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How Artists Can Win When Music Is The Loss Leader

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Photo Credit: Getty Images

by Dan Runcie

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How Artists Can Win When Music Is The Loss Leader

Amazon Prime Music and Apple Music both trail Spotify in paid subscribers, but it’s tough to compare when they aren’t playing the same game.

Spotify is the pure-play digital streaming provider. The Swedish company wants you to stream its playlists, but it really hopes you listen to its higher-margin content like podcasts and audiobooks. But whether you listen to Bad Bunny or Bill Simmons, Spotify sells you content in an era where content has become the loss leader for many companies.

Amazon hopes its upcoming Lil Baby concert after Thursday Night Football and NFL Black Friday 2023 broadcasts leads you to buy more computers off Amazon (so you can launch a startup that relies on Amazon Web Services). Apple hopes its Super Bowl Halftime Show sponsorship leads you to buy more AirPods. It’s not a coincidence that these companies spend billions to sponsor content, and Spotify doesn’t.

These trends aren’t new, but they have accelerated in recent years. So who ultimately wins when content is most lucrative as content marketing?

Artists with better economics on the content itself

In music and media, content marketing isn’t new. Artists have used music to promote their tours for decades. And media companies have used content to sell high-end conference tickets. But social media and technology has accelerated this shift further. When it’s cheaper than ever to produce content, there will be more content produced than ever before.

It turns streaming content consumption into a volume game. When many superstar artists hope their album gets 200+ million streams in its first week, the terms of their deals matter even more. In most cases, the record labels and publishing companies win since they often own the material, but artists who own their assets are in great shape.

It’s not a coincidence that Republic Records’ artists Drake, The Weeknd, and Taylor Swift have signed more lucrative deals in recent years and are now releasing albums more often than they did before. It’s the same reason why Master P and No Limit released albums every other week back in 1998. When the numbers worked in their favor, it’s in their interest to drop new music on the regular.

Artists like NBA YoungBoy or Curren$y take it even further. They have new projects every other month. In volume games, it’s more lucrative to be consistently good than occasionally great.

The downside is that this can cheapen the music. Good art takes time. If Beyonce dropped albums every other month, they wouldn’t sound like Renaissance. But streaming does allow flexibility. Artists can still release singles, EPs, soundtracks, mixtapes, and collaborative projects to stay present while saving their best for the studio album.

This is also where NFTs can come in (and web3 music opportunities more broadly). Artists can use NFTs to make some of their music and experiences more exclusive, which has inherent value itself. These artists can also identify and connect more directly with their diehard fans, which isn’t possible on many streaming services.

Artists with maximum reach on the content as well

Even if an artist owns their masters and publishing, if their ultimate goals are to sell out stadiums, launch a company with global reach, and invest in other companies, then it’s in their interest for their content to reach as many casual fans as possible.

I specified “casual” because diehard fans are already bought in. They already listen to the music and will attend the artist’s shows no matter what. And for many successful independent artists, serving their non-diehard fans doesn’t matter. These artists can focus on their niche however they choose and let the major artists try to maximize everything else. It’s the barbell effect, but for music.

But for those who want maximum reach, their casual fans need an extra push. These are fans who generally like the artist, but they don’t follow the artist religiously. With the right push though, they can be sold on the next event or the big product.

This is why artists still rely on record labels. They offer that push. They help capitalize on the casual fanbase by maximizing exposure. Through marketing and distribution, they amplify the artist’s content. So when it’s time to launch the higher-end item, they are more aware of it thanks to the content and everything surrounding it.

This is an opportunity to maximize the artist funnel

Economics matter for high-end products too

For most artists, touring is that high-end product. Their music is marketing for concert tickets. Touring can be lucrative, but the cost is high and time-consuming. It’s not uncommon for artists to do 150-200 shows in a calendar year. With all that time on the road, there’s not much time to do anything else.

Many artists have done well selling physical products, like beats by dre, Fenty Beauty, and Ciroc. Artists often make more money from successful products than a successful tour. It often takes years (decades) of music and touring to get there though. But when it works, it’s great. These products aren’t directly tied to the artists’ “labor” on stage, so the production can be scaled. The cost of goods sold can be high depending on the product, but scalability helps.

This is one reason why SaaS products are even more lucrative for artists to launch or invest in. Beats by dre’s streaming service was the underlying product behind Apple Music. Nas’ investments in both Lyft and Coinbase paid off well. A lot of software has cheap or very low marginal cost to serve an additional customer. If one thousand or one million users use the product, the cost doesn’t change that much. Sure, there is high risk associated with startups. Most of the companies will fail. But the ones that take off will more than make up for it.

And many of the ones that succeed have used hip-hop music and content from artists to attract users and reach unicorn status.

The real opportunity for artists and creators

For years, artists have had their issues with Spotify for the lower payouts from streaming and the overall devaluing of music. But that music still has value in streaming, especially for the artists who make the most popular hits. It’s in the artist’s interest to have the most favorable terms possible for their music, maximize the reach of their music, and have healthy margins for any high-end products or services that their music helps them sell.

In the game of content marketing, no one makes content with higher ROI potential than a talented musician making a generation-defining album. It’s in the artist’s favor to get a slice of the upside at the highest levels possible. Otherwise, whoever owns their content will likely do it for them.

Dan Runcie

Dan Runcie

Founder of Trapital

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