The economics of music streaming is currently under close scrutiny in the UK thanks to an ongoing Government inquiry, where the CEOs of Universal, Sony and Warner appeared before Parliament on January 19.

It is inevitable that the outcomes of these rather headline grabbing evidence sessions will have an impact on the global music industry.

So far, the sessions have raised plenty of discussion points — namely the paltry pay-outs that reach songwriters and artists as a result of streaming’s market share model and individual deals, a lack of transparency over how royalties are calculated and accounted for, and the relationship between streaming services and major record labels.

On one side of the debate, streaming has ‘saved’ and democratised the music industry and brings heaps of potential as services penetrate markets like never before monetised.

On the other, the major labels and streaming services are operating a “like a cartel” that benefits label market share and leaves creators earning next to nothing for their work and with little choice over the terms under which it’s used.

As the debate continues, a number of new streaming services are pledging to offer more choices via seemingly ethical ways for fans to listen to music and for artists to sell their work.

One of those in Audius – a San Francisco-based start-up that’s raised nearly $10m from Silicon Valley investors for a blockchain-based digital streaming network that connects fans directly with artists and exclusive new releases.

Through its monetisation programme, which is still in development, CEO Roneil Rumburg tells us that the platform aims to allow artists to set the rate for their own work and capitalise on data that shows them who their superfans are.

When payments are able to be exchanged between fans and artists, the Audius network will keep 10% of revenue to help support itself and the rightsholder will keep 90%. Because artists set the conditions on which their content is accessed, Rumburg says that advertising could be possible in future for artists who opt-in.

Since launching in 2019, Audius has reached 1.3m users listening every month, over 50k people have uploaded content and the platform hosts around 200k tracks.

In October, its top 10,000 users, which included artists, developers and fans, were gifted cryptographic tokens that essentially grant governance of the platform, allow holders to vote on developments and features and operate businesses on the decentralised network.

Rumburg explains: “I think artists are feeling like they have a seat at the table for the first time. The team that built the initial version of Audius isn’t the one in control of what features are developed and what changes happen in the future.

“It’s actually all of the artists that have made Audius something today, and brought those 1.3m people here to listen to music — they are the ones that have the power to make those changes.”

Unlike major players like Spotify, Audius the company doesn’t exist to make a profit — investors are instead investing into the cryptographic token. This begs the question, how does the Audius team sustain its work in future?

“Our company exists to build these open source tools and put them out to the world and that naturally will mean that at some point, we no longer have money to do that,” Rumburg explains.

“What we would do [then] is ask the community of folks holding tokens to vote to support our team with more tokens in exchange for the team developing features and doing things like that. But effectively, there is no real business model.

“Our company is almost like a consulting shop from a business model perspective — we do work on these features and hope that the community will want to keep supporting the work that we do.”

Below is chat by Music Business World with Rumburg about various issues including copyright infringement within the Audius platform, the impact of multiple payment rates on user experience, his ultimate ambitions and perspective on the issues that exist in the wider streaming economy.

CAN YOU TELL US MORE ABOUT THE MONETIZATION PLAN FOR AUDIUS AND WHAT THAT MIGHT LOOK LIKE?

This is something that the community will need to ratify into place but I can share what our team has built and what we would hope to propose to the community. What we’ve built is what I would call a content unlock primitive and what it means is, as an artist, you have the ability to set conditions upon which your content can be decrypted by a user on the Audius network. So let’s say you upload a track to Audius and you want to set your own streaming rate, then you set the condition — for example, this content can only be unlocked if a one cent payment is made.

The much more interesting evolution of this is having a fan club with an Audius rate. So you could pay a recurring monthly subscription specifically to an artist and be able to get exclusive content from that artist. The thinking here is that folks could use some of their core catalogue or tentpole pieces that everyone knows and loves as marketing to bring people into this funnel to up-sell them into these more premium types of content and experiences, where folks typically have a higher propensity to pay or they’re willing to pay a more meaningful amount.

My personal opinion here is that I think this idea that all streams should be treated equally just doesn’t make sense for maximising the amount of revenue to the artist. There are always going to be a section of fans that want to buy your merch and come out to shows and engage more deeply with you as the artist.

