Analysis

How can memberships and tips economies work for musicians?


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Once upon a time, when the music industry talked about crowdfunding it generally meant Kickstarter and other project-based platforms where artists and other people could raise money directly from their fans.

There are now a number of other ways to get those crowds to open their wallets, from ongoing membership tools like Patreon to the tips economies of Twitch and other live video / social services.

At Music Ally’s Sandbox Summit Global online conference this week, a panel explored the potential for musicians. Ronny Krieger, GM, Europe at Patreon, Will Farrell-Green, head of music content at Twitch, and Zael Ellenhorn, who manages RAC as part of the YMU Group, were the speakers, with Music Ally’s Marlen Hüllbrock chairing.

Ellenhorn explained how RAC chose to focus on a combination of Twitch and Patreon after his touring schedule for 2020 was cancelled by the Covid-19 pandemic.

“We just went all-in on both platforms for the next six months,” he said. With startling results: “The income that we’d made from both Patreon and Twitch was more than he would have netted from his headline tour in the US.”

Patreon’s Krieger had some blunt words for the music industry’s original response to that platform, when its founder Jack Conte (a musician himself) asked 40 artists if they would like to join for its launch.

“All 40 of them said no,” he said. “Unfortunately the music industry has always been one of the slowest and most pessimistic about the opportunities of new platforms, and you can see that in the history of Patreon… The music industry has been really slow adapting to new ideas. But obviously once Covid hit a lot of people felt ‘I have no idea how I’m going to survive this'”

“A lot of people finally started to recognise membership [models] and consider the benefits of working with a loyal fanbase that they’ve hopefully built over time. And not have a one-off payment, but recurring revenue, almost like a salary… it’s giving you a lot of creative freedom.”

Patreon’s key pitch to musicians is that memberships are a way to “monetise something else other than a finished product” – in other words, the creative process itself. That’s also something that Twitch sees as one of its benefits for artists.

“Music industry economics is tough… there are long periods of time when you don’t earn any money,” he said. “We all know the stories of people who have three four jobs while they’re trying to finance a music career. [On Twitch] there are middle-class musicians who are earning seriously good money: a lot more than they’d earn from touring. Come to Twitch, build a community and monetise it, and then it’s a sustainable source of revenue.. that’s a complement for the rest of your career.”

twitch panel 2

The panel talked about the fact that memberships are far from a new idea in music. “A lot of the things that seem extremely new are actually just based on ideas that are around forever. Like the fanclub model,” said Krieger. “That existed for decades! It was essentially a model that got lost on the way of digitalisation, and I think a lot of bands are now rediscovering that.”

He also suggested that the core fan communities being built on platforms like Patreon and Twitch are a reaction to the predominant success metrics of the big social networks.

“It’s important to reach big numbers on social platforms; have a million followers, 10 million, whatever your benchmark is… I think during Covid a lot of people started to question if that is what it’s really about for them: if it’s rewarding and these people really care, or if it isn’t better to focus just on the people who really care, and build a community around that,” he said. “And all the rest is really just extra. We’ve seen a lot of artists who want to focus on their real fanbase… and no longer chase these gigantic number of social media followers.”

Ellenhorn agreed, while highlighting the challenges of identifying those people. “A thousand superfans is much more important than 100,000 casual fans or whatever. But the question is how do you find those people, and how do you engage with them, and super-serve them?”

On the latter aspect, RAC’s Twitch subscribers and Patreon backers also get access to his community on Discord, which Ellenhorn sees as an essential part of the mix. Not just because RAC could use Discord to let fans know when he was about to stream live on Twitch, but also because he could give different levels of access to fans on Discord based on the tier they were backing on Patreon.

The conversation moved on to what works well on Twitch, with Farrell-Green saying consistency is key, including a schedule that is stuck to, so that audiences know when to tune in. He also stressed that artists can earn a decent living from fairly small (compared to other platforms) crowds.

“If you have 100 people watching you live, think about 100 people in a bar, that’s a lot of people!” he said. “Our median audience level for people earning over $50,000 per year is about 183 people [watching at once]. It’s still a decent number, but it shows if you can build that community quite quickly and get a self-sustaining audience, there’s some really good money to be made.”

Patreon and Twitch are both dealing with another challenge of persuading artists to use their platforms: the perception in some quarters that it’s about asking fans for money, and that this is an awkward dynamic.

“It’s kind of funny to me. Essentially you’re not asking for money,” said Krieger, who compared it instead to a retail store: the staff are not asking shoppers to “please spend $200 in my store”, instead they’re showing off the products that those shoppers might like.

“The misconception of digital platforms is that you ask for money. You really don’t. You just showcase what you do, and make it so attractive that people want to spend money on it.”

However, running a Patreon (or offering a Twitch subscription) does involve setting a price. “Traditionally most artists undervalue their work,” he said, adding that they will often put the lowest possible price on the cost of their Patreon membership so as not to scare off fans or seem to be money-grabbing.

“It’s not really new. When you’ve done this on social media platforms, every artist that I know has posted ‘my new record is out’. That doesn’t mean steal it! That means in most cases ‘go to a store and buy my record’. The same with tickets,” he said. “Membership etc is no different in that sense, but somehow psychologically people haven’t made that link yet.”

Ellenhorn chimed in. “A lot of artists would be surprised at how many of their fans would be willing to support them directly, if given the opportunity to. This kind of fandom isn’t just about giving artists money, it’s about expressing a different part of what you like. I don’t think that’s any different from buying a new t-shirt.”

Farrell-Green offered some more tips on how artists can make their Twitch streams interesting for fans, stressing that it’s about finding a good format rather than just broadcasting without a plan.

“Finding a format that works for the artist is really really important. We find that artists who come and dabble initially and then find a format that they really like, wether it’s a creative process or Q&A stye or straight performance, that tends to work as well,” he said.

“As you get smarter and spend more time on the service, your audience starts to understand the monetisation aspect. And I think artists start to get more comfortable with that, and they start to push subscriptions, and they see people throwing bits, our digital currency, at them.”

The panel closed with some thoughts on how platforms like Patreon and Twitch can complement the traditional music industry – labels in particular – rather than pose a threat to it.

“We see ourselves as integrated into the network or the creative process of every creator,” said Krieger. “By nature we’re only for the core fans, for the hardcore audience. We’re not for a large percentage of your audience that casually wants to buy one of your shirts or likes one of your tracks.”

He continued: “Large parts of the industry are still looking at potential threats rather than opportunities… But find something that works for what your artist is currently doing, that is maintainable not just short-term, but something the artist feels comfortable doing over a longer period of time. Diversify and don’t be scared! There is room for everyone.”

Ellenhorn agreed. “The best record labels out there aren’t seeing Patreon or Twitch as a threat, they’re seeing it as an opportunity,” he said, suggesting that these kinds of platforms are not so different from the way the live business has always sat alongside recordings in artists’ businesses. “They [labels] are not going to tell you not to go on tour just because they’re not making any money out of it!”

Sandbox Summit Global was held in association with Linkfire, Vevo and Songfluencer and supported by Colabox.

Stuart Dredge

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