether you’re an independent artist or you’re Kanye or you’re Drake releasing a track.

 

If Drake could know who his true one — I mean, for Drake, it’s probably millions of really big fans, but if you could know them and have a direct relationship closer to them, that’s really powerful. 

 

Dan: Yeah, I agree. I mean, if we look at what Drake did with Certified Loverboy and the album before that, Scorpion, it was right around just over 600,000 albums sold.

 

I know that so much of that is based on streaming numbers that are then backed into those album totals but, still, if there’s a way to identify who were those mega streamers, who were the people that are pushing most of it, I think it would help a lot.

 

One question for you, though, because there might have been something you mentioned back with the fan-powered royalties. I know that there were a lot of people that had talked about the cost of fan-powered royalties and how it is something that is much more expensive than the traditional model.

 

Can you talk a little bit about the cost-benefit and any of the tradeoffs that you may have made with the decision there to go with this route as opposed to the way you have been doing it before?

 

Mike: It’s the same expense for us as doing anything else. Honestly, I think either we built it better than everyone or someone’s not telling the truth because, you know, we’ve really seen this be, you know, as cost effective and simple to calculate. In a lot of ways, actually, just as easy.

 

I mean, we’re able to tell, I know, if you had a user account, I could tell that you listen to my music, you should be able to connect the revenue to those two things.

 

So, yeah, I think others have had challenges to do this technically. I give kudos to our engineering and our product teams and our royalty teams who built it for SoundCloud, but we haven’t seen any sort of uptick in expenses and challenge anyone to see why it really has to be that way. 

 

Dan: That’s an interesting point, because I remember one of the big things that everyone talked about was just how much more expensive it was to do the fan-powered or user-centric royalties. So, that’s interesting to hear.

 

It’d be great to shift gears and talk a little bit more about the Web 3.0 piece of this and what does that look like for SoundCloud? What does the strategy look like and what does the opportunity look like for artists?

 

Mike: So without getting too in the weeds on Web 3.0, crypto, and all that, I think the fundamental notion of what a Web 3.0 platform can provide is very powerful. 

 

I mean, the fact that both the artist participating and the fan participating, to have really a direct and in a lot of ways potential ownership stake in the outcome of that success of that platform, that’s incredibly powerful and it’s something we’d love to explore.

 

Two is one of the things that I think music has is that, as a fan, I wanna show to other fans how much of a fan I am. And it’s like, I was the first person to listen to, you know, Billie Eilish before she broke and got a Grammy.

 

And that, being able to show that to your friends, to other people in your network, to your community, is incredibly powerful. It’s the idea of status. And right now, it’s very difficult to show off in streaming services but status is something that any music fan really sort of wants as well.

 

It is a little bit, you know, there’s some ego involved with that but that’s just human nature. So, with Web 3.0, you both get an ownership component plus you also get to be able to actually express your status in a digital format. 

 

And that’s — those two things together are sort of inherently music is like the perfect art form and the perfect medium for that to come together in.

 

I think we’re in very early stages of this. It’s kind of hearing a lot of the more sort of broad thinkers on the space say we’re probably at the — just as mobile was being developed, this Web 3.0 is kind of in year one or two of really being developed. 

 

And then once someone, either SoundCloud or others, start to develop a very compelling consumer experience around that, it could really break open because of those first two things. 

 

Dan: I also think that given where SoundCloud is as well as some of the other distributors and relative to some of the other DSPs, you’re in a good position to be able to lead that as opposed to, let’s say, some of the other digital stream providers that are more reliant on the major record labels.

 

Given some of the big corporations and partnerships that they have and the major artists that they rely on, they might be more likely to follow some of the major trends, especially if they’re all funneling up into the same big company as opposed to you all who’s working more directly with the artist on the ground who they themselves are probably more likely to lead that front.

 

Mike: Yeah, we have some things in the in the works right now where we have a small team working on it, we’re trying to figure out what the right thing is. A lot of it right now is still ancillary, in terms of like NFTs and some of the other things that are happening,

 

but we’re trying not to make it just a side project, a nice sort of thing that artists can do on the side and actually make it more of a core to what we’re doing. So, stay tuned. We’re figuring out the ways through this, like everyone else, but, you know, we definitely —  similar to the way we produced fan-powered royalties, us being able to offer products and solutions built around Web 3.0 is something that we definitely have an advantage to do.

