The Record Industry Invests in the Metaverse (Part 2)
8 min read

The Record Industry Invests in the Metaverse (Part 2)

Hello, hello! Last week, I got a couple of nice messages about speaking at some college classes so I’ll mention again that I'm always open to such opportunities. Also, I once again wanted to say that we’re entering the midway point of our partnership with Infinite Catalog, so be sure to check out their words later in the newsletter. Otherwise, if you have any questions feel free to hit me up at, and if you like this newsletter, please forward it to a friend! Now let’s get back to the metaverse...

In the last newsletter, when teasing out the origins of the phrase “metaverse”, I circled back to its reframing of disparate tech ventures. The phrase could be a catch-all to mean: augmented reality, Facebook digital meetings are another repackaging of virtual reality, and nearly all of the digital goods (be it social tokens, NFTs, or just buying skins in Fortnite) could from an end-user perspective just appear to be ever more elaborate ways of gamification. The renaming of these initiatives all under the “metaverse” feels even more bizarre in the music world where the impact of these ventures is still so limited to upper-tier musical artists and operates on an assumption of an audience with disposable cash to spend.  

That’s what leads to headlines like: “How Twenty One Pilots' Roblox Concert Is Changing the Virtual Gig Game”, which hyped up what is effectively just corporate synergy, as the article lays out: “The concert marks the latest output from Warner Music Group’s (WMG) January investment in Roblox, as Twenty One Pilots is signed to WMG record company Elektra Music Group under the Fueled By Ramen label.” The executives behind Fortnite and Roblox may talk about the metaverse but for most musicians there’s very little to be offered here beyond work for your marketing department. Ozuna might collaborate with Call of Duty and Post Malone might appear in a digital Pokemon “concert”, but the common theme is that these are all highly controlled and mediated experiences that center the artist within specific digital contexts. Fans are only given the opportunity to engage as consumers without a real sense of ownership or community.

These metaverse propositions suggest new revenue streams outside of traditional (read: regulated) realms of the record industry. A more contentious dynamic arising is about licensing for social media and gaming, which are both pushing this metaverse-based future. Opportunities may arise for individual deals but the litigious side of the record industry, one that still centers copyright protection, isn’t going to let a new income stream go unlitigated. Roblox was sued for $200 million by the National Music Publishers’ Association for copyright infringement, which will likely lead to an agreement not unlike what it appears Twitch and the NMPA are close to agreeing on. (Facebook Gaming even recently secured deals with the major labels, showing once again an acquiescence of these companies to the music industry’s fierce defense of copyrights.) This creates an odd dynamic between these firms, where one part of them is investing in the metaverse and the other is calling up their trade association of choice to make sure the same company is coughing up enough money to avoid lawsuits.

Billboard’s recent coverage of the Twitch and NMPA deal helps shine a light on that tension between interconnected firms, Tatiana Cirisano writes: “...lump sum payments are often offered and accepted. From there, the burden is on the publisher to decide how to allocate royalties to its artists and songwriters, which is sometimes done by market share. Those settlements can also have go-forward licenses, which are also based on a lump-sum pool and distributed accordingly.”

The nature of these deals is that its smaller artists are left out of the monetary windfall that occurs when major tech firms do sign these licensing deals. So, while Warner may have invested into Roblox, all while Warner Chappell accepts with the NMPA suing Roblox, since they’ll still see that money flow back their way. Smaller artists who are never given a voice in this soup of lawsuits and backroom deals that’s arisen over the last five or so years as these tech firms were fine to play nice with the music industry. This might explain why below this level of elite legal drama there’s a more decentralized vision being laid out of the metaverse.

Earlier this year, Cherie Hu reported on the near 90% drop-off in NFT sales from its frenzied high in March. This sudden crash doesn’t mean an end to the music industry’s fascination with crypto and Web3 ventures. Just that the scale of these efforts, right now, is still fairly small. However, money is being raised. Ditto Music, now a blockchain-centric music distribution company, continues to pull press headlines, and Resident Advisor just profiled Friends with Benefits for a broader story on decentralized autonomous organizations (DAOs). Many initiatives are trying to figure out new methods of financializing digital assets, all backed by some similar mix of venture capital and crypto-supports. It’s created an interesting alliance of musicians that want some real control over their livelihoods and those who see a new cultural revenue path while sidestepping several established players.

This increased digitization right now, in a moment of still fractured live music infrastructure, can appear a bit more relevant than I’d guess it is in reality. Cherie Hu also tweeted out some recent MRC Data that showed only 5% of people watched a digital concert last year and only 5% of people planning on doing so later. And despite headlines, only a handful of artists are dipping into the crypto sphere, a sign of there being a disconnect between evangelists and fans about its value.

