How Can a Hybrid Web2-Web3 Approach Reshape the Future of Music?
Decoding the Discovery Journey of Consumers, Fans, and Superfans
As we take our first steps into this journey dissecting the artist-fan relationship, with a distinct lens on the music industry, we encounter opinions ranging from fervently hopeful to starkly skeptical. A faction passionately propounds that Web3, a realm built on the foundation of ownership, will invariably define our future. Conversely, we find skeptics who, although not entirely dismissive, express trepidations regarding the plausible complexities and drawbacks of the Web3 technology. As is the case with most dichotomies, reality habitually situates itself in the gray area.
Our dialogue necessitates a comprehension of artists' requirements, an evaluation of the efficacy of diverse platforms, but preceding such dissection, we must familiarize ourselves with the pivotal entities of this narrative – the music connoisseurs. Those who sit online all day or out in the rain enduring hours-long queues to secure a prized concert ticket.
The listener base manifests itself into three salient groups: consumers, fans, and superfans. Discerning these divisions is of utmost importance. An oversimplification or misunderstanding of the audience catalyzes an array of complications, from platforms grappling with identifying a market fit, artists receiving flak for their non-involvement in NFT endeavors, to fans experiencing a sense of alienation from the very artists they derive emotional solace from.
Consumers essentially are those who enjoy an artist's craft sporadically. They may add a track to their playlist, appreciate a song on the radio but are unlikely to invest in the artist's work directly
Fans constitute a significant slice of most artists' audience demographic. These are the individuals who have the lyrics memorized, have a favourite album and can tell you the exact moment they first heard it, and wouldn't think twice before purchasing a concert ticket or merchandise.
Culminating with the superfans. As per Luminate and Goldman Sachs' estimations, this group represents an approximate 15-20% of the audience. They significantly outspend regular fans, with an average expenditure surging to 80% higher in general, and an astronomical 128% more on premium streaming services.
The advent of streaming platforms has ushered in an era of unparalleled convenience for music consumers, allowing them to access virtually any song, at any time, from anywhere. However, this ease of accessibility is not without its pitfalls. It feeds into the prevailing culture of instant gratification, where users can switch from one song to another with a simple swipe, leading to a devaluation of the art itself.
On one hand, platforms like Spotify and Apple Music have democratized music distribution, allowing artists to reach a global audience without the need for a record label. On the other hand, these platforms pay artists fractions of a cent per stream, leading to a significant imbalance where the creators of the content receive a minuscule fraction of the revenues generated. Furthermore, the 'all-you-can-eat' subscription models employed by these platforms have conditioned the audience to expect unlimited access to music for less than the cost of a single album.
This trend mirrors a broader societal shift towards an 'instant gratification' culture, driven by the always-on, always-connected digital age. With an abundance of music at their fingertips, listeners are often inclined to seek novelty and constant stimulation, rather than invest time and effort into appreciating individual works of art. This insatiable thirst for newness can inadvertently devalue the artistic intent and labor that goes into producing a piece of music.
A cognizance of this segmentation illuminates why a Web3-exclusive strategy may not always be the most effective approach for artists. While Web3 does bring to the table a myriad of unique advantages, and undeniably has found its niche within the music industry's ecosystem, it's not a cure. An artist's path to success weaves through a holistic approach encompassing discovery, engagement, monetization, marketing, and the ability to catalyze a metamorphosis turning consumers into fans, and eventually, superfans.
The prospect of venturing into the Web3 realm is enticing indeed, with big-league artists like Snoop Dogg spearheading the initiative. Given his robust 20m+ following spanning music and Web3, one might surmise his debut project on Sound.xyz, aptly named "XYZ," would have raked in substantial success. However, a contrary narrative unfolds with a mere 10,498 mints converted, painting a picture that suggests a plunge into Web3 might be a less fruitful endeavor for artists whose fanbase chiefly comprises consumers and fans as opposed to superfans.
Sound.xyz did just close a $20m Series A led by Andreessen Horowitz as well as high-profile artists and supporters including Snoop Dogg himself and OneDirection's Ryan Tedder, both of whom have released music via Sound and participated in the funding round. Over the last year, while still in closed beta, Sound distributed $5.5 million to 500 artists, who in total released about 1,600 music NFTs. Now, the platform allows any artist to upload their music, mint NFTs, and retain full ownership so time will tell with how they move this model to a broader audience.
Web3's influence permeates beyond the realm of content, seeping into sectors like concert ticketing. Platforms are capitalizing on Web3 technology to redefine the manner fans engage with music, tackling issues such as ticket scalping and counterfeit. By tokenizing tickets on the blockchain, artists have the power to maintain fair pricing, shielding fans from exploitation, and fostering a transparent ticketing ecosystem.
In terms of content, NFTs have emerged as an innovative platform for artists to channel their creativity and monetize their craft. DJ and music producer 3LAU has set the benchmark by auctioning an entire album as NFTs for an impressive $11.6 million. Similarly, Kings of Leon released their latest album as an NFT, offering unique perks such as limited-edition vinyl and front-row concert seats to token holders.
Despite these groundbreaking advancements, significant challenges endure. The onboarding process can be intimidating, particularly for those not well-versed in tech. Furthermore, the volatile nature of cryptocurrencies, the backbone of these Web3 platforms, brings with it financial risks.
The journey to onboarding into the Web3 space can be an uphill task for many. The trajectory from setting up a digital wallet to getting familiar with interacting on blockchain-based platforms can be painstaking. The technology's current dependency on users managing their private keys introduces a level of responsibility and risk that could deter potential users.