Streaming platforms that exist today, because they don’t have that direct connection between the artist and the fan, there’s never been an opportunity for an artist to be able to discover who their superfans are and how they can monetize that group of people more effectively. Our thinking is that by giving control of that relationship back to the artist, and then giving pricing power back to the artists like on a per track basis, all of that freedom will create much more interesting monetization strategies.

HOW Will DIFFERENT PAYMENT STRUCTURES FOR DIFFERENT ARTISTS WORK FROM A USER PERSPECTIVE? STREAMING SERVICES THAT CHARGE ONE MONTHLY SUBSCRIPTION FOR ALL CONTENT TEND TO BE QUITE SEAMLESS.

Despite being this decentralised crypto powered thing, our team has really gone out of its way to make sure that Audius looks, feels and behaves like a typical consumer application that you might be used to using. We see ourselves extending that ethos into monetization by effectively having a network-wide streaming rate that is voted into place by the community and artists can choose to be at or below that.

The user would not be prompted to pay every time they click play — they’d either top up a pre-paid balance every so often or could pay for a recurring subscription to the whole network that would get access to anything that’s at or below that network-wide streaming rate for the artists that have chosen to opt into that.

But if you’re an artist who’s like, ‘Well, I want to charge $100 every time someone listens to my music,’ the user interface would prompt the user when they stumble upon a track that’s monetised above that network-wide rate and say, ‘This is more expensive, are you sure you actually want to listen?’ to make that a more conscious choice.

A lot of artists we work with feel that the Spotify model of streaming payment has cheapened their music — people treat it as background noise because there’s no investment coming from the user into that experience of listening. And for that reason, there are portions of their catalogue that folks explicitly want to charge more for with the knowledge that far fewer people would end up listening to it. But those people who do listen to it would do so very thoughtfully — if you had paid $1 to listen to something, you wouldn’t put it on in the background while you’re doing something else at home.

ON THE SUBJECT OF FAN CLUB-STYLE OFFERINGS WITHIN AUDIUS — HOW DOES THAT DIFFER TO WHAT PLATFORMS LIKE PATREON AND BANDCAMP ALREADY OFFER?

It differs by marrying the streaming user experience with a fan club offering. There’s a lot more data available to the artists in terms of who they should be targeting and offers around that. But also, our hope is that as a user, you can actually earn your way into that fan club, too. So you know when you were a kid and didn’t have enough money to go out to the record store and buy stuff, what if you could engage with the artist’s content to a sufficient degree and actually earn your place in that community?

A lot of the thinking that we’ve started to pursue was inspired by Bandcamp and Patreon and what both of those companies have done for artists, their earnings and getting back to that direct relationship between the artist and the fan is really admirable and commendable. We see ourselves wanting to carry forward that torch of artist empowerment but doing so with a different user experience.

Patreon has become this great place for artists to build up a super fanbase, if you will, but without native streaming features and a broader funnel that you can source fans from. Bandcamp is a different case, in that their model is still oriented around purchasing and downloading tracks, for the most part. They are now just starting to make some moves into streaming but without a free offering alongside of it, there’s no funnel that you can, again, source fans into. So it kind of falls into the same discoverability problem that a lot of folks on Patreon have.

The frustrating thing to me is a lot of fans almost see these things as charity — like ‘I want to give some money back to my favourite artists because they don’t make any money.’ It’s not, ‘I am getting a unique user experience and unique set of content by doing this.’ It’s almost like this altruistic motive and it doesn’t need to be.

There could be offerings from the artists that are so compelling that folks actually want to go, hang out there and join that circle because they can’t get those offerings otherwise. I think that’s the thing that we as a broader music industry need to challenge to be able to make progress. Fans should not feel like they’re giving charity to their favourite artists to support them, that’s not a sustainable way of thinking. Music is inherently valuable and should be valued.

IT WOULD BE OBVIOUS TO ASSUME THAT AUDIUS, ALONGSIDE OTHER STREAMING PLATFORMS THAT ARE OFFERING A MORE ETHICAL WAY OF REMUNERATING ARTISTS, WILL ALWAYS BE NICHE OFFERINGS WHEN THE MAJOR PLATFORMS ALREADY HAVE SO MUCH TRACTION. HOW REALISTIC DO YOU THINK IT IS THAT AUDIUS WILL BE ABLE TO GROW AT MASS SCALE? IS THAT EVEN YOUR AMBITION?