 

Dan: Right, and this ties back to a point that I remember you making in another interview that you had recently gave. You were talking about how artists are releasing music at a much faster rate than people are listening to more music, and, because of that, we should probably see a shift away from this $10 all-you-can-consume subscription model that we’ve seen for the past few years in the streaming era.

 

It’d be great to hear more about why you think that is and what you think the change should look like and where do you see things going in the future? 

 

Mike: Yeah, I think it kind of touches on what we’ve discussed before. So, I think the research is for media is that you had 5 million, in last year, we had 5 million self-releasing artists going through things like DistroKid or SoundCloud what we offer,  and that’s growing at 30 percent plus year over year. Streaming overall globally is growing at 10 percent so you just say, “Wait a minute, there’s more artists incrementally than there is enough revenue in the space.” Artists are growing faster than revenue.

 

And so, what that means is it’s actually kind of a contraction and the revenue model actually needs to expand and offer more solutions, more monetization. You know, everything from ad supported to subscription to various forms of transactions, because, without that, you’re actually constraining the growth of the industry. And so, a lot of things we’re doing, as you know, I think back to your point you just made is like gaming is a great example of this. 

 

You go into Fortnite and you can buy everything and there’s all sorts of ways to add skins and worlds and all of those different components and it’s not a one-size-fits-all model. Today, in music, I think it’s still too much of a one-size-fits-all model.

 

The industry is back to growth and it’s been fantastic to see music be one of the fastest growing parts of entertainment, but there’s a next evolution that I think we’re just on the early stages of crossing into.

 

Dan: That’s a good point because it makes me think not just about the price that these are set at but also the mentality behind these $10-a-month subscriptions.

 

A lot of them are priced in this way where, let’s say you can capture 10 or maybe 20 percent of the listenership, I’m thinking mostly about, let’s say, Spotify and some of the other DSPs that have that freemium model there, and that can work, but I think the difference here though is that with the future of these platforms, you are no longer trying to monetize for that 10 to 20 percent of user, you’re now trying to monetize for that 0.1 percent because that person might be more likely to buy a high priced item or some other exclusive rare type of thing,

 

and this ties back into what we were just talking about before, with NFTs and things like that, and being able to have the platform that offers that, that could end up being potentially even more revenue for both the artist and the platform that pushes it.

 

So, I think that’s a really interesting point and I think that is where things could be heading. 

 

Mike: Oh, exactly. In Fortnite, you can buy things that don’t actually help you play the game. You just buy things because it makes your self look cooler. In music, I can’t do that right now. And I think that’s accelerated by COVID where a lot of people are still at home.

 

You know, we used to do that through merchandise but the idea of like virtual merchandise and status symbols in streaming services has to come to life.

 

And, again, I think we’re like right about to start to see some of these models. You have a lot of that coming in different — starting to build up in different markets. The kind of US, EU market is still sort of centered around that $10 equivalent subscription though.

 

Mike: Yeah, and it makes me think about — I don’t know if you remember but there was this report a couple months back of this exclusive bag, maybe it was a Birkin bag or something like that, that sold for a higher price in one of these digital environments, I forget if it was Roblox or Fortnite, but it’s sold for a higher price in that environment than it actually did in real life. 

 

Dan: I mean, you should see like some of the NFT art with people. I mean, it’s a digital art in sort of the crypto form being sold for much more than any physical artwork. 

 

You can get very heady in here and say, in 20 years, we’re all gonna be living in some sort of digital version of reality or some blended version reality and so there’s no difference between a digital good and a physical good. 

 

But that model is starting — you’re starting to see that when there’s Birkin bags being sold in games that are more expensive than the real thing. It’s interesting. It’s crazy —

 

Dan: Yeah, it’s wild. And speaking of gaming, I know that you all had partnered with Fortnite earlier this year. There was this tournament you had, I believe Rico Nasty was one of the host, it was cool to see women involved in gaming in that type of way.

 

And I feel like that has to be just the beginning. I’m sure that you all have some more plans, not just maybe for Fortnite, but in these digital environments overall. 

