Why music isn't a top-two category on Patreon (yet)
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View this email in your browser (|ARCHIVE|) http://hotpodnews.com/presents.... A Newsletter about Big Ideas in Music and Technology, by Cherie Hu This is issue #60, published on August 15, 2019 Happy Thursday!
This is the second email update focused on my Water & Music podcast (http://waterandmusic.transistor.fm) . ICYMI: I’ll be summarizing the most interesting takeaways from each future episode of the podcast via this newsletter, including a link to a full transcript with my own annotations.
I’m especially excited for this week’s episode, because it touches upon a lot of questions I’ve had about membership from running my own Patreon page (http://patreon.com/cheriehu) , applied specifically to the music industry. Hope you enjoy!!
- Cherie Why music isn’t a top-two category on Patreon (yet)
For the 11th episode of the Water & Music podcast, I got to speak with Wyatt Jenkins — SVP Product at Patreon, seasoned product executive (Hired, Optimizely, Shutterstock) and founding team member at Beatport, a music marketplace for DJs.
You can listen to this episode on Apple Podcasts (https://podcasts.apple.com/us/podcast/episode-11-ft-wyatt-jenkins-why-music-isnt-top-two/id1454221845?i=1000446938032) , Spotify (https://open.spotify.com/episode/3XakGA229GswO0gQwHc1Ax) , Overcast (https://overcast.fm/+Q4VdTeY9E) , Pocket Casts (https://pca.st/R72f) , Stitcher (https://app.stitcher.com/splayer/f/377286/63227099) and most other major audio listening platforms (https://waterandmusic.transistor.fm/subscribe) .
Patreon (patreon.com) , a crowdfunding membership platform, has been in a hyper-growth state for the past few years. The company recently raised a $60 million Series D funding round (https://techcrunch.com/2019/07/16/patreon-raises-60m-series-d-targets-international-growth-and-more-customization/) , which will help the platform add features to its new Pro and Premium pricing tiers for creators, build out its merchandising capabilities and expand internationally.
Wyatt and I actually recorded our interview in late June 2019, one month before the above announcement, so there’s no talk about VC funding in this episode.
Nonetheless, our conversation spans a ton of interesting and hopefully evergreen topics around Patreon’s five-year roadmap, the viability of membership models in the music industry and the challenges of building discovery and membership mechanisms simultaneously into the same platform (i.e. Spotify shouldn’t acquire PledgeMusic (https://www.musicbusinessworldwide.com/seven-startups-spotify-should-try-to-buy-to-better-serve-artists/) ).
Below is a summary of Wyatt’s most interesting points; you can read the full transcript of this interview on Medium (https://medium.com/@cheriehu42/why-music-isnt-a-top-two-category-on-patreon-yet-c734a71d8959) . Please feel free to respond directly to this email with any feedback or additional questions you have — it’ll go straight to me! :) 1. Music is one of the fastest-growing categories of creators on Patreon — and it could be even bigger.
“Music is currently in our top five categories right now … over the past few years, music has grown about 6x in the number of creators, and about 4x in revenue.
But, honestly, I think it should be number 1 or 2, and we haven’t yet reached that tipping point.” 2. Membership doesn’t fit neatly within incumbent music-business models.
“I think if I had to summarize what the blocker is for musicians: all of their other revenue streams look, sound and act really differently from a membership. They’re coming from gigs, they’re coming from sales of music, touring — you know, all these spiky, hustle-based lines of business. And Patreon’s over here saying: Hey, you can make a six-figure income by just having a close relationship with your fans, and delivering unique value to them in some form, whether it’s just them getting some backstage access to you, or them getting behind the scenes in how you made a song, or them getting some merch.
Most musicians who I talk to … It’s very rarely like, ‘if Patreon did x, then I would join.’ It’s usually like, ‘wait, how would that work? Can I monetize my brand deals on Patreon?’ And it’s like, no, no, no, that’s different. They try to take the model that they’re currently using, and put it on Patreon. And we have to say … what Patreon’s job is, is to define membership for the whole world. That’s what we’re working on right now: we’re defining, what is a membership? And why do artists give a shit about it? I think that’s the biggest hurdle for us.” 3. Membership models aren’t for every artist.
“If you want Patreon to work, you have to like your top fans. You have to want to ping them every once in a while, send them a post, say hello, jump into a chat room. I’d say less than a quarter of artists really don’t want to engage with their fans. Sometimes I’ll meet a creator or musician who’s very popular, and then I’ll ask them about their fan relationship. I’m like, how often do you chat with your fans? And occasionally I’m like, ‘oh, you shouldn’t do a membership.’ Like, actually, this isn’t for you. Because if you’re disgusted by them, or you don’t want to talk to them, that’s probably not going to work. You have to really like your fans. [laughs]
When I think about the market size, I think is a really good business model for, like, 70% of musicians. And maybe not a great business model for the top 1%, unless they like that fan relationship.” 4. You don’t have to focus on discovery to be a successful creator-oriented company.
“I think there are examples of other industries where people aren’t focused on discovery and they’ve grown very large businesses. I’d say Shopify (http://shopify.com) is a really good example of that. When you buy a T-shirt from someone’s Shopify store, Shopify doesn’t tell you to go buy a T-shirt at some other Shopify T-shirt store. Their strategy is: We will be the SaaS platform of all these stores, where the store owners have complete control over their business.
… Discovery platforms by their nature encourage the end user to keep looking at stuff or listening to stuff. That’s the mousetrap: just keep clicking, keep getting notifications. And by that design, it will always prioritize the engagement of the consumer over the needs of the person making the thing. That’s just the way they’re built.
