The quest to build a #platformcoop for music streaming

Can the industry come together to build a service we all own?

What a long strange trip it’s been.

A year and a half ago, a sprout emerged from the fertile soil of my unconscious mind. A seed had been germinating for more than 15 years, when Napster first arrived and fundamentally re-aligned the entire music industry virtually overnight.

The question that haunted me all those years was how could we adapt to an abundance model when the whole industry was designed around scarcity?

For those who remember the early 2000s, the shift happened so abruptly, with such monumental force that it rendered almost everyone mute, unable to even formulate appropriate questions. Sure, we could all ask “what are we going to do now?” but nothing much beyond that, because we were all so stunned into submission. The world was suddenly different and there was surely no going back. The way forward was made utterly unintelligible because we weren’t really even sure where we stood in the present moment.

Personally, this was articulated as a highly disturbing feeling that gnawed at me for years. I couldn’t understand why I had personally changed so dramatically, going from a listener obsessed with saving money to obtain truly prized objects like CDs and records, to spending virtually nothing on music and being almost totally indifferent to the idea itself. Even saying the phrase “buying music” seems strange to me now, as if the entire concept has been obliterated from my consciousness. (Sure, I kept buying DJ singles on vinyl and digital, but that seemed somehow far removed, justified as a “business expense” and not something done for personal use.)

How could something that was once of such fundamental value go to being almost totally worthless overnight?

It’s as if food was suddenly free, available anywhere, at anytime. Imagine what would happen to farmers, grocers, restaurants and the dozens of other jobs linking these businesses if almost instantly every home had a Star Trek food replicator and there was simply no need to go anywhere else for any conceivable type of cuisine. The affect on culture and economy would be devastating.

And that’s almost exactly what happened with music and publishing in the early 2000s thanks to network affects and the digitization of media.

Trailer for a fantastic documentary about the arrival of Napster.

Then along came streaming

While much of the music industry either directly battled with the new digital gatekeepers or simply chose to bury their head in the sand (as if wishful thinking would somehow transport us back to the golden age of tightly controlled distribution) technologists were busy doing what technologists often do… code without consequence.

The result, at least where music distribution is concerned, was streaming. Shifting the desire for quick access that Napster and Tor offered into an even easier to use form of instant gratification. This time the major labels applauded, thrilled for an alternative to potentially mitigate the damage wrought by Napster and other P2P technologies. (The majors had also learned a few lessons in the intervening years, choosing to partner with rather than pummel their tech adversaries.)

But there’s an uncomfortable truth lingering behind the recent shift towards streaming and it stems from a fundamental flaw within engineering culture — coders often code without consequence — oblivious to the attendant effects of their actions in pursuit of The Killer App.

While the majors applauded streaming (given the very real benefit of converting torrent users into streaming customers) it seems that once again, no one has really examined the business model.

Can I just say it like it is…?

Streaming is a totally sucky business model

Recently I got into an email exchange with a very well known indie label. They were thrilled about Spotify and streaming because they said “it keeps on paying over and over again.”

Unfortunately, no one bothered to check the math.

Spotify states that their average payout is .006 -.0084 per stream. It’s almost impossible to find consistent news reports verifying those numbers (meaning that the stories always quote lower amounts) so we’ll take the smaller number for our calculations:

$1.29 iTunes download — 30% Apple fee = $.90 for artist
.90 / .006 = 150 plays

So it takes at least 150 plays on Spotify for an artist to make the same amount as a single download. It should be noted that is for an un-signed artist. Plus we didn’t account for digital distributor/aggregator cuts which would make the total count even higher.

Is it just me or does this math not make any sense?

Personally I can only think of a handful of songs or albums I’ve listened to over 150 times. While much of the industry seems to be dreamy-eyed over the Spotify model (repeated by Apple, Amazon, Deezer, Tidal and others) it seems no one is really questioning the total lack of sustainability for artists in these models.

Another world is possible

At the beginning of this post I asked the question “how could we adapt to an abundance model when the whole industry was designed around scarcity?” Unfortunately, it seems no one has learned the lesson yet. Digital created virtually instant access and abundance, but it’s like a fire hose, blasting listeners with an endless reservoir of content, without meaning or purpose.

What if there was an entirely different model? One in which listeners could explore new music for virtually nothing, then effortlessly transition into becoming real fans over time?

This is the underlying phenomenon behind music discovery that has been almost totally forgotten… that after listening to a song three, four, five times, something changes in the heart. A connection is made with the artist. You can feel the gravity and weight of the experience behind the creative work, as small nuances in arrangements, mixing and other unique characteristics come to life. At this point, a bond starts to form and a craving sets in… you want to hear MORE music from these artists.

Introducing Stream to Own

It’s fairly simple. Breaking away from the “all you can gorge yourself silly on” models to focused discovery, meaningful connection and a way for artists to maintain a more realistic earning model than monthly subscription models could ever hope to offer:

Micro-payments based on a top-up model.

In this chart lies a profoundly basic logic — the more we listen, the more we fall in love, the more we should pay.

We start with a basic top up — deposit $5 to $10 in your account and start listening. At the beginning, it’s so cheap you barely notice credits deducting from your account. But as you fall in love with a particular song and listen three, four, five times, the price deducted starts to increase. At the 9th stream, the song is paid for and forever free. The artist achieves the same earnings as a download, providing a much more sustainable source of revenue. (Our estimates put it around 2.5–4 times as much as monthly subscription models, but we can’t be sure until beta testing begins early next year.)

With this totally new model for digital music consumption we then ask the question…

Can the industry come together to build a service we all own?

By “industry” we may need to clarify. We mostly mean the indie sector that comprises 35% of the total market, plus the tens of thousand of industry professionals who don’t directly take a paycheck from the major labels. The reason should be somewhat obvious — the majors aren’t incentivized for alternatives because they’re co-owners in the prevailing paradigm.

So we’re gonna create another paradigm ourselves… one in which EVERYONE is an owner.

It’s a business type called a cooperative and while most often known in the context of grocery stores and other small enterprises, coops can be as large as corporations. In fact, the Mondragon coop in Spain is valued over $5.5 billion. It’s about sharing in decisions and sharing in the profits if we’re successful:

That’s Resonate  a streaming music cooperative with a totally new business model that’s more financially sustainable for artists. One that opens up totally new markets for consumers.

So we’re throwing down a challenge to all indie artists, labels, managers, booking agents, you name it…

Become part of the real alternative to a broken model of low payments to artists and “rent but never own” for fans.
Together we can build it.
Together we can own it.