After the one-time pop of Spotify’s public stock offering cash-out, the new reality is going to be increasingly obvious–we’re stuck for at least a generation with trading high margin physical for low-to-no margin streaming royalties. That stock-fueled sugar high created a near-total dependence on big minimum guarantees and non recoupable payments from streamers–if you could get those payments. But the bad thing about non-recurring income is that it’s non-recurring. Spotify’s stock price is already testing lower lows near the $110 level, $7 above it’s 52 week low, but $80 below its 52 week high.
There’s three obvious things we know about streaming if we know nothing else: Everyone who works for Spotify got even richer in their stock market cashout while the overwhelming majority of artists and songwriters on the service languish; per-stream royalties are pitiful which matters if you don’t get minimum guarantees; plus streamers lose money because they spend too much on overhead, especially salaries and rent.
There’s a less obvious problem we know but that doesn’t come up very often–streamers don’t empower fans to reward the artists they love, much less the songwriters who write the music it all starts with. Imagine if fans could actually give money directly to their artists (and sign up for direct communications outside of the service).
But–thanks to inspiration from Tencent’s “virtual gift” feature, artists may have renewed negotiation leverage in actually getting streamers to empower fans to make direct contributions to the artists they love in the form of small “Ethical Prop” payments. Of course, in order to be entitled to be “ethical” handle, the streaming services–including Tencent–will have to make some changes in their current business practice.
“Tencent Music is a major part of the micropayment ecosystem because they let you give virtual gifts,” Cramer said. “If you want to tip your favorite blogger with a song, you do it through Tencent Music. In the latest quarter we have numbers for, 9.5 million users spent money on virtual gifts, and these purchases accounted for more than 70 percent of Tencent Music’s revenue.”
We are pioneering the way people enjoy online music and music-centric social entertainment services. We have demonstrated that users will pay for personalized, engaging and interactive music experiences. Just as we value our users, we also respect those who create music. This is why we champion copyright protection-because unless content creators are rewarded for their creative work, there won’t be a sustainable music entertainment industry in the long run. Our scale, technology and commitment to copyright protection make us a partner of choice for artists and content owners.
Apps may enable individual users to give a monetary gift to another individual without using in-app purchase, provided that (a) the gift is a completely optional choice by the giver, and (b) 100% of the funds go to the receiver of the gift. However, a gift that is connected to or associated at any point in time with receiving digital content or services must use in-app purchase.
(That’s section 3.2.1(vii) in Apple’s App Store Review Guidelines for those reading along at home.)
Ethical Props present a win-win opportunity for services and all artists that want to break the headlock of hyper-efficient market share distributions on streaming services. As we all know and Tencent acknowledges, sustainability requires more than a per-stream royalty that starts 2, 3 or even 4 decimal places to the right.