How Technology Can Help Artists Make Money From Music

‍The digitisation of music distribution

The past decade has seen notable changes in the music industry, with the shift from physical to digital distribution perhaps being the most consequential. This shift, which has seen the anchoring of the Digital Service Provide (DSP) as the primary channel for music distribution, has effected further change within the industry.

With the rapid development of technology, the expansion of the Internet, and the growing importance of Blockchain, a previously underserved player in the industry now has the chance to truly emerge: The Independent Artist.

In the past—and indeed presently—record empires (along with the labels they preside over) have had an iron grip on all the important distribution levers. Namely, they control the physical channels of distribution and they maintain the marketing and monetisation machinery. As key technologies become readily available to more artists, the power balance has begun to shift. For the first time ever, the artist is being met with the opportunity to operate and scale at the level of the record label.

The Rise and Reign of the Digital Service Provider (DSP)

While the development and implications of Blockchain far extend the music business, peer-to-peer technologies have actually been around in the industry for as long as the Internet has been up. As early as 1999, Shawn Fanning pioneered (and was later penalised for) a peer-to-peer file sharing protocol or model that ran on Napster.com. This was the industry's first glimpse at how powerful of a tool the Internet could be in terms of distribution.

On Napster, music files were being freely shared between its users—with astounding velocity. Music labels, and by extension artists, saw massive profit losses, which eventually motivated them to sue the creators of Napster. Within two years of receiving its first copyright lawsuit, Napster had to file for bankruptcy.  

In the wake of Napster's closure, and with the rise of internet piracy, business-minded people within the industry had to think of a way to maintain the profits they were getting from physical sales while selling music digitally. And so, the Digital Service Provider—or DSP—was conceived. First with iTunes, Amazon.com, and the like (these merchants were a direct digital translation of the brick-and-mortar); and then with the industry game-changer that is Spotify, the streaming service giant that spawned the likes of Apple Music, Deezer, and Tidal. In a humorous twist, even Napster has resurfaced as a music streaming service.

Music is now almost exclusively distributed through the DSP.‍

Record Label vs. the Artist: The Democratisation of Music

In the midst of all these industry changes, all the technological changes, there still prevails a decades-long power struggle between music artists, and the record companies that manage them. Even with the prevalence of the Internet, and the proliferation of the streaming service, a boon for music listeners in that it has now become less of an expense to consume music, the artist is still seeing minimal gains for his/her work.

Here's why: say a DSP, such as Apple Music, splits its profits 30-70, with the 70% going to the copyright holder/s of the music they are providing on their service (it is important to note that, in most cases, the copyright holders of music are record companies and very rarely artists). Depending on the deal that an artist has signed with his label, which may or may not include terms and clauses that refer specifically to digital distribution, the artist might only see a small percentage cut of the profits made from his/her music.

It paints an even bleaker image when one discovers that the streaming service, as it is currently set up, can only really be profitable unto itself (and of course, the record business). Owing to how meagre the pay rate of a single stream is (averaging around $ 0.007 per stream on Apple Music, and even less on Spotify), coupled with the sheer volume of music released every day (reportedly at 60 000 new tracks a day; a variable that poses a problem not only for monetization, but visibility too), it is nigh impossible for the signed musician to earn a profit comparable to his managers. This is why he might entertain ideations of becoming independent.

Enter Blockchain, coupled with the democratisation of tools and software, and the question of profitability for the independent artist is becoming less-and-less of a head-scratcher.

‍Why the NFT and the CTO?

As the Internet continues to evolve, now gearing into its third iteration, the possibilities for the artist who wants to break free from the record label are endless. With proper insight into the relevant technologies, the necessary tools, and an awareness of where the pitfalls of independence may be, the indie artist is poised to challenge the record company stronghold and its practices.

The indie artist can now market themselves in a way that they perhaps couldn't before the Internet; at least, they are able to engage directly with their audience. Fans and followers have proven to be excellent marketers; word-of-mouth has now evolved into retweets, reposts, reactions, likes, and shares, and an artist can quickly gain notoriety this way. It is now easier for an indie artist to broadcast their music as well, with tools such as YouTube, SoundCloud, Bandcamp, or even registering their single on a DSP to have access to the same monetisation scheme that record companies have enjoyed. And with Web3's Audius and the introduction and adoption of NFTs, he/she now has the opportunity to receive next to all of the profit gains.