Another considerable hurdle stems from trust issues, primarily originating from high-profile incidents such as "rug pulling" and wallet hacking. These events can severely compromise the confidence of new users in the security and integrity of the Web3 ecosystem.
The rapidly evolving vernacular of the Web3 space can further compound these challenges. The inclination of some individuals to over-intellectualize and adopt TED-Talk-like jargon may inadvertently estrange newcomers, painting the technology as more inaccessible than it truly is.
Mitigating these obstacles will necessitate concerted efforts to simplify the onboarding process, bolster security measures, and adopt a more accessible and stable linguistic approach. In doing so, we can ensure that Web3's transformative potential extends beyond the confines of superfans and tech enthusiasts, reaching the wider population of music listeners.
As we envision the contours of a hybrid Web2-Web3 music world, we need to contemplate the entire journey an artist and their audience might embark on, starting from the strumming of the first chord to the crescendo of a world tour.
Music discovery, largely dominated by Web2 platforms like Spotify and Apple Music, sets the stage in our hybrid model. Artists, while continuing to leverage the broad user base of Web2 platforms, could simultaneously debut their work on Web3 platforms. They might offer exclusive streams as unique NFTs, effectively morphing listeners into proprietors.
As fans immerse themselves in the artist's work, they might seek more than just streams. Artists could release limited-edition album NFTs, each providing distinct bonuses like high-quality downloads, exclusive content such as BTS interviews or making of the album videos, or invites to a virtual and physical meet-and-greets. For fans, it's a channel to tangibly support their favorite artists, and for artists, it's a conduit to directly monetize their work.
Merchandising in this hybrid scenario could also evolve to provide a more diverse array of experiences and tangible connections to the artists. Traditional merchandise like T-shirts, posters, and vinyl records could be augmented with NFTs offering exclusive benefits, thereby enhancing their value. For instance, owning a band T-shirt NFT might offer a fan early access to new music or exclusive content, enriching the artist-fan interaction.
Moreover, the concept of digital merchandise could gain momentum in a Web3 landscape. Imagine virtual concerts or metaverse experiences - fans could purchase NFTs representing digital merchandise, like a branded virtual T-shirt for their avatar or a unique in-game instrument tied to their favorite band.
Artist + Brand web2/3 partnership concept
An idea that has been floating around in the back of my mind even before the rise of web3 and the metaverse was artist and brand partnerships within video games. We saw the success of the Travis Scott Fortnite show, but what if we took it a few steps further…
Let’s use Drake's current tour as an example. What if to close his tour the last show was digital and set inside GTA where fans from all over the world regardless of financial status and means could attend. On top of the actual performance, Drake could sell limited digital merchandise/skins that could be bought at merch tables setup at the entry of the stadium, these merch items could even be tiered out and linked to physical ticket holders so those with VIP tickets could claim VIP merch in game.
If these shows became a regular occurrence with artists across all genres, GTA could introduce vintage style stores run by users to buy and sell 2nd hand tour merch to trade in game with a % of profit share going to the artists as well as the store owners. In an ideal world skins would be an NFT that hold varies versions of each that adapts to the games design so if a user purchased a limited VIP Drake hoodie in GTA they should be able to rep it across all games to show their love. At that point digital skins as merchandise begins to make sense as fans can wear them no matter the digital environment and not forced to pay for the same product multiple times in different games to have the same digital version of themselves.
To take advantage of the demographic and looking at how other brands could enter the space what if the wallet for the game was in partnership with Cash App and users could spend bitcoin they have already in their Cash App wallet to purchase digital goods, this partnership could and should be extended to the physical tour as well where your $Cashtag serves as a proof of access to ticket holders, and even as far as Drake being able to gift fans directly to their account.
In this hybrid world, physical and digital merchandise transcend their role as mere mementos; they become passports to a richer, deeper fan experience. This amalgamation of Web2 and Web3 could unlock novel monetization avenues for artists while providing unprecedented opportunities for fans to forge connections with their favorite artists. This not only incentivizes purchase for superfans, but can also draw in more casual listeners, facilitating their transition from consumer to fan to superfan.
Ultimately, whether it’s selling NFT albums, tokenizing concert tickets, or expanding the boundaries of merchandising, the potential of a hybrid Web2-Web3 model in the music industry is considerable. What's more, it goes beyond merely a transactional relationship - it could redefine the very essence of being a fan, opening the door to immersive, interactive, and intimate artist-fan relationships like never before.
The allure of our hybrid world extends beyond content into areas such as concert ticketing. Here, Web3 platforms could introduce transformative changes. Tokenizing concert tickets on the blockchain could potentially solve the age-old issue of ticket scalping. Tickets in this system could be tied to specific identities, ensuring transparency and reducing fraudulent activity. Through smart contracts, artists could place constraints on the maximum resale value, ensuring that fans aren't priced out of attending the concerts they love.
There's no denying that we stand at a crossroads, with the traditional music industry on one side and a brave new Web3 world on the other. How we navigate this junction will depend on our collective ability to construct a musical landscape that serves artists and fans alike. The opportunities presented by Web3 are vast, and the potential impact on the music industry could be groundbreaking, but it must be pursued responsibly, inclusively, and with the artists and fans at its heart.
A future where artists exercise absolute control over their work, superfans, fans, and consumers alike experience an unparalleled level of interaction with their favorite artists, and the once-rigid boundaries of the music industry are disrupted, seems to be within reach. A golden era of the music industry, where technology, creativity, and fan engagement intersect, could be on the horizon, and it’s a melody we're eager to listen to.
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Cam Diamond