Music Has Been Commoditised, Now What? 4 Causes and 3 Possible Solutions [Part 2]
Previously on The Biz of AI: Over the last few decades, the process of music commoditisation has been unstoppable. Its perceived value has declined to the point where, today, most people expect access to extensive and diverse music catalogues for free. Various factors contributed to the relegation of such a precious experiential good to nothing more than a simple commodity. However, we can narrow it down to some key factors: illegal file sharing, music streaming, technological advancements and labels’ inability to adapt their business models to a music landscape that’s changed beyond recognition. But hope prevails that the wheels of commoditisation can be turned back, i.e., de-commoditised, especially through fan-driven business models.
To understand how to de-commoditise music let’s journey to a fascinating country filled with culture, mystery and history: China. There was a time when China looked to the West for examples of technological innovation, learning with the intention to reproduce industry secrets and standards. But now firmly at the forefront of R&D in AI and other frontier technologies, it seems that China has learned and adapted incredibly well. In the music tech space, it’s fair to say that the student has become the master.
Tencent Music: Spearheading music de-commoditisation
Take Tencent Music, the music arm of the Chinese tech behemoth Tencent — one of the world’s largest companies by market value. With a number of streaming services like QQ Music, WeSing, and Kuwo, Tencent Music has completely reshaped the music business model. In a sentence, Tencent Music has turned monetisation from consumption to fan-driven models.
Here’s how. Artists can sell limited time access to newly released albums. Tencent Music uses a leaderboard that shows the number of times fans have purchased access to a new release. This promotes friendly competition among fans, and harnesses their need to connect with the artist they adore. Most users may buy albums once, but so-called superfans might buy hundreds. Say you’ve purchased the last Taylor Swift hit five times. It won’t matter that you’re top of the leaderboard, you’ll still have your shot at winning signed CDs, posters or concert tickets. This gamification device strengthens the relationship between artists and their potential superfans.
Another clever monetisation device is the option to change the skin of Tencent Music apps, for a small fee. Imagine your Spotify app going from black and green to shades of Wiz Khalifa, or whatever artist you fancy. Fans can also follow and discover artist-related news, and other written and visual content, all on one integrated social platform. Couple this with behind-the-scenes content, and they’re reinforcing the sense of closeness to the artist.
There’s also a feature to buy tickets for concerts and, in case you’re stranded and can’t make it in person, to watch them through a live stream. Tencent Music pays attention to the wants and needs of fans. But they also tap into popular cultural phenomena, like karaoke. Their app WeSing — unsurprisingly one of their most successful apps — lets people stream their karaoke sessions. Other users can tip the wanna-be singers, while becoming even more fond of the songs they listen to. This has the useful side-effect of increasing their emotional attachment to the artist.
If you prefer your karaoke fix live, Tencent Music has that covered, too. They’ve opened thousands of karaoke booths in shopping malls across China, to roaring success. And they’ve introduced innovation: You can record your perfectly imperfect performance and receive the audio on your phone, ready to be shared with friends (as long as they’re accepting of your karaoke obsession).
With its leaderboards, tipping, reward systems and social experience focus, Tencent Music fosters the connection between artists and users, turning them into fans. These features are devised to provide a strong musical experience that’s shared among listeners. Music has become a lifestyle sharing experience. Tencent Music doesn’t monetise consumption like Western music streaming services do — it monetises an experience that provides strong emotional value to fans.
Fan, super fan, how fan!
Users don’t care about every piece of music ever written. They care about the artists that they admire or gush over. Fans and superfans are more than ready to support their much-loved artists. A similar idea is leveraged by the online platform Patreon, where users can tip the creators they follow. This idea actually harks back to famous patrons like Gaius Cilnius Maecenas of Ancient Rome, who would sponsor poets and intellectuals like Horace and Virgil. Obviously I’m not claiming that Roman and Renaissance patrons are like the people who tip karaoke stars on WeSing, nor that they will have the same influence on the history of human culture. But if you think about it, what fundamentally drives Roman and contemporary patrons, often at quite different levels of implementation, is probably the same: We support the people we love; the people we have an emotional attachment to. In today’s jargon, I could say that Maecenas was nothing short of a Virgile superfan. (I hope my Latin teacher from secondary school never reads this article).
The new value of music
Now, back to the music. A flat subscription, just like the one offered by Spotify, assumes that all people desire is to consume as much music content as possible. But that’s probably not the case. With their one-size-fits-all monetisation model, Spotify leaves a lot of money on the table. Fans and superfans would be ready to pay far more than the $9.99 Spotify Premium subscription to support their favourite artists, if only they were given the chance to connect with them through more than the music.
The value of music doesn’t lie in the song itself any more, rather in the human relationship established between fans and artists. A song is only a means to reach a goal. As concert goers can attest, music has never been a good, but rather an experience; a shared experience to be precise. In that sense, a song is only a catalyst to propel an emotional experience.
In the age of the experience economy, it’s up to the music platforms and labels to implement the infrastructure necessary to facilitate the connection between users and artists. As the Tencent Music case suggests, if the right tools are there, users will grow into fans, and fans into superfans. Fans and superfans are the key to de-commoditise music if leveraged through innovative business models. Tencent Music has figured this out. Spotify and the other leading Western music streaming services haven’t, yet. Senescent music labels are so out of touch that they probably don’t even remember their own names.
The revenue distribution of Tencent Music is a testament to the effectiveness of the fan-driven business model in the music industry. While 90% of Spotify’s revenue comes from subscriptions, for Tencent Music, subscriptions account for only 13% of the whole pie. 70% of the revenue for the Chinese music behemoth is the result of fan-driven monetisation models, like tips and gifts.
The most skeptical readers might argue that while fan-driven business models could solve the commoditisation problem in China, there may be some cultural differences which make these monetisation devices ineffective in Western countries. I already hear someone shouting at the screen that, “The fan culture has always been big in the Far East, but not in the West!”. This is only partially true. Fandom is exploding in the West and services like Patreon, Kickstarter and FanBacked are proof that Westeners are more than ready to support the projects and the creators they find interesting. Humans are humans everywhere. We respond to the same basic needs. Now more than ever, in the experience economy, users are looking for shared experiences. Music is no exception.
In the next and final part of this post series, I’ll focus on two other possible solutions to music commoditisation: customisation and technology.
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