FEATURE: The music startups fighting for acts disillusioned with Spotify and Apple
Written for Digital Frontier [28/2/24]. Lead image credit: Julian Bajsel
MP3s WERE STILL A THING when Tokimonsta, a DJ and producer from Los Angeles, first started making music.
“People were purchasing music to some degree,” she says as she reflects on the evolution of music consumption during her 15-year career. In the intervening years, listening habits shifted to favour digital service providers (DSPs). “Music streaming platforms like Spotify and Apple were made to combat piracy and, though it worked, it really changed income streams for musicians. For myself, I found that because music wasn’t really paying me enough to survive, I ended up touring a lot.”
Touring has been manageable for a one-person powerhouse like Tokimonsta (real name Jennifer Lee) whose electronic-leaning music slots easily into the live environment, not to mention DJ bookings. But Tokimonsta saw first-hand the impact of poor renumeration from streaming on acts in different genres who couldn’t so easily tour. “With the combination of payment lag [from DSPs] I found that constant struggle to be very impactful on my view of the entire industry. I would see artists that were amazing essentially having to quit. That was really disheartening.”
It motivated her to co-found Sonu, an “artist-centric” streaming platform where acts publish their catalogues and start earning royalties, known as streaming rewards. Artists also have the option of auctioning tokenised digital twins of their songs to a fans or collector for immediate liquidity. After the sale, the new owner pockets a percentage of the song’s streaming rewards on Sonu. Since each track is a unique digital twin of the original, only one person can own that track on Sonu at a time. The fan or collector earn 70% of the track's royalties while the artist receives 30%. Song discovery or “user-generated crate-digging”, as Sonu’s CEO and co-founder Laura Jaramillo puts it, is also a key feature. And the blockchain tech on the platform enables artists to get paid more quickly.
Sonu is one of several platforms developed in recent years to counter the fact that the mainstream DSP monetisation model fosters paltry financial gain. Others in the web3 space include TokenTraxx, an infrastructure layer that allows acts to build new revenue streams via NFT tech.
Bolero Music, meanwhile, is a music rights platform that enables creators to sell unique digital assets called Song Shares to fans and other investors, with each share containing a percentage of a track’s Intellectual Property (IP).
““Music should have more value. But the issue is not Spotify; the issue is music listeners””
In music copyright, a song or sound is divided up by its master recording rights and its publishing rights. Master rights belong to the owner of a master sound recording, which typically belong to an act, record label, studio or any other party that financed the recording. Publishing rights belong to the owner of the actual music composition, which comprises melodies, notes, chords, rhythms, lyrics and other components.
Musicians and fans who shun cryptocurrency and NFTs can also buy royalty shares via centralised web2 platforms including DjookyX and Jkbx. Over at Duetti, independent acts can sell their master catalogues, individual tracks or parts thereof.
Streaming economy is broken
All these startups are trying to address a music streaming market where the lion’s share of rewards goes to the top artists. Taylor Swift, for example, had 26.1bn global streams on Spotify in 2023, which will have earned her an estimated $100m in that year alone. On Apple Music, the world’s second-biggest DSP, Swift’s streams grew 61% globally when her The Eras Tour began last March.
Headline figures expose the reality for those who don’t enjoy such stratospheric success. The UK government’s 2021 inquiry into the economics of music streaming showed that the top 1% of artists account for 78-80% of streams and the top 10% of acts for 98%. It found that a “sustained achievement” of approximately 1m streams per month “may be some kind of guide to a minimum threshold for making a sustainable living out of music.”
In an associated study by the government’s Intellectual Property Office that year, it was estimated that only 720 UK musicians are able to make a living solely from streaming royalties. Just 0.4% of acts achieve more than 1m UK streams per month, equating to roughly a £30,000 ($38,000) annual salary. More recently the Musicians’ Census 2023 of nearly 6,000 working musicians in the UK found that nearly 50% earn less than £14,000 a year from their craft. Yet the economics aren’t trickling down to the creators.
William Bailey is the co-founder and CEO of Paris-based startup Bolero Music. “Most artists, producers and composers are accusing Spotify of not paying enough money… and I think they’re right,” Bailey tells Digital Frontier. “Music should have more value. But the issue is not Spotify; the issue is music listeners.”
Almost two-thirds of adults in Great Britain, the US, Australia, Germany, Spain and France do not pay a monthly subscription to stream music, according to Worldpanel’s latest Music on Demand report. Bailey argues that traditional DSPs have weakened the relationship between artists and their fans. He suggests that the one-third of adults who subscribe monthly are more engaged consumers and are thus more likely to invest in their favourite artists.
Encouraging a ‘belonging feeling’
Bolero Music’s model encourages more of that “belonging feeling”, which Bailey believes is missing from DSPs. Ownership is also central to modern fandom, particularly “stans”, the most dedicated – some might say obsessive – of an artist’s followers. Streaming a song isn’t the same as owning it on a CD, vinyl, as a digital download or otherwise. Bolero Music goes even further and has a publicly viewable leaderboard upon which fans can show off their individual investments.
“That’s much more powerful than when I look at my Spotify Wrapped and I see that I’m in the top 5% of an artist community,” Bailey says. “I’ve got proof of my belonging.”
