Spotify (Finally) Lets Users Tip Artists

Hey! Happy Friday. Two quick things:

1. I need to clarify yesterday's email on Trapital's consulting and advisory services. In yesterday's email I said it was "1-1" offering. To clarify clients will mostly be companies, not solely individuals. If you are interested and have questions, please fill out this form.
2. I'll write about Travis Scott's Fortnite concert next week. I know it's the hot topic, but there's a lot to cover. Stay tuned!

Today's update is on Spotify new tipping option, EMPIRE's new content on Instagram, and what Facebook's investment in India's Jio Platforms means for music streaming service JioSaavn.

Spotify (Finally) Lets Users Tip Artists

From Spotify for Artists:

That’s why, today, Spotify for Artists is launching a new feature: the Artist Fundraising Pick. Just like artists can select any piece of music to highlight on their profile as an Artist’s Pick, they can now highlight a fundraising destination (in addition to their Artist’s Pick). 

First and foremost, this feature enables artists who are interested in raising money to support themselves, their bands, or their crews, to get the word out to their fans on their Spotify artist profiles. We have a strong group of initial fundraising partners: Artists can choose to add a link to Cash App, GoFundMe, and PayPal.me.

It's about time. All it took was a pandemic!

The way it's currently structured, Spotify will not take a cut of the donations. Funds go directly to the artist and their causes.

The global streaming community has wondered whether Spotify would ever do this. It was mentioned often because Tencent earns 70% of its revenue from "social entertainment services" including tipping, virtual gifts, karaoke, and merchandise. Many critics have said, "well if Tencent can do this, why can't Spotify?"

I have made this comparison myself, but I still had issues with it for a few reasons.

First, Tencent is heavily supported by the Chinese government. The conglomerate doesn't face true competition. Its business decisions are less consequential than a company operating in a capitalist society.

Second, Tencent can earn 70% of its revenue from tipping-related services because it takes... wait for it... a whopping 70% cut from tips! That would never fly in the United States. Gratuity is seen as a direct payment. If people think that the App Store's 30% cut is heinous, they might riot if Spotify tried this.

That said, there's nuance. Spotify could have adopted this 2-3 years ago when everyone was pushing for it. It didn't need to take a steep revenue cut. The ability to tip on Spotify would keep users engaged on that platform.

It also could have teamed up with Cash App much sooner. Three years ago, artists weren't giving away money on Cash App like they are today. But now, Cash App is its own wave in hip-hop. There's less need for Spotify to bridge the payment gap between artists and fans.

But better late than never, right? It's great to see the platform used for good. I recommend you read the rest of Spotify's blog post for more info on Spotify's contribution to MusiCares, CDC, WHO, and other organizations.

Instagram and EMPIRE team up for new IGTV shows

Instagram Live has gotten all the attention lately, but IG has other hip-hop plans underway.

From Billboard:

"Indie record label, distributor and publishing company EMPIRE has paired with Instagram to debut two new shows of original content on IGTV, the company announced today (April 21). The shows have been developed by the company’s in-house creative team, EMPIRE Studios, with the first series kicking off today... 

The first of the two shows is called Canvas Conversations, described as an interview series between "a musician, a visual artist and a comedian" -- this is not the start of a joke set in a bar -- who will have an "illustrated conversation about life and music," according to a press release... 

The second show, Cover Story, will go in-depth with artists who have designed some of music’s most memorable cover art for albums and singles, including showcasing rough drafts and alternate versions. The show is currently in pre-production.

Last fall, EMPIRE's VP of Digital Moody Jones was a guest on the Trapital Podcast. He spoke about consistency in an artist's social media presence and their music. These shows can highlight that consistency on a platform that EMPIRE has succeeded on.

The other benefit is the size of Instagram Live's audience. As I wrote in last week's Instagram Live article, the app has hundreds of millions of daily active users. The friction is incredibly low, so it's easier than ever to consume content.

But the Verzuz challenge sheds light on Instagram's shortcoming: its performance. I already acknowledged that other platforms are better equipped to handle millions on a livestream. That's given. But I didn't expect IG Live to crash on Monday for Babyface and Teddy Riley's battle. It can't take more than 500,000 viewers? Really? Previous IG Lives with Justin Bieber, Tory Lanez, and Taylor Swift were close enough to that threshold. IG is more reactive when it should have been proactive. EMPIRE's shows aren't on IG Live, but it's still Instagram.

The 11-minute episode is in that Quibi, Facebook Watch, YouTube web series time frame. IG may make the most sense today, but there are other networks if technical issues persist.

What Facebook's investment means for JioSaavn

Earlier this week, Facebook made a $5.7 million investment in Indian telecom operator Jio Platforms. I recommend you read the analyses from Stratechery (paywall) and The Verge on the deal. I am covering it here because the conglomerate is the parent company of JioSaavn— India's second-largest digital streaming provider with over 100 million active users.

This investment may cover some of the challenges I mentioned last fall in The Globalization of Hip-Hop, Part II:

International popularity is no longer an issue for rappers outside the U.S., but monetization is. Music piracy is still rampant across the world. Here’s what I wrote about Indian hip-hop in a recent Trapital member update: 

“According to Music Ally, just 1% of the monthly active users of music streaming services pay for their service. Spotify has boasted about its subscriber growth in India, but a majority of those users are likely on free trials and heavily-subsidized promotional offers. Music piracy is also a huge challenge in India. It’s nearly twice as high as in other countries.” 

Spotify sells monthly subscriptions for less than $2 in India and still pushes to gain traction. The country’s own digital streaming providers, Ganaa and JioSaavn, are priced lower and have had strong growth, but run at a steep operating loss and needed an influx of capital, respectively.

Each DSP — Ganaa, JioSaavn, Spotify, Apple Music, and YouTube— is playing the same game. They're spending upfront to acquire customers now. Per-user monetization is low, but economies of scale (and scope) should work in the winner's favor. As Jio's mobile footprint expands, the streaming service should follow.

The interesting opportunity is in ecommerce. JioMart had already collaborated with WhatsApp on digital transactions for small Indian shops. This can also help JioSaavn. More artists are relying on ecommerce, especially since live performances won't be back for a while.

Adjustments will need to be made in India though. Adoption is already low. Just 1% of users pay for a music subscription that costs less than $2 per month. I doubt that most of these listeners are willing to drop $70 on a Beyonce Homecoming t-shirt. The strategy will need to be adjusted. To attract the masses, artists can sell less expensive items, virtual gifts, or something similar. Or, JioSaavn can focus on the small subset of folks who can afford these luxuries and focus there. The integration opportunity is there.

Hope you have a great weekend! One of my favorite podcasts, Dissect, just started its newest season which is dedicated to Beyonce's Lemonade. I'll check it out this weekend!