I would start by challenging the premise there a little bit in that most of our users today are not coming with that altruistic motive in mind. They’re actually coming because there are tracks on Audius that they haven’t been able to find elsewhere. If you take the same catalogue that you have on Spotify as an artist and throw it up on Bandcamp and on Patreon and say, ‘Hey, here are places where you can support me, but you’re listening to the same thing that you could listen to on Spotify’, you’re naturally going to draw these altruistic users who are just saying, ‘I want to support my artists, no matter what’.

To the broader question of does that relegate us to a niche forever —we see ourselves as being this set of tools for artists to build a fanbase and to monetize them more effectively. If you’re signed to a major label as an artist, that’s effectively what the major label is for you and that’s part of the reason why we’ve naturally seen more independent artists gravitate towards Audius and that’s the segment of the market that we want to continue to serve.

But we’re only a year old, a lot can change in the future and our ambitions are definitely larger than being a niche player for fans that are altruistically wanting to serve their artists. We see ourselves as being the future place for superfans of artists to come together to hear exclusive music from those artists and also to meet the other folks who are part of that fandom and to engage with different types of content. Our mission is just focused on getting artists paid, and helping them get paid in the best ways possible. That’s the carrot that we’ll keep chasing.

DO YOU INTEND TO MOVE BEYOND THE SELF-RELEASING ARTISTS MARKET AND SECURE MAJOR LABEL LICENSING DEALS IN FUTURE?

We would be very open to it but because we don’t set terms on Audius, that’s almost like taking a step back. Our company is not here defining what the streaming rate is so what would a licensing deal look like? It’s not really something that I think makes sense from the traditional angle and deal structures.

However, what we have built is this very useful, generic set of tools that a label could use to do similar things — a label could build up fan clubs around their artists, for example, and we’ve even gotten interest from folks for creating a label specific subscription within Audius.

 

FINAL QUESTION: WHAT’S WRONG WITH THE WIDER STREAMING ECONOMY?

There are so many things. I touched on that one size fits all approach and I think that’s the single largest problem. But as an extension of that problem, you don’t even know what the size is — there’s this black box that sits between artists or rightsholders and fans and you have no idea what the calculus is that’s going on behind the scenes that determines why you’re getting paid like 10 bucks or whatever for 100,000 streams. The problems that exist here really come down to transparency and accountability.

The symptoms that we see of those problems are this one size fits all approach that we have and the fact that artists feel like they have no idea why are they earning, what they’re earning and who their fans are and how did they find the music and all of this stuff. It’s technically possible to give artists these freedoms and powers, so why don’t they? Why don’t those things exist?

This one size fits all, non-transparent approach, is a great fit for making as much money as possible as a corporation and I think streaming shouldn’t be something that’s owned by a corporation. As an artist, your ability to distribute content should not be something that’s governed by a single set of shareholders whose goal is to maximise their shareholder value. Streaming should be something that’s owned by the community — almost like a public utility.

When there’s a company building a platform to extract value from the creators that are sharing stuff on that platform, the platform and the creator are always kind of at odds with each other. And that brings us back to the core motivating reasons for why our team is building Audius and why the community that has rallied around Audius has become so meaningful in the last year.

If you flip that question on its head and say, ‘Well, what if there is no company? What if the means of distribution are something that’s actually owned and controlled by the community itself? What if those are the same people? What if you, as a creator, in the process of creating on this platform and building a fanbase on this platform, are earning the ability to govern that platform?’ These are the things that we’re really excited about.

Spotify and other companies are acting completely correctly from a game-theoretic perspective. Their goal is to maximise shareholder value. So what are they going to do? They’re going to launch things like a promotional streaming rate, ‘Oh, if you’re willing to cut down the amount that you earn as an artist, we’ll help promote your music because now our cost of inventory is lower’.

These are logical things for them to do when their mission is to maximise shareholder value. What we’re trying to do here is to say, ‘What if our mission could be different? What if the company model also should not be one size fits all?’ Our hope is that in structuring Audius in that way, we have an opportunity to chip away at some of these broader issues. Music Business Worldwide

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