Bailey’s comments speak to a growing interest in music as an asset class. “It’s interesting that music is being seen as something that is investable,” says Eamonn Forde, a journalist and author who writes about the music business. He references the IFPI’s latest findings and notes that the report shows that “previously unviable” markets including China, India and South America are now in the top 20 global markets. “If we were having this conversation 15 years ago, we’d be in the middle of a downturn in the recorded music industry’s fortunes where music wasn’t quite dead in the water but wasn’t seen as a healthy growth area.”
Music as an emerging asset class can’t be divorced from stan culture. A report from last year claimed that only half of vinyl buyers in the US own a record player. That alone reveals much about the state of modern fandom.
Tim Gentry, the CEO and founder of TokenTraxx, is cognisant of that. “It’s all about a new monetisation model based around 360-degree fandom that all happens on-chain,” he says of TokenTraxx’s aim to transform the music ecosystem using blockchain technology. “I think this is about providing a path for expansion of the superfan community.”
Leading DSPs are modernising
Amid the flurry of startup launches, the streaming giants are taking steps to address the royalties issue. Last year Spotify raised the price of its single-account premium plan for the first time since 2011 and hiked prices of its other services “to help us to continue to deliver value to fans and artists on our platform.”
In September Deezer, which has a 1.5% market share of music DSPs, launched an artist-centric streaming model in France that’s designed to better reward acts and the music that fans value the most. Among its enhancements is a double boost attributed to “professional artists” (those who have a minimum of 1,000 streams per month by a minimum of 500 unique listeners). The aim is to reward acts more fairly for the quality and engagement that they bring to the platform and fans.
““No industry has been disrupted arguably more over the last 25 years than the record industry””
But Deezer has partnered with the world’s largest major record label, Universal Music Group, for the model – a move that Forde believes puts independent artists and labels in a further stranglehold. He thinks that it will have limited impact on democratising the industry at large.
“No industry has been disrupted arguably more over the last 25 years than the record industry,” Forde says, highlighting “accelerated consolidation”. In 1998 there were six major record companies. In 2023, there are three: Universal, Sony and Warner. “They control a bigger share of the market than the six did,” he says. Universal being permitted to buy up most of EMI in 2011 is testament to a disinterested regulatory framework. “If you’ve got three companies controlling the bulk of the market, that puts [others] in a really bad negotiating position.”
Digital Frontier approached Deezer for comment but didn’t get a response. Spotify’s press team linked to an article on how the platform is modernising its royalties system. This includes how it will better distribute small payments that aren’t reaching artists through new track monetisation eligibility.
‘Artist-centric’ model limitations
Forde nods to the impact that consolidation has on smaller artists, and music rights and royalty share startups. “Consolidation is really bad for our culture. That leaves everyone trying to deal with the majors in an incrementally weaker position.” Universal’s partnership with Deezer is something of a smokescreen. “I don’t want to disparage Universal. It’s a very, very successful company,” he says, “but Universal has never done anything out of pure altruism.”
Tokimonsta agrees. “Deezer is trying to create a more equitable model, but it’s still powered by Universal. Anytime there’s a major label involved in these types of platforms, they’re going to look out for their best interests… [they’re] going to look out for Universal artists.”
Jaramillo believes there are promising signals at the leading DSPs. “We’re definitely seeing larger platforms adopt things to shift the public narrative.” But, as she highlights of Sonu, “we can move really nimbly.” She adds that it’s harder for larger operations to enact meaningful change.
“If Spotify wanted to adopt our model we would love to work with them as well as any other streaming platform,” Tokimonsta says.
Of the music startup platforms, Forde recognises the good in their “utopian” ethos but warns that they’re quixotic. “All of your ideas written down on paper mean nothing when you when you rush headlong into the harsh reality of the market,” he says, “unless your exit strategy is being bought by a major tech company.”
“Services can talk about disruption and services can talk about democratisation of royalties all day long but [whether] they can stay the distance – if they can actually drive measurable change in the mainstream – is a whole other matter.”
Spotify posted its first quarterly profit in a year in December thanks to bumping up prices and reporting a growth in subscribers. If the world’s biggest DSP doesn’t turn a profit consistently, the odds aren’t exactly stacked in music startups’ favour. That has implications for the acts who are beginning to rely on the startups for supplementary income.
Keys N Krates are also featured on Sonu
The brains behind the platforms seem energised by change even if it’s an incremental one, though. “I think that step-by-step we’re going towards a better model for everybody,” Bailey of Bolero Music adds. “The people who are building companies and new products in today’s industry are really serious about it. The people who don’t have the courage or the resiliency to wait for it will be disappearing at some point. But if you're still here, it means that you’re here for the right reasons.”
Sonu’s goals
Meanwhile, Jaramillo says that Sonu’s goal is to create a platform where listeners “feel a lot more involved and have a stronger impact on an artist's career and their success”, which leads to “a much healthier ecosystem around music”.
“That’s the community that we want to build. The types of products that are coming out now are bringing community back into music because that’s what keeps it alive. It’s just not reflected in the products that we consume music on today,” she says.
“By creating this infrastructure,” Tokimonsta adds, “you will be able to have this way of showing support for this intangible thing that is music. Musicians are a lot more vocal about the unfortunate situation that many of us are in. Now, we’re really reaching a crossroads with that.”
