In 2015, we’re going to see a second wave of mobile apps based on music artists, aiming to find better ways to connect musicians with their fans – and also better ways for those creators to develop new income streams.
US startup Freeform Development is one of the companies trying to make it happen. It was co-founded by Bryan Calhoun, the former SoundExchange exec who’s also worked on digital strategy for the likes of Kanye West and Nicki Minaj, and Tim Quirk, who helped to launch Rhapsody in 2001 and since headed up global content programming for Google Play.
Freeform’s mission statement is to help artists learn from the lucrative mobile games business, where games like Clash of Clans and Candy Crush Saga are making billions from in-app purchases.
The company’s first six artist apps launched last week, including one for Matchbox 20 frontman Rob Thomas – and, having been used for testing, one for Quirk’s own band Wonderlick.
“I was blown away very early on by how far ahead of everyone else mobile games are when it comes to taking advantage of digital distribution,” Quirk told Music Ally ahead of the apps’ launch. “They run data-driven businesses, and although they’ve faced a lot of the same challenges of digital distribution to the music industry, they responded in different ways.”
Stats released this week by analyst firm IHS hammer home the different trajectories of the two industries: it claims that by 2019, mobile games spending by players will reach $40bn – a far cry from the $18bn of consumer spending on music that it predicts for 2015.
“The global recorded music business peaked in 1999, at a time when games was a fraction of the record business, and when mobile gaming as a subset didn’t really exist. Yet at the end of 2013, it was the same size as the record business: mobile gaming is growing explosively, while the record business is shrinking,” said Quirk.
“So what do the games folks know that music doesn’t? A large part of it has to do with the fact that they’re companies run by engineering, with no religion about anything: it’s a zero or a one. If it’s a zero, it’s not working, so they change it. If it’s a one, it’s working, so they optimise it.”
Quirk also pointed out that the business model of mobile games “did a 180” from 2010 – the point at which Apple started allowing developers to release games for free and make money purely from in-app purchases and ads. Freemium. Previously, games were either paid or free.
Quirk made the comparison between the most lucrative mobile game, Candy Crush Saga – on which players spent $1.33bn in 2014 alone – and popular albums.
“Last year’s biggest album was Taylor Swift, and it made, say, $48m? In the music industry, that’s an amazing number to celebrate,” he said. “But Candy Crush Saga is making its money from 3% of its audience – 97% of the people playing that game never pay a penny.”
Quirk boiled the difference down to a simple comparison: “The mobile games industry has learned that in the 21st century, free doesn’t mean promotion: it means distribution. They literally give their stuff away, and charge after the fact – and it works on a staggering, mind-blowing level,” he said.
“I’ve lived this experience when I was a touring musician [Quirk was singer and lyricist for 80s/90s alt-rock band Too Much Joy] when everything was a commercial for the record: the videos, the tours, every interview that we did,” he continued.
“Folks are now waking up to the fact that this century, the record is a commercial for the artist. The artist is the brand, and we’re shifting away from measuring success by the total number of units sold to ARPU – average revenue per user, or per fan. And games has already figured this out: they’re living in an ARPU world, and they’re experts at it.”
Freemium, of course, is currently a heated issue within the music industry in the context of streaming services like Spotify, whose free, on-demand tier has been criticised by Taylor Swift, UMG boss Lucian Grainge and others for being too generous – and thus not good enough to nudging fans to upgrade to a paid subscription.
“I know Lucian Grainge is on the rampage about freemium being terrible. It’s the right diagnosis, but the wrong prescription,” said Quirk. “I can see that as a content owner you are not getting back in return from the free tier of Spotify or Pandora the investment that you are putting in. But the culprit is not freemium itself, but rather the inefficiency of relying on third-party companies to convert your free customers into paying customers.”
This, as you may have guessed, is the pitch for Freeform, which is aiming to persuade musicians that it can help them do exactly that. Although as it turns out, the pitch is as much about connecting them with commercial partners – advertisers – who might just be prepared to pay an even higher price for their music than fans.
“We’re not ‘gamifying’ music. We’re taking all the lessons of free-to-play gaming distribution and applying them to the music space. And we believe we can do it more effectively than games,” said Quirk.
“Artist apps are not a new concept, but they have a really bad rap, and I would argue they have been broken. Mainly because they usually don’t have any music in them. Our mantra is that your album is an app: the most compelling thing you can have as an artist is your music.”
In that sense, Freeform is part of a wider desire among music/tech people who remember the heyday of vinyl (and CD, to some extent), where albums came as a package of artwork and lyrics to be pored over, to somehow recapture that digitally. Something that entities from Apple to Bjork have tried and not-quite succeeded at making a commercial success.
