Bandcamp, Letterboxd, and the Superfan Opportunity

I love it when two startup acquisitions capture a topic I’ve been waiting to discuss. But before we get there, let’s set the stage for these two companies.‍

Bandcamp is a marketplace and online community for music lovers to buy albums and products from their favorite musicians. In 2021, Epic Games acquired Bandcamp. Now, 18 months later, amid a 16% workforce reduction by Epic Games, Bandcamp has been sold to Songtradr, a B2B music licensing company.

‍Letterboxd is a social network for film lovers to review, track, and share lists of their favorite movies. Tiny, a Canadian investment firm, just acquired it.

‍Bandcamp and Letterboxd are both profitable, raised minimal to no outside capital, and focused on serving passionate, niche communities. They added value for their users and didn’t charge much for that value. Bandcamp is well known for its no fees charged on Bandcamp Fridays. Customers love them both. It’s no surprise that bigger companies wanted to acquire them.

These moves are also quite timely. Music and entertainment are under-monetized industries; all eyes are on the superfan to help close that gap. A 2023 Goldman Sachs report estimates that 20% of music listeners are superfans of at least one artist and are willing to spend 2x more on music than the average listener. Superfans are a $4.2 billion opportunity in music.

But Letterboxd and Bandcamp attracted many superfans in their respective sectors because they focused on community rather than maximizing revenue. They left plenty of money on the table, which is likely a feature, not a bug.

The opportunity (and challenge) is to find the right balance between leaving too much money on the table and not treating superfans like an ATM.

According to The New York Times, Letterboxd has 10 million registered users. Let’s assume 5% of those users (500,000) are on its $19 per year or $49 per year tiers; it likely generates over $10 million in annual revenue. That’s a solid number, but Letterboxd’s cultural influence probably outweighs its $50 million valuation.

The same is true about Bandcamp. A sharp analysis by Andrew Thompson estimates that Bandcamp’s 2020 net revenue was $21 million. But this service has the cultural capital of a famous local independent bookstore, but at scale.

In a recent blog post, Homebrew partner, VC, and longtime Trapital supporter Hunter Walk wrote a blog post about why he’s still bullish on the creator economy and believes that most startups aren’t greedy enough:

‍“Too many [creator economy] startups started with sub 20% take rates or venture-subsidized subscription prices. I get it – you want to get to scale first, don’t want to be greedy and reach into Creator pockets. But it’s really tough to get your P&L rightsized this way… how much value would you have to create for a Creator in order to justify taking 25% – 50% of a transaction instead of 5%? A lot of value! And it totally resets how you think about a minimum viable product offering or what success can be.”

Bandcamp’s take rate is 15% on digital items and 10% on physical goods. These users don’t want to be charged more for the same, but as Songtradr brings Bandcamp under the fold, there are likely value-add services that can justify a higher take rate.

The same applies to Letterboxd, since its premium tier costs less than $5 monthly. What are the digital and in-real-life opportunities that could elevate its service? In music, a lot of that superfan revenue has gone to live music, vinyl purchases, and other experiences that attract a subset of an artist’s biggest fans. The opportunity is to maximize that.

Based on a quick search of responses on X (formerly Twitter), “Please don’t F this up” is the general sentiment from the loyal users of both Bandcamp and Letterboxd. In Songtradr’s blog announcing the deal, it plans to grow music licensing opportunities for artists using Bandcamp. Meanwhile, Tiny is in a very different position as an investment firm, but the Letterboxd announcement also came with plans to expand the product into TV. Despite the guards being up from their respective communities, the moves make sense.

The broader challenge may exist for the companies that leave money on the table but are viewed very differently by consumers, like music streaming services or nationwide theater chains. They all want to offer more products and services to the superfans, whether by building themselves or through acquisition. The right balance may be more challenging for a billion-dollar company than a niche community platform. But finding that balance is a prerequisite to succeed in serving superfans.