PC Gaming Is Just Like Independent Music

Chris Dixon’s article yesterday discussed the trends that media is experiencing in the digital age. While his article focuses mostly on the gaming industry, it also heavily references the music industry, drawing numerous parallels and comparisons throughout the piece. Since I’m not much of a gamer, the music-related aspects of the post fascinate me because:

1. They so closely mirror those in the gaming industry, which I find intriguing and even somewhat surprising, and
2. Because Dixon is exactly on-point in his dissection of them.

Regarding the first point, it’s almost eerie how broad Dixon’s thesis could have been, were one to read the piece out of context. Of particular note are subtitles like “PC games are way bigger than you think[,]” which could easily say “independent music” instead of “PC games.” And it is way bigger. Way, way bigger.

Independent Music Is Way, Way Bigger Than You Think

Independent music, like PC gaming (it seems), is substantially bigger than many people initially realize, particularly if they’re only considering one part of “the music industry.” The “music industry” is a misnomer itself since it lends credence to the thought that there is a singular music industry in which to exist and do business. This is incorrect because there are in fact multiple paradigms that exist within the music universe, all of which operate according to very different rules. Independent music is a whole different world than major label music, and thus the opportunities that lie there do not necessarily mirror the opportunities that lie in the latter.

Growth of independent music between 2003-2012; image courtesy of Techdirt

The stark reality is that independent music cannot be measured according to the traditional metrics. Unlike major label material, independent music cannot be measured and calculated metrically based on chart success, album copies sold (physical or digital), or video hits. Independent music extends to places major label music never touches: to the garage of the punk band in Chicago, the coffee house performance of the singer in London, the bedroom demo of the multi-instrumentalist in Melbourne, and the piano jazz bar in Amsterdam. As a result, the sheer number of artists that exist (and are popping up every day) is staggering.

The Problem with the “Walled-Garden”

As Dixon pointed out, where gaming wins is in providing endless choices for users, and relying on the dynamic of attention instead of scarcity. This is directly at odds with the current approach in most of the traditional music industry (in streaming especially) where the “walled-garden” approach is used as a means of obtaining exclusive rights to material on one service, and thus making it scarce or unavailable on all the other services. The notion here is that if you can garner enough scarce material, you’ll have something your competitors simply can’t lay their hands on.

The problem with this line of thinking is twofold:

1. It doesn’t actually work, since material (major label or independent) inevitably finds it way off of solely one system and onto multiple systems; and
2. It’s against the nature of music. Music is art, and the nature of art is to be seen, shared, engaged with, and shared again.

Music is freedom and expression, and to try and stifle that on one system is simultaneously useless and misguided. It’s misguided precisely because music is inherently social. Unlike movies or books, music has a unique live element which can be leveraged to the benefit of both the artists and their fans (both current and prospective). One of the fastest growing trends in independent music is for artists to alter their perspective of their own music: rather than looking at it solely as an end commodity for sale, now it’s becoming a mechanism for free marketing and advertising. It’s a means to an end, a way to get people to come out to shows, connect on a personal level in the live paradigm, and walk away feeling a direct identification with that artist.

What the major label industry really looks like; The Big Three

Unfortunately, major labels have been less enthusiastic about this approach. As Dixon notes, they rely heavily on litigation and have effectively stayed focused on protecting their back catalog, looking backwards at the past with forlorn eyes rather than tasting the future.

Royalties Are the Emperor’s Clothes

The royalty system is a whole other monster, which I’ve tackled a number of times, and which I think is simply a chain to the past and nothing more. It doesn’t help artists the way they need to be helped, doesn’t make fans feel good about how artists are compensated, and just remains a massive headache for any music company, streaming or otherwise.

Royalty Rates, Minimum Wage, and Reality; image courtesy of informationisbeautiful.net

Simply put, the royalty system is arguably the best example in media of the Emperor’s clothes: everyone keeps saying that we just need to find a way to make it work in the new age, when in reality there is no way to make it work in the new age. Arguably, it didn’t even work in previous decades; but it was the only real, scalable revenue system around, and thus became the industry standard.

In the post, Dixon quoted the post-mortem statement of Turntable.fm, which states that the Turntable team spent tons of cash on lawyers, tons of time trying to secure label deals, and ultimately that they didn’t heed the lessons of so many failed music startups. I’ll go so far as to argue that one of these mistakes (which founders continue to make) is buying into the old royalty-based system, and thus undercutting their own feet before even beginning the race.

The music pipeline

The diagram above paints this picture, and if you look closely, you see that there are really only two entities who hold any significant amount of consistent power: the major labels and independent artists.

• The former group essentially controls the lifeblood of dependent streaming services (like Spotify, Apple Music, Tidal, and more recently SoundCloud), the payment to artists from the royalties collected, and the gatekeeping authority over the music to which the mainstream is exposed.

Major Label Percentage Ownerships of (some) Streaming Services; *(Beats has since been purchased and rolled into Apple Music)

• Independent artists, however, control their own distribution, exposure, and revenues models. Because they’re not beholden to any one paradigm or other entity, they are free to explore a wide range of possibilities, and mix-and-match those that work best for them. In many cases, this is highly individualized; what works well for one artist doesn’t work at all for another, and vice versa.

Community. It’s All About Community.

Dixon nails it home in the latter paragraph on books, when he states:

From a legal perspective, some fanfiction could be seen as copyright or trademark infringement. From a business perspective, the book industry would be smart to learn from the PC gaming business. Instead of fighting over pieces of a shrinking pie, try to grow the pie by getting more people to read and write books.

This is exactly true for the music business too. Instead of looking to block remixes and free distribution models, music companies would be better off learning how to leverage those models for improved community building and engagement, particularly as music is so heavily impacted by live continuous interaction. Build the community around the artists, and fans will follow. From those core fans, new and more flexible revenue models arise. The future of music is democratization and community.

If you look at many of the companies that are winning in media/tech right now—companies like Medium, Twitch, Product Hunt (with Games, Books, and Podcasts), and BuzzFeed—you see that they have invested a substantial amount of time and energy in creating communities around their products and/or services. The Medium community writes about anything and everything, and communities on Product Hunt and Twitch are super sticky. And all of this is to say nothing of the Dixon’s crowdfunding point, which certainly has massive and positive implications for the music business moving forward.

Scarcity Is Obsolete, Democratization Wins

Dixon’s closing statement gives me chills:

The internet renders business models focused on scarcity and litigation obsolete. But as the PC gaming market shows, it also unlocks lucrative new business models, and lets creators connect with consumers in new and exciting ways.

It gives me chills because it’s so on-point with what’s happening in music. Dixon set out to write a post on gaming, but in the process he laid out precisely the dynamic that’s bubbling to the surface in the music universe. I can’t believe this is a coincidence. Art is art, its essence is sharing and engagement. Music and games are forms of art, and draw their life-force from the communal engagement that occurs between the creators and the consumers. It all comes back to community. Every time.