“Bjork’s Biophilia cost hundreds of thousands of dollars to make, but nobody was going to buy it. If you give that away, though, and get a Candy Crush-like install base, then you have the ability to convert people to paying,” said Quirk.
“You have to cast the widest possible net with free, then accept you’re only going to monetise a minority of those people. But music has been like a club with a velvet rope and a cover charge: it’s mind-blowing how many people we’re leaving out in the cold.
“If you’re making an app, make it the richest, deepest, most engaging experience you can. And don’t charge for the fucking app! Give it away for free, get the highest possible install base, and then decide what content to distribute and how you’re going to charge for it.”
This is how Freeform’s platform works. The company is encouraging artists to, for example, give their apps away for free including a free daily play of their latest album in its entirety – but then prompt fans to “take action” if they want to listen to it more than that, or get a copy for offline listening.
Taking action might involve buying the album from iTunes or Google Play, but Quirk harked back to Candy Crush with a reminder that “97% are not going to click the buy button”. That’s where commercial offers come in.
Rob Thomas fans can get his album free from his app by – to quote a few examples – signing up for a trial of magazine-subscriptions app Next Issue; redeeming a voucher at a Peet’s Coffee & Tea store; trialling Disney’s DVD and Blu-ray Movie Club; joining dating service eHarmony.com; and a selection of other e-commerce and and financial offers.
“It’s about the lifetime value of a subscriber. The marketing budgets of some of these companies are such that they’re willing to pay more to get a subscriber than the wholesale price of selling an album,” said Quirk.
“The bounty they pay for those customers is more money than the artist would have made selling their album. So the free app gets the artists way more fans than they would have otherwise; the fans get free music; and the partner gets a huge funnel of qualified customers. This is not the endgame, but it’s a very obvious place to start.”
It’s interesting to note the differences between Freeform’s apps on iOS and Android. On the latter, an offer to sign up for streaming music service Rhapsody is prominent. On iOS, it’s nowhere to be seen – an indication that perhaps Apple isn’t as comfortable with the idea of such offers for streaming subscription services that aren’t its own.
Talking generally before the launch, Quirk said that streaming services could be key partners for artists in this area, however. “There’s an 18-36 month opportunity where these companies are not only in a landgrab for new customers, but will pay a premium to poach one another’s customers,” he said. “If we’re wildly successful, we can help grow the number of paying customers for these subscription services.”
Some artists will bridle at the idea of their music being used as a carrot to persuade their fans to get cheap Subway baguettes or financial services. For them, Freeform has other options: fans will be able to unlock content by contributing their own photos and posts to an app, or by buying merchandise, joining a fan-club or completing various levels of a game.
Artists will also be able to define their own price if they go down the partner offers route: for example, specifying that they only want offers paying more than $10 or $15, if that’s the value they want to put on their music. “They could even unlock their new single or album if fans donate to a charity of their choice,” suggested Quirk. “We’re limited only by artists’ imaginations.” And, likely, app store regulations.
He went on to compare Freeform’s platform to U2’s infamous album giveaway through iTunes in 2014. “Apple and U2 proved that free means distribution not promotion, but they could have executed it a lot better. All they gave away was a square JPEG and some audio bits. They could have done it as an app,” said Quirk.
“They pushed the album onto people, and they basically turned their art into spam. In our model, even when the customer is not paying hard cash, they are getting music in reward for something. There’s an exchange of value there – the music itself has value, even if the listener isn’t paying.”
For now, Freeform is making its pitch to independent artists, labels and management companies – the latter emerging as key figures in this kind of distribution experimentation, according to Calhoun.
“There is somebody now at every artist management company that is focusing on this space, and at every label. It’s interesting to see what pushes their buttons. At labels, it’s the bar graphs we show comparing the revenues associated with music and gaming, and the stark difference,” he said.
“When we’re talking to artist and managers, it’s more the ability to have an engaging digital album package for the first time – to take all their content and present it in a really rich and engaging way that’s going to provide meaningful context.”
Quirk’s pitch to labels, meanwhile, is not just about praising mobile games – it’s about persuading music people that they can do better.
“Candy Crush Saga is making so much money and it’s almost embarrassing, because when you look at what people are buying in that game, it’s bullshit that doesn’t exist! It’s literally ephemera: dollar lollipops. Show me a Candy Crush Saga player that has as deep an emotional connection with that game as music fans do with artists,” he said.
“Candy Crush Saga is a mega success with a 3% conversion rate. I think musicians could easily double that. Right now there are too many casual music fans in the world, and a lot of that is our fault as an industry. I want to turn more people into the music geek that I was as a teenager!
“Candy Crush Saga is the ebola virus of freemium gaming. And we want to create musical ebola viruses! We want to give artists the tools to create their own destiny.”