CNN pegged the shift of the narrative to the metaverse as a potential smokescreen of regulatory clamps coming down on social media companies. This is already playing out in China where the country is looking to implement further restrictions on youth gaming and fan culture, which would be two of the main touchpoints the record industry is looking to cash in on here. This should offer a warning that while the record industry, certainly not unfamiliar with child labor concerns, is attempting to ever emulate the video game industry, there are clearly lines that can be crossed. In a way, that is what the metaverse is proposing right now. It’s a space, sans regulation, for companies to figure out ways of squeezing each dollar from teenagers. For those looking to make the most of these “decentralized” spaces, it's worth keeping an eye on what is being taken away from everyone in these attempts to shift the ground on musicians, not just what is being gained by a select few.

Artists (“creators” if you're nasty), and the catalogs who help fund and sell their work, used to only have to worry about one or two formats, maybe some merch. Now it’s all formats all the time, plus there are more ways to monetize: distribution, direct-to-fan, socials, subscriptions, publishing, rights, NFTs, etc. Keeping track of it all is the new challenge - what’s the solution? Well...

Infinite Catalog is the first account-for-anything software + service made for catalogs and artists alike, simplifying royalties so you can grow your catalog, keep everyone in the loop, and get everybody paid.

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Unheard Labor

The United Kingdom’s Competition and Markets Authority announced it will continue into the second phase of investigating Sony's purchase of AWAL, from earlier this year. The deadline is March 2022, so we’ll be eagerly following the updates here. In additional governmental oversight news, Billboard reported on a report commissioned by the Canadian government to look into the economics of the record industry. Music Canada, a trade organization that represents major labels in Canada, called the report “flawed” which I think is a fairly high compliment. I covered an early draft of this report earlier this summer and would still say it’s the best paper on the biz I’ve read in a year of many wonderful reports.

A Note of Financialization

This month, GoDigital Media Group, along with MEP Capital, purchased Sound Royalties, a company that gives advances based on future royalties earnings. GDMG also owns Cinq Music Group, which is another hybrid label and rights management company, so it’s covering all its bases with finance creeping into the world of music. (MEP Capital’s other investments are a rather eclectic mix of video games, Hollywood, and music efforts). Audius, the blockchain-based streaming platform, received $5 million of investment from a SESAC executive, Katy Perry, the Chainsmokers, and a number of other b-list music celebrities. Just good to know that the company is now firmly within the music industry mainstream while often talking about itself as if it's bucking such trends. Also, Lucian Grainge is looking to make $150 million from Universal Music Group’s public offering this week. Don’t get too excited all at once.

Now to round up this week’s catalog deals. Reservoir Media, this newsletter’s favorite SPAC, is now “the worldwide administrator of her publishing catalog” for Joni Mitchell. On the purchasing front, Round Hill Music bought the “master royalty income” from the catalog of Foreigner drummer Dennis Elliott and a hodgepodge of royalties from the rock producer Tim Palmer.

Library Music - Pioneer Works

Liz Pelly goes deep into the last decade of public digital music libraries and how artists are beginning to think of them as alternatives for traditional music streaming platforms. It’s nice seeing musicians trying to build upon public infrastructure that’s rooted in local communities, rather than rely on purely digital formations.

Songwriters Organize New Guild to Take Bigger Piece of Streaming Pie - Billboard (Subscription)

The idea of a Hipgnosis Songs Fund adjacent songwriter organization, allegedly modeled off of the Writers Guild of America, my old union, is curious. The fact there are already so many musician/songwriter organizations does make me wish there was some more unified call to action or set of demands. Still won’t complain if major publishers get another thorn in their side.

Spotify’s King of Sleep Music Outstreams Lady Gaga, Somehow - Rolling Stone

Here’s an excellent case showing many of the current pro-rata streaming models, where all revenue is thrown into a single bucket and divided up by market share. Exceedingly long playlists full of 31-second tracks pull money from other musicians with “music” that’s often being consumed in people’s sleep. Sleep Fruits Music is no different than Spotify diluting its own mood playlists but both examples reveal the rather perverse incentives of winner-take-all-streaming economics.

Recycle, repackage, remix - MusicX

My co-worker, and occasional co-conspirator, Kaitlyn Davies wrote a bit about the role of various remix albums in the streaming era. She points out that these efforts may be fun, but major label acts harvesting smaller community for their cultural capital is something that DAOs and Web3 thinking is trying to renegotiate, so artists aren’t just left with exposure and piddling streaming income.

Music streaming platforms and self-releasing musicians: the case of China - Information, Communication, & Society

An excellent academic paper on the still-emerging Chinese space for “self-releasing” artists that’s currently dominated by Tencent and NetEase. Those two companies are an interesting parallel to western-based music distributors that are often backed by major labels and venture capital. The essay calls out the lack of academic, or even journalistic, coverage of this space from a more macro-level so I hope folks do take that up over time.

Can Social Tokens Pave a New Future for Music? BitClout's Still Banking On It - Billboard (Subscription)

Can never get enough of crypto-music business stories that feature copyright infringement, corporate mismanagement, and shoddy business practices. A perfect trifecta.