Hello readers, this is the last issue sponsored by Infinite Catalog, a great royalties software company, so check em out if you haven’t done so. Last week, Gwendolyn Seale, an Austin-based entertainment lawyer, wrote an op-ed for the Trichordist about the ongoing debate between the National Music Publishers’ Association and streaming platforms about the Phonorecords IV ruling that’s been in front of the Copyright Royalty Board in the coming years. Her piece cuts through both sides’ talking points towards the deeper issues impacting songwriters. Do check it out, but now let’s look into the “creator economy”.
Earlier this summer, the New Yorker posed a question that was answered by one of their cultural critic Kyle Chayka: What the “Creator Economy” Promises—and What It Actually Does. His story focused on Patreon, Substack, and other startups that aim to provide a clearer path of monetization for a newly defined class of entertainers. He observed that the phrase “creator” can be traced back to 2011 YouTube press material when the company attempted to move away from the phrase “YouTube star”. It’s in this mode of seeing users, often young, join these platforms in hope of a career, or stardom, which Chayka compared to another 2010s phrase the “gig economy” associated with apps like Uber, Lyft, and Doordash. Economically, the set-up of gig workers, as seen in California's now deemed unconstitutional Prop 22, was clearly a marketing attempt by tech companies to skirt labor law, but the “creator economy” and its peers the “passion economy” or “ownership economy” are on different missions.
Li Jin, a 31-year-old investor, was bestowed the title of “Investor Guru for Online Creators” by the New York Times. An alum of Andreessen Horowitz (a16z), the media darling venture capital firm founded by Marc Andreessen and Ben Horowitz, Jin follows the VC’s path of narrative-building through prolific blogging and podcasting about this self-defined internet niche. In an interview with the YouTube channel Bankless, Jin walked through her own history of the creator economy.
She broke this down in a way that might be familiar to music fans and professionals in beginning with the proto-social media era of Myspace and Live Journal; then the arrival of Facebook, YouTube, and Instagram where people found a route to money through platform-orchestrated advertisements or from brands seeking to reach new-formed audiences. The third phrase she marks with Patreon, Substack, and Twitch that allowed users to directly monetize their audiences, and no longer be forced into working with brands. Then the current chapter of this arc according to Jin isn’t creators being a single business or selling themselves to advertisers but rather creating “micro-economies” around themselves and their communities. This shape could be through decentralized autonomous organizations (DAO) or potentially other Web3 initiatives. The pivot points attach neatly to the last twenty years of web development but also seemingly provide little context for what entertainers, creators, or whatever word we used before “creators” were finding ways to make a business work before digital platforms.
In her book Playing to the Crowd, the researcher Nancy Baym cites a number of early web music fan communities where fans used online message boards to chat (think Discord), artists could directly fundraise for projects (see: Kickstarter), and also having direct mailing lists that were at that point not mediated by venture capital-backed platforms (see: platformless Substack). There isn’t an exact straight line between these eras, since often it’s the technology guiding, often with a strong hand, but not fully dictating how one interacts with their fans. Chayka closed his New Yorker essay centering the question of how a creator is supposed to find an audience without using Twitter, TikTok, or Instagram, all allegedly networks that are at this point two creator eras ago. Jin’s framework is useful to see what is being offered and backed by moneyed interest over the years but there are other factors (fan base, artist needs, etc.) that influence how people make money online. Technology is a, but not only, piece. Now, if there is a creator economy, at least from the side of investors like Jin, Chayka mentions how the sector’s raised over $1.3 billion in 2021 alone, so where is this money going?
Who Funds the Creator Economy
The phrase “creator economy'' may be buzzing now, but another Andreessen Horowitz alum leaned on a different phrase: “Ownership Economy”. Jesse Walden, a former music manager, and startup founder, used it when talking about his latest venture: Variant Fund. His blog post on the “ownership economy” suggests the future of the internet will be in ventures where users have more control and input into the platform rather than allow all of the value to accrue upward. He cites the rise of Bitcoin and Ethereum, as being early proof points saying: “[It] means that ownership — which may manifest in the form of novel economic rewards, platform governance, or new forms of social capital — can be a new keystone of user experiences, with plenty of design space to explore.” Austin Robey, a co-founder of Ampled, a music co-op I sit on the board of, critiqued Walden’s proposition by unpacking further what does “ownership” really mean. Suggesting that without clear definitions of what is “ownership” or even “community” these terms can slip into meaninglessness like “democratizing” did in an earlier web era. That critical eye is certainly needed when Walden’s Variant Fund is a key investor in this space.