 

Mike: Yeah, we’re doing more. I mean, one of the big areas of focus for us is how to enable SoundCloud within gaming environments. Also, just to help artists, you know? Most artists and most of fans who use SoundCloud today are gamers. 

 

And so there’s just a huge overlap. And a lot of those times when people are playing games, they listen to music too. It doesn’t — it’s not either-or, it’s a lot of and. Yeah, and so earlier this year, we decided we partner with Fortnite, we built a custom SoundCloud world in conjunction with them.

 

We had eight musicians go head to head in a Fortnite battle, hosted by Rico Nasty, who also did a performance and we’d live streamed it on Twitch. 

 

And we actually, I think at that night, we were the — I think we were the number one non-gaming live stream on Twitch that night. So we actually hit some pretty big numbers in terms of the audience. And we’re gonna do more things like that, both bring artists together in gaming and put SoundCloud into gaming environments because that’s where people are consuming now. It’s not always just in a streaming app, it’s in different places. And as more, as we said, as more of the world becomes this kind of digital metaverse, to say, cliché word right now, that’s gonna be more of what we’re gonna be doing.

 

Dan: Right. This market is just so hot right now. Universal just had its public listing, and there’s just so many more opportunities coming up. And I know we talked about a bunch of things, especially on the emergent side already in this conversation with NFTs and crypto, but is there anything else that we haven’t talked about yet that is on the future roadmap for you all at SoundCloud?

 

Mike: Definitely. I think the other two areas, I mean, what we’re offering independent artists and creators is more and more tools and solutions to stay independent longer. So, you’ll see us release, over the next six to twelve months, more products, creator products for artists. 

 

We’re working more and more directly with artists, sometimes on our own to help build them up, and, you know, hopefully help them become superstars, but also sometimes in conjunction with independent major labels as well. 

 

And the idea that we’re really trying to build is, you know, we’re really calling SoundCloud a modern music entertainment business, is the idea of having both artist relationships and consumer relationships or fan relationships at the same time.

 

Right now, in music, everything is a little bit too one side or the other. You’re either a label and you don’t really have a direct connection to a consumer or a fan, or you’re a streaming service, you don’t really have a direct connection to the artist.

 

We’re trying to bridge that gap and try to bring those things closer and closer together.

 

Dan: I’m glad that you bet should the piece about focusing on music entertainment and doubling down as a music entertainment business. 

 

Obviously, many of the other digital streaming providers have focused on non-music audio and other forms of entertainment. What has been the main thing driving your focus on music as opposed to what some of those other companies have done? 

 

Mike: There’s so much opportunity in music. I’m very much a big believer in focus and one of the things we try to do here is we always try to do less things, not more things.

 

And building things for music fans, building products for music artists and creators, helping artists succeed, you’ve gotta be really good at what you do and you have to be focused in order to do that. 

 

And so by going into podcasting, which a lot of people think is a natural extension, I mean, the way you do it is fantastic but it’s different than going into a studio and releasing music and trying to promote your music on social media and streaming services. 

 

It’s also a different consumer experience. Podcasts serve, you know, 30 minutes long, most tracks are two minutes. There’s transcribing and all the other things that you have to — to be really good at podcasts, you have to be focused on that. 

 

And so it’s basically, it’s a choice that we made at SoundCloud and we’re saying there’s so much opportunity in music but we’ve gotta be really good at music. And you can’t be good at everything. 

 

Dan: Yeah, I get that and seeing how some of the other companies have played it, it makes me think of two things: (a) podcasts are a very long game. 

 

Even though some of these other companies have been making eight-, nine-figure investments in podcasting, it is a very long game to be able to see the true ROI of that. 

 

And, (b), podcasting itself is just such a different type of product and platform and what I think a lot of the other companies have tried to do is combining the non-audio experience with some of the music that they may have exclusive rights to and even that itself is a completely different type of product. 

 

And I think it may be very advantageous to those creators that may want it all together but some artists just wanna focus on making music and some of those other features just may not be as relevant for them.

 

Mike: Yeah, and it’s a great promotional tool for artists. It’s great listening. I mean, I listen to podcasts, I listen to music, you know? And a lot of the other streaming services use it to steer costs. Music is expensive, you know? You have to support the artist base, both recorded and publishing.