In a world of discovery platforms, we think the pendulum’s swinging the other direction for the next ten or fifteen years, whereby a platform that strengthens the connections between you and your fans is going to actually be a long-term, viable, high-growth business.
That’s the pitch if I were to be talking to a VC [venture capitalist] in Silicon Valley: Hey, this is not a discovery-platform mousetrap that you’re used to seeing in 20 other businesses that you invest in. This is quite the opposite. It’s a platform of lots of little memberships, and what our product does is strengthen the relationship of our memberships.” 5. Discovery-driven platforms like YouTube and Spotify typically fail at membership, because it doesn’t align with their business priorities.
“When you think about companies and how they operate — big financial organizations — really all you have to do to understand their priorities is follow the money. It’s very simple math. What Patreon’s doing is prioritizing the needs of musicians and creators in general. When you log into this product and you use it, it’s designed for the creator first. And we take a percentage of creators’ revenue, which means that we’re only successful when the creator is successful. So if you, Cherie, make zero dollars, we’re going to take between five and 12% of zero dollars. If we were to ever go public, or if you were to look at Patreon in five years, you would know what our priorities are.
If you just look at the core business model of a discovery platform, the people who make stuff are the third priority. Like, YouTube’s not a bad company — those are good people. And they care about creators. I believe that. But if you look at their financial model and their business, you realize very quickly that their number one priority is advertisers. Period. And the number two priority is end users, because they need the end users to get the advertisers … And then the third most important thing is to make sure that people make stuff for people to watch.
Spotify cares most about end users listening and retaining on subscriptions, and advertisers selling. All those things come before musicians monetizing. That’s why Daniel [Ek, CEO of Spotify] can’t go out and say, ‘We spent the first ten years on being a great discovery platform, and now we’re going to switch to creators.’ Really? Your entire business model is predicated on subscriptions and ads.” 6. Musicians don’t have to give away their most valuable assets to ad platforms for free.
“I have a DJ friend of mine who has not yet joined Patreon. She’s going to, or I’m going to die trying. Her name’s Honey Dijon (https://www.instagram.com/honeydijon/?hl=en) . I DJ’d with her 25 years ago back in Chicago, so we’ve known each other for a very long time.
On Instagram, she has such a presence. Such a power. She has something to say. She’s a black trans woman, she’s deep in fashion, she’s always touring the world — she’s just such a force. I’ve known her for a while as a human, but also I’m just a fan, I guess, when I follow her on Instagram. And when I talk to her personally, I say, ‘gosh, Honey, you have such a force and the people who follow you are really interested in the things you have to say. Why do you give that away?’ And she doesn’t have a very good answer …
I hear this from a lot of musicians. They’re just doing it for eyeballs, because they think that funds the other things that they do. Like, oh, if I have a lot of followers, that means I’ll get brand deals and that means I’ll get tour … so this is, like, a means to an end. But it doesn’t have to be. I guess that’s the way I would talk to any musician. You don’t have to give all that away to the ad platforms. You can do your Instagram thing twice a week, and then take some of your really special stuff back into your membership. You can still get those top-of-funnel eyeballs, but you can then make a wonderful membership with your top fans. It’s not one or the other; it’s just that the one with membership actually gets you paid a lot in a very predictable way.” 7. In five years, Patreon might compete with music distribution platforms by offering additional financial services to independent artists.
“An obvious future for Patreon is to move further into the back office, because what Patreon represents for musicians looks and smells like a steady paycheck. It varies a little month to month — maybe you got a few extra fans this month, maybe you lost a few more this month — but it starts to resemble this really steady, predictable income, and there’s so much more we can do for musicians now that that’s solidified. That’s pretty much the future roadmap.
You can imagine a world in five or ten years … where Patreon gets into capital, for example, because we have a really predictable income stream. We could go to a bank, and say: I can tell you what this musician’s going to make for the next three years, within 5% error, because it’s very steady and predictable.
So we can get into loans, kind of the way Square Capital (https://squareup.com/us/en/capital) does. If creators have a big project they want to do, there’s no reason we can’t be the source for them to loan the money against their revenue stream over longer periods of time.” 8. Many artists still have a difficult time legitimizing themselves as businesses to industry outsiders.
“I was a DJ, and I had a good year sometime in the late ’90s. I think I made over $100,000 — which, for a DJ playing vinyl at nightclubs and raves, was kind of a lot. It felt like a lot.
I was living in Denver, Colorado at the time, and that year I wanted to buy a home. I definitely had more than enough for the down payment, and I had been a successful DJ for almost a decade at that point… but the bank wouldn’t loan me money as an artist because I didn’t have pay stubs. I had made $100,000 that year off of my various revenue streams from touring and selling music, and someone who worked at the post office and made $30,000 a year could get a loan from the bank because it was predictable, and I couldn’t.
And that was, as an artist, this moment for me where I was, like, ‘oh shit, I’m not in the system.’ [laughs] I’m this weird thing that the regular financial world doesn’t recognize as legitimate.
The future of Patreon, of course, is legitimizing artists in a way that’s super compelling. That’s something that I’m personally passionate about, because I never for a minute felt like I was a big risk for a bank. I think that was, what, 1998 or 1999 — so twenty years later, here we are, solving that problem.”
🌊 ✨ If you’d like to support even more thoughts and conversations on music and tech, I encourage you to become a paying member of the Water & Music ecosystem on Patreon (http://patreon.com/cheriehu?utm_campaign=Water%20%26%20Music&utm_medium=email&utm_source=Revue%20newsletter) . For as little as $1/month or as much as $40+/month, you can access a wide range of perks including: * A closed, members-only Discord server * Exclusive essays * Bonus material for already-published freelance articles * Monthly editorial meetings and video hangouts with me
…and much more! Thanks so much for reading! ✨
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