The Variant Fund’s gotten behind the much talked about DAO Friends with Benefits, the writing platform Mirror, the NFT auction house Zora, and even PleasrDAO, a loose cluster of artist collectors, that just bought the limited-edition Wu-Tang Clan album Once Upon a Time in Shaolin for $4 million. Meanwhile, Jin’s Atelier Ventures is a mixture of subscription platforms (Patreon, Substack) and creator-centric tooling startups (Stir, Contra). Variant’s portfolio illustrates a clearer worldview of early adopters pooling together their unregulated money for collective purchases and clout building, why else would the New York Times announce the Wu-Tang album purchase, except for notoriety. Or, the investments are going towards more benign tooling for these companies. Last week, a16z announced raising $10 million for FWB, saying “We’re thrilled to be a part of the FWB community as they lead the charge toward mainstream adoption of web3.” If Atelier’s lead spokesperson is saying creators need ownership and Variant is acting as a spear of investment that can be backed up by a VC giant, it helps explain a recent pivot by both funds.
In October, the two funds revealed they would be combining efforts because in their words: “The future of consumer software is crypto, centered around the belief that what users create and the value they engender belongs to them.” This conjoining at the hip of “creators” and crypto makes sense, as a means of pumping cash into initiatives that’d otherwise be fairly unattractive to capital. The speculative mania around NFTs might’ve come down from its early 2021 high but there are still plenty of folks willing to fork over thousands of dollars for digital goods and potential millions to invest into the platform that hold those works. That might be why the parents of these two funds, a16z, put $100 million, into the NFT marketplace Opensea. The Web3 future comes with an a16z seal of approval.
Your Own Personal Economy
Last year, Li Jin wrote about an idea that’s stuck with me for a while called the “Universal Creator Income”. The idea was a riff on the “Universal Basic Income” that’s become popularized in the United States by the former presidential and New York City mayoral candidate Andrew Yang. The two ideas pair well together in that creators suddenly would know their audience holds disposable income and they themselves would be less burden to make sure they're hitting self-imposed growth numbers. Either or both solutions address an understated issue with the passion, ownership, or creator economy: How much money does your community have? If the answer isn't much, then suddenly the state, or a firm acting as the state, is suddenly very appealing.
That financial crunch on artists helps clarify the necessity of crypto in these efforts. Jin's analysis produces a fairly neat answer in the UCI, which both favors companies with deep pokets but smartly reflects a geninue political desire. The artists Jaime Brooks, and my friend Liz Ryerson, both expressed on Twitter concern of artists being swept up in this new wealthy audience that's looking to only build upon musician clout. Certainly, some artists will gravitate towards that pull with real success, others as seen in certain backlashes to NFTs drops won’t, and many others will just never know this conversation is alive. Venture capital and crypto see a real opening within music during a moment when industry's success feels every more disconnected from regular artist fortunes.
For all the talk about the community that swarms amongst many of these spaces of DAOs, Web3, and NFTs there’s very little context given for what exactly is the community that is so eagerly pumping money into these ventures. Atelier and Variant hold at least $110 million to try and boost up this self-generated market. A couple of folks at a16z even wrote a 30-page paper carving out the legal American framework for DAOs. Decentralization can only begin when Silicon Valley’s biggest VC firm provides the framework. In an era of still relatively low interest rates and people riding high on the 2021 crypto boom, it’s not that shocking new technologies with undefined use cases are eyeing artists and musicians for legitimization. An a16z sponsored party in Brooklyn doesn’t quite produce the same level of FOMO as hot-shit DAO being its cultural gatekeeper. But perhaps that’s the real creator economy: Correctly decrying old internet structures, while expecting the same eventual profits from the new internet.
Sponsored #6: Every Business is a Collaboration
We’ve come to the end of our sponsored series, for now anyway. Big thanks to David for trusting us with this platform and to all of you for reading. I’d like to leave you with this:
Imagine working together - on a record, on a new business, on anything - and from day one everyone involved is on the same page about the expenses, the income coming in, who earns what % of the net profits. Everything is clear. Everything is flexible. Everyone gets paid their share, on time.
This doesn’t happen often, but it can, and it should. It doesn’t have to be hard. If you’ve got a business that earns money and pays some of it to collaborators, music industry or otherwise, give us a shout. If you want to start one, keep in touch. We’re just getting started ourselves.