 

So, you know, I do believe a lot of the other streaming services look at it and say, “Oh, podcasting, even though it costs us a lot of money, it actually may in the long run be less expensive than music.” And we’re just not making that call to say we’re gonna try to do both of those things at the same time. 

 

It’s kinda like trying to be a cable provider and you’re offering sports and news and shows. That’s great, but that’s really just a distributor of all sorts of things, it’s not just focused on one. We have to focus on one.

 

Dan: How do you look at video? Do you look at video in the same type of way as non-music audio or do you look at it in the same type of music entertainment lens?

 

Mike: No, actually, video I think is — music’s a visual medium, you know? As fans, you see music live, it’s visceral, you can kind of feel it differently. So, we, right now, in our app, you’ll see it’s primarily audio only but that doesn’t necessarily mean we have religion around that.

 

We do believe that video is a core part of music and so — and it doesn’t necessarily need to be like music videos but the interaction that a fan has goes deeper than just listening to music too. 

 

And so many musicians right now, they’re visually aesthetic, they’re creative, they’re doing things outside of just the track, listening to the track, that you really need to feel and see to actually get understanding with that artist.

 

Dan: That makes sense. So, tying back into the music entertainment business that you’re building, one of the things that I’m often hearing in the music industry now is just how much more expensive it is to acquire new artists and develop new artists, and I’m curious if you have seen any of those changes make any type of impact on how you’ve been measuring things, specifically with what your customer acquisition cost may look like and how your lifetime value for the artists that you’re attracting to your platform, have you seen any type of meaningful changes there or any differences?

 

Mike: We haven’t seen any major increases in the cost of customer acquisition or CAC. It’s still pretty consistent, but you have to keep up with it literally weekly. 

 

I mean, there’s things that, as you’re trying to build, and this is even for any artist if you’re trying to build, same thing, we’re trying to build audiences, we’re trying to get people to use our products and services, we’re trying to resonate out there in the market, and so you have to be able to both understand what’s happening, things are changing. I mean, privacy changes are changing like monthly. I mean, Apple’s changing a lot of the ecosystem with what they’re doing through their privacy and data sharing right now. 

 

You’re also having to keep up with a lot of people who are throwing a lot more things out there once and so it doesn’t necessarily change the way the cost of us trying to do business but it changes the way you have to keep up in the pace.

 

And, interestingly, I think over the past year and a half, during COVID, things have gotten more — have gotten faster. The rate of innovation has gotten faster. The rate of people trying new things, the rate of people experimenting with different marketing tactics, both creatively and sort of on the more analytical side of it, it’s just all going faster and so you have to keep running at it as fast as you can to keep up. 

 

Dan: I bet. And I know last time that we had talked, you mentioned how the Middle East was one of the really strong areas that you’ve had for international growth. Is that still the case and are there any other regions that have been growing as well?

 

Mike: We’re definitely seeing growth in the Middle East, in particular, still been unbelievably strong for us. We’re starting to start to see how we can sort of be more proactive in the market there. We’re seeing a lot of up and coming musicians now. Most of those musicians, they’re still — generally, the way we think about it is like 80 percent of the music that’s listened to in a country comes from that country. So, in the US, for example, 70 to 80 percent of the music listened to in the US is from US-based musicians. 

 

In Egypt, 70 to 80 percent of music that’s listened to in Egypt is not from Trippie Red and Drake and all the US hip hop artists that we see in the US, it’s coming from local Egyptian musicians. 

 

And so, right now, we’re still seeing that growth but what we’re really now trying to figure out is how do we get teams on the ground? How do we help support those artists? The music ecosystem works differently in different markets and so we’re trying to understand how we can take that to our advantage. 

 

We’re also seeing growth in Brazil, Latin America, and Southeast Asia. So, a lot of the same trends that are happening in the US and the EU are translating over there as well. 

 

Dan: That makes sense. And I imagine that there’s certain things that are just standard across the board, like your meetups, your select sections, those are always gonna be the same regardless of where you’re doing them. 

 

But I imagine that with certain things, there may be some cultural differences or unique things in that ecosystem, let’s say, the Middle East, that may work in that region but just wouldn’t make sense elsewhere. Are there any examples of those?