The NFT, or non-fungible token, is of particular interest to any artist who is concerned with ownership of his art .Up to now, it has been common practice for a musician, upon being discovered, to sign his masters and copyright over to a company in exchange for amenities (such as sessions in a recording studio with the latest-and-greatest industry furnishings), royalties (an industry term for the percentage cut of distribution profits), and marketing support (these include advertisements, such as billboard rentals—all at the expense of the company).

The NFT addresses, most directly, the issue of monetisation. This is because of the underlying premise of NFTs: it is the opportunity for artists to have full, unalienable ownership of their digital assets, in this case music files. If an independent artist could somehow circumnavigate the question of marketing, and have available to them the right tools for production without the intercession of a record label, they could virtually be unstoppable if they made the transition to Blockchain technologies.

Some notable examples of the possibilities presented by NFTs are those of prominent Hip-Hop artists Snoop Dogg and NAS. Snoop released his 20^th studio album, B.O.D.R. (Back on Death Row) in February 2022 to much fanfare, raising over $44 million. To put things in perspective, he would have needed billions of streams on perhaps multiple DSPs to raise the same amount through streaming alone. Nas’ NFT project, released via Royal.io 3LAUs recently launched Blockchain royalty platform, sold out in record time. These are just two examples of what is possible with NFTs.

Nas and Snoop are established artists—what are the possibilities for an undiscovered artist who would may be like to be independent? How could these artists go about establishing themselves?

As previously mentioned, there exists a conundrum of visibility for all artists, not just independent ones. Indeed, adjacent to the problem of monetisation is the problem of visibility. With an average of 60 000 new tracks posted on the Internet each day, it can be very easy for even the most gifted artist to be drowned out in the noise, especially if they aren't savvy about how the system is stacked up. And if the artist is not really concerned with metrics and analytics, if he/she is more concerned with his art-making for instance, the odds that he'll/she’ll ever be discovered (and thus be profitable) are low. This is where the CTO, or chief technological officer comes in.

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For music artists however, technology has upended the monetisation metrics due to the way in which the DSPs split royalties. The finer details of this will be the subject of future blogs, and are adequately covered in podcasts and articles, but for the purposes of this blog, suffice it to note that the per stream revenues accruing to most artists are minuscule.

Compounding this monetisation conundrum is the sheer volume of music released per day that now averages 60 000 new tracks per day.

Given this volume of new tracks, music discovery for average independent artist is a Herculean challenge. In a fascinating twist, what technology gives to the indie artist on the one hand in the form of scale; it takes with the other by making it more difficult to break through, and be discovered.

All these technological changes are confusing for the indie artist who, for the most part, is primarily concerned with practicing his/her art. Save for the indie artists with large fan bases and better possibilities of monetising, most indie artists are self-managed. Without some sort of management and/or marketing support, it is difficult for indie artists to breakthrough.  

Those artists who do have support, often have people working on a part time basis. For the lucky few artists who have managers and/or team, there is the distinct advantage of being able to focus their energies almost exclusively to making music.

In addition to the changes outlined above that technology has brought in its wake, new developments in blockchain technologies and crypto have heralded new opportunities in NFTs and other forms of tokenisation. Although there has been a downturn in NFT activity recently due to turmoil in the crypto market, NFTs are unlikely to lose their cachet because their underlying premise presents too great an opportunity to monetise.

Other innovative case studies of NFT utility include Troy Carter’s Venice Music, which recently launched its Venice Music Collective, an NFT-gated project. This initiative offers artists accepted into the collective, among other perks, access to Venice House, a creative precinct where music cohabits with gaming, distribution, A&R support, sync and other services.

Another important technological development in the past few years has been the growth of Twitch, an interactive livestreaming service. Twitch grew between 70 to 100% during the height of Covid era, and with most countries on lockdown, artists had to go on livestreaming apps to make a living.

While social media and Digital Streaming platforms have enabled music artists to engage and grow their fan bases, they have limitations in that ultimately all data on platform belongs to the social media companies rather than the artists. It is not surprising therefore that new fan engagement platforms such as Fanbase and Patreon that, in addition to enabling engagement, also facilitate monetisation, have sprung up. Yet, these platforms are also not enabling direct, unmediated, engagement with fans. Further, one can be de-platformed at any time, with Donald Trump being a good example of what can happen.