Infinite Catalog is a software + service company that simplifies accounting so you can grow your business while keeping everybody paid. Infinite Catalog is free to try for 30 days, and Penny Fractions readers get a 30% discount off your first three months.
The United Kingdom’s Competition and Markets Authority announced a study into the music streaming competition, which the press quickly called out could put government's eyes towards major label industry dominance. That couldn’t be more welcome news for this newsletter. Though this is only the first step, before a full-blown investigation, or even potential regulatory action, it’s always nice to see the state really diving into such a thoroughly uncompetitive market. Now if only such moments could be sparked across the pond.
I already mentioned the excellent op-ed by Gwendolyn Seale on the current Copyright Royalty Board firestorm but wanted to go into a little more detail. Right now the CRB is starting to look into the rates for Phonorecords IV that covers mechanical and performance royalties. The National Music Publishers' Association came out swinging with a fairly high asking price from streaming platforms, and those platforms countered with paltry low rates. Seale’s op-ed suggested much of this posturing can be found both parties digging their in heels and dismissing compromise, while the current Phonorecords III ruling continues to be mired in court battles. Ultimately more people need to become hip to this ongoing back-and-forth, and there needs to be some real legislative work that can properly fix what’s becoming a tiresome stalemate only benefitting the lawyers and public spokespeople.
Then to quickly close, Florida representative Ted Deutch introduced the Protecting Working Musicians Act that would allow artists to negotiate alongside one another with streaming platforms over pay rates and waive antitrust laws that potentially hold back such actions. If anyone reading this has any thoughts on this particular act please let me know because on its surface it addresses a number of important issues for freelance workers.
A Note of Financialization
After last month’s big spending news stories, November isn’t slowing down. Primary Wave picked up the catalog and additional rights of Luther Vandross from his family for reportedly over $40 million. Tempo Music, Warner Music Group’s private equity-funded song rights firm, picked up the masters and compositions of two 2000s Korn albums. The Financial Times reported David Bowie’s catalog may be sold for $200 million, but no details on the buyer yet. And speaking of low details, Reservoir picked up “songs” by the songwriter Stephony Smith, but the reporting didn’t say what exactly was bought or for how much, which is even vaguer than a typical deal. At least tell us if it’s the writer or publisher’s share!
Concord, a rare mid-sized independent label/publisher, may be up for sale, as the company wants to raise more money for acquisitions, and the Michigan State Retirement Systems, its primary owner, isn’t quite as interested in pumping more money into the firm. Billboard reports it could be sold for $4 billion, I’m sure some institutional investor is reading those deck slides.
6 Links 2 Read
Sale Is Unlawful - Dada Drummer Almanach
Damon Krukowski unpacks one of the many ways that music piracy opens up music in ways to be experienced out of the primary commodified mode of consumption at the very moment. Though piracy is less at the center of record industry discussions with each new earnings call, I appreciate remembering how black markets can form new, and unexpected, contexts for music.
The Digital Millennium Copyright Act looms large over the contemporary music streaming ecosystem but it’s often overlooked by other industry boogeymen. And though it’s an increasingly consistent theme of this newsletter, federal governments often have far more control over the direction of a country's record industry than most folks realize. So, def keep an eye open for potential reforms around the DMCA and the ways it could help working musicians.
Democratised Finance in Music - The Liminal Space
An interesting history of the trials and errors attempting to collectivize attempts at investing into musicians, while also weaving a parallel history of the Securities and Exchange Commission legal tangle with cryptocurrencies. Personally, I’m all for fairly harsh regulation on crypto, but Dan’s piece does a great job of outlining what could be gained if fan support for artists was more opened up. If only all crypto-music writing were this thoughtful.
Over the last few years of tracking music catalog purchases, I’ve thought about what would happen if the state got involved. Well, turns out my thought wasn’t too original. Now, I still have some reservations about using public funds on private music catalogs that are mostly seeing valuations go up because of tech firms, but I do like knowing others are thinking about this potential proposal.
Truthfully, there’s been very little happening of note between SiriusXM, Pandora, and iHeartMedia. All maintained notable audiences but continue to be usurped by Spotify, Apple, and Amazon. The removal of iHeartMedia from Liberty Media’s portfolio isn’t too shocking but still curious about the company's future.
Christian Girl Autumn - Nymphet Alumni
The world's only good podcast remains astutely critical of millennial narcissism, but not completely above embracing certain aspects, see in this episode. A fun journey through meme backlash, contemporary Christian culture, Starbucks, various shades of confessional lifestyle blogging, and the concept of “autumnal”.