 

Mike: It’s a great question. We’ve gone and started to do things where we’re going in more proactively. We just — we have a series that we call Scenes on SoundCloud where we find not necessarily new genres but new kind of combination between genres and locations.

 

So, one of the scenes we’re focused on is East African underground and that, we did a few things and we — and a lot of it’s the same but a lot of it’s slightly different. You have to go in and do — we do go in and do events down locally. We’ve tried to help artists collaborate that they wouldn’t have collaborated otherwise.

 

Some of the things that are probably slightly different internationally is the ways to generate revenue for artists. So, for example, in the Middle East, you know, the idea of a $10 subscription that people pay for doesn’t really exist. A lot of it’s billed through the mobile provider. 

 

There’s a lot more branded opportunities versus music direct opportunities and so you start to see some of the nuances. But for the most part, it’s artists trying to make music, trying to find fans, us trying to provide audiences for those artists and provide the products that we can, so a lot of it’s the same but there’s always these nuances too. 

 

Dan: Yeah, so much of it is gonna be the same across the board regardless, but I have thought a lot about that willingness to pay and just how different that could be in different regions. 

 

There’s obviously countries where $10 a month for a digital streaming subscription is not gonna cut it and, in some countries, $2 a month isn’t gonna cut it either. 

 

And, at some point, the model may not necessarily make the most sense but if even some of the more flexible models that still do rely on some type of monetization, whether it is through branding or other opportunities, there is some trickle down that eventually impacts everyone so it’ll be interesting to see what shakes out but, ultimately, it just will require people to have a more broad expectation for what can happen. 

 

Mike: Yeah. It looks very different and I think one of the things were — international growth doesn’t mean you find an artist in Egypt and that artist blows up in the US. I mean, you gotta make sure that artist really works in Egypt and that’s where you go into the sort of the different ways you need to sort of build up and the ecosystem there. 

 

And a lot of these markets, there also isn’t the established label ecosystem too. So, the idea of being an independent artist is kind of, for a lot of people, it’s the only way forward. You may not have a Republic or an Interscope knocking at your door to sign a big deal because there aren’t those labels.

 

Now, a lot of the major labels and others are starting to put in infrastructure but it’s still very early days. 

 

Dan: Yeah, I definitely see it a lot of that too. Well, we’re going to the tail end but, before we let you go, I’m remembering one of the things you had said in our first interview where you mentioned that you saw SoundCloud positioned as an accelerator. 

 

And this was of course before the creator economy and many of these other terms really became as commonplace as they are now. And, for you, I wonder if, just given the place that SoundCloud is, if that vision has grown or expanded, because I think that, in a lot of ways, you’re not only building an accelerator but it also is a home where an artist can stay as well so it can accelerate you to different heights, if you want that, or, if you wanna stay here, you can reach many of those same heights too given what you’re building towards. 

 

What are your thoughts on that?

 

Mike: That’s a very good way to put the way of what we’re trying to build. I mean, it goes everything from uploading my first track to finding my fans to building a fan base to, “Wait, oh, I can distribute music into other streaming services, and now SoundCloud can really help me build my career.” 

 

Yeah, in a lot of ways, we’re trying to be the home base for that artist to build out their career. And artists will always decide, we never sort of constrain an artist to go somewhere else if they want to, but we’re trying to put in the pieces along that puzzle so it’s not just an accelerator, it’s a little bit more than that and a little bit more than that and a little bit more than that and we continue to build. 

 

And so you’ll see us kind of do everything from products and technology that service hundreds of thousands, if not millions, of artists, to things that, you know, service potential superstars as well. 

 

Dan: Nice. That makes sense. Well, Mike, before we let you go, is there anything else that you wanna plug or let the Trapital audience know about? 

 

Mike: Keep doing what you’re doing, Dan. What we need most. Actually, they help us quite a bit think through things or you confirm a lot of the same thoughts that we have. So, I’ll give you a plug back. Great stuff. 

 

Dan: Oh, thank you. Appreciate that, Mike. No, it’s been a pleasure. 

 

Mike: All right. Talk to you soon.

Dan Runcie

Dan Runcie

Founder of Trapital

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