Given all the developments outlined above, and the fact that the music industry is already complex in the way it is structured when one considers legal and Intellectual Property (IP) aspects, it is not difficult to understand why most independent artists would feel at sea.

For South African and broad African market music artists, music discovery, fan engagement, monetisation as well as IP & meta data management are key challenges.

 And yet, for all its complexities, modern music industry is replete with opportunities. For the independent artist or label, however, these opportunities are difficult to access without the requisite technological knowledge.

Some of the questions indie artists have to grapple with in terms of tech choices include the following:

• With the plethora of platforms out there, what platforms should indie artists be on?
• What digital marketing playbooks should they run with to launch or promote music?
• Should they build their own software or buy off the shelf fan-engagement technologies for instance?
• What Customer Relationship Management (CRM) systems can they use to connect with their fan base? Text? WhatsApp?
• How best to connect with back end messaging APIs like Twilio?
• What is the best way of using short form social media platforms like Tiktok, which has become the go to place for promoting music?
• How can artists access the opportunities in gaming, film sync opportunities?
• What is the best way to handle and secure music while still in production to allow easier file management and collaboration?
• What is the best way for positioning to monetise in the impending Web3 world?
• Should they build their own ecommerce merch platforms or buy off the shelf from vendors such as Shopify?
• How should they read, and make use of Data Analytics to better manage their careers as well as manage and track meta data?
• How best to optimise content links through technologies such as Linkfire?

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It is patently clear that indie artists need technological advice to navigate the complex terrain. Enter the Chief Technology Officer.

Leading the charge on the centrality of the role of the CTO in music has been marketing guru OG Steve Stoute, the founder of United Masters/Translation, and a thought leader on independent artist empowerment and monetisation. In an interview in Trapital podcast, Stoute most clearly outlined some of the roles of such a CTO would be. In his view, blockchain technology and associated crypto as well as text-based fan engagement platforms are examples of the areas in which a CTO would be key. SXSW also hosted a workshop on this topic at the 2022 event, clearly indicative of the growing realization of its importance.

Other artists who have made use of technology specialists include Nipsey Hussle who worked with Iddris Sandu to set up a smart store.

Although some of the technologies being explored above are still some way off for the South African/Africa market, there are steps that indie artists and labels can take to bolster their technological acumen. For starters, more indie artists/labels need to build digital assets (websites, apps) that are optimised for ecommerce and interaction with fans. Bespoke fan engagement platforms are probably the most critical tech infrastructures that indie artists should invest in as they potentially present the highest Return On Investment (ROI).

Well-built fan engagement platforms would enable artists to build a fan database segment as well as profile distinct groups like superfans. Through smart CRM systems, indie artists can send text/WhatsApp/email alerts to fans on new music, merch drops as well as enable direct financial gifting from fans. These direct-to-fan rails would be important later for indie artists when they start exploring opportunities inWeb3 such as NFTs as they will have existing fan data.

Another area where indie artists can benefit from tech advice is in understanding DSP algorithms. For instance, can artists structure their songs to take advantage of TikTok algorithm, which favours hooks/choruses that come in early in the song? CTOs would also advise on how best to repurpose content for use in different platforms including some level of digital marketing automation.

Within the South African environment, there have been some notable tech-savvy artist moves including an NFT drop by Amapiano DJ Duo and mavens Major League, who partnered with MaXhosa to release their NFT at Art Basel Miami.  Hopefully, other artists will follow suit and explore the plethora of opportunities that technology provides. The popular CottonFest can, for instance, tokenize tickets to lifetime passes that enable access not only to the event but also to some unique experiences.

Testimony of the many new opportunities spawned by technology is a recent statistic from Sony that it made over $500million in “new business categories, like social, gaming and fitness”.

South African/African indie artists and labels are well advised to take a cue from this to, with the help of tech savvy teams, build their businesses for future growth.

At Brand’Art we are well positioned to partner with indie artists/labels and provide tech advisory services as well as help them build bespoke technology platforms to monetise. Our team, which includes music industry strategy, technology (digital marketing/software development) as well as UX/UI design experts, has worked with leading figures in the South African music scene and internationally.