Music’s biggest companies are determined to better monetize ‘superfans’ on streaming platforms. Audius is already doing it. – Music Business Worldwide

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Welcome to the latest episode of the Music Business Worldwide Podcast. The MBW Podcast is supported by Voly Music. On this episode, MBW founder Tim Ingham speaks to Forrest Browning, co-founder and Chief Product Officer at California-headquartered music streaming service, Audius.

Audius is one of the most talked-about new digital streaming startups in today’s music business.

Powered by Web 3.0 technology – remember that?! – it describes itself as a “global decentralized music community and discovery platform that puts the artist in control”.

What that really means is that Audius enables artists to connect directly with their ‘superfans’, while offering those superfans the opportunity to pay more for access to coveted digital products and treats – including rare catalog recordings, or even official permission to remix a track.

Audius boasts over 7 million unique monthly users on its platform, and has attracted investment from some impressive people – both music artists and music executives.

In 2021, Audius accepted a USD $5 million funding round that included financing from the likes of Katy Perry, Nas, and the Chainsmokers, as well as SESAC CEO John Josephson, former Sony Music Publishing boss Marty Bandier, Three Six Zero founder Mark Gillespie, and all-round music biz mogul Guy Oseary.

On this Music Business Worldwide podcast, MBW founder, Tim Ingham, speaks to Audius’ co-founder and Chief Product Officer, Forrest Browning, about what differentiates his company from other music streaming platforms.

Also discussed: how Audius’ model fits increasingly snugly with clamoring from major music company bosses, not least Universal Music Group’s Sir Lucian Grainge, for a better commercial relationship with music’s superfans.

Listen to the podcast interview above, or read an abridged version of the Q&A below…

For those who don’t know, Forrest, could you just give us a quick Beginner’s Guide to Audius?

Audius is a music community and discovery platform that puts artists directly in control. You can almost think of it as a decentralized UGC platform, reminiscent of how SoundCloud was back in the day.

It empowers artists to have a direct connection to their fan base, and to engage on a deeper level than they may be able to do on other major DSPs.

Talk us through some of the ways that artists are using Audius to tap into ‘superfans’.

A lot of the things that we’re able to do uniquely are powered by Web 3.0, cryptocurrency, and things like that. You don’t need to know any of that as a user, a fan, or an artist. But it enables us to give our clients and users more functionality than they can get in a normal Web 2.0 ecosystem.

Our positioning here, in many ways, is all about superfans.

Audius [today] has about 7 or 8 million monthly active users. A lot of our initial traction was in electronic music and hip-hop, and a lot of the artists that do well on Audius are not necessarily putting up the same catalog that they have on all the major DSPs [like] Spotify or Apple Music.

Instead, what tends to do really well on Audius is this grassroots sort of direct interaction – maybe [via] b-sides, or long-form DJ sets.

“Essentially, what Audius has built up at this point is 7 or 8 million monthly active superfans.”

For many DJs, for every 10 songs that win up on their album, there are 30 more on a hard drive in a closet somewhere, tracks that never saw the light of day for one reason or another. Those things wind up on Audius.

Frankly, places like TIDAL, Apple Music, Spotify… those are great for the majority of your fan base. But the problem is [that approach] treats all fans as essentially the same. It doesn’t allow you to have a deeper engagement with those superfans – folks who want to really dig in and go to a deeper level.

Maybe not all of your fans care about [rarities, or the chance to remix your tracks]. But some percentage of your fans absolutely do – maybe the top 1% or the top 5% of your fan base will go wherever you put that content because they want to engage on a more meaningful, deeper level.

So essentially what Audius has built up at this point is 7 or 8 million monthly active superfans.

[For example] a lot of electronic artists, when they upload a track [to Audius], also upload the accompanying stem files. So that’s what’s kind of cool is you can say: For my fans, if they follow me on Audius, they can download the drums, or whatever the different aspects of the songs are. And then you can run remix competitions [based on those samples].

It’s a timely moment in the evolution of the music industry to be talking to you. One of the dominant themes in MBW’s reporting this year has been the evolution of the royalty streaming model. I’m sure you saw the letter from Sir Lucian Grange hinting at the idea that different levels of fandom should be rewarded and monetized in different ways on streaming services. Do you think the music industry is leaving money on the table by not charging superfans on streaming platforms differently than it charges regular fans?

Yes. Audius has been live since late 2019; we’ve been beating this drum for four or five years. That’s core to what Audius does: figuring out ways to help monetize and engage fans at different levels.

You can look over the last 50 or 60 years of the music industry and the value of a [play] has gone down dramatically, almost to zero.

Back in the day, you’d have to perhaps buy the entire vinyl record to be able to listen to one song. Then there’s been cassette tapes and CDs and various evolutions, then iTunes unbundling [the album]. And every step of the way, the value of one particular song – or, especially, of one particular stream – has gone down and down to the point where today you can listen to [any] song on streaming services or YouTube, and it’s ad-supported [with] minuscule [royalty payments], essentially a [fraction] of a penny per stream.

I think the bigger picture, and this is where people miss the forest for the trees, is that [streaming model] only values every listener at the exact same rate – including the casual fan. It’s almost the lowest common denominator in terms of how you can monetize [listeners].

“There’s a world here where everyone comes away from this happy – where the casual fans can continue to pay [roughly] what they pay right now on the major DSPs, but the superfans can pull out 5-10 [extra] bucks a month.”

Think about a bell curve – on the right side of the bell curve, the top 5% to 10% of your fandom – those are not casual fans. Those are folks that would gladly pay a little bit more money to go deeper and get extra content or extra access that isn’t available elsewhere.

I think there’s a world here where everyone comes away from this happy – where the casual fans can continue to pay [roughly] what they pay right now on the major DSPs. But the superfans can pull out 5-10 [extra] bucks a month and get access to a fan club, or special access to stuff, to get more content.

It’s ‘choose your own adventure’. We’ve kind of reached a point where in the last few years [the value of a stream] has hit, frankly, rock bottom. The only place you can go from there is up. And I think we go back up and rebuild by adding more optionality for consumers.

We can’t expect that everyone is just going to be okay waking up tomorrow and doubling the price that they pay to Spotify every month. But I think there are interesting ways that you can monetize different fans at different rates. [Casual video game giant] Zynga and all these other folks have proven this out over the last few decades.

Are you excited – or otherwise – by having a large-scale company like Universal Music Group start to turn its attention towards the crux of the thing that you’ve been developing these past few years?

I think it’s fantastic! To be clear, I think everyone in this entire music ecosystem [to date] has been acting rationally – especially the majors. Major [record company] DSP streaming revenue has been [growing at] almost at a J curve. So why kill the golden goose?

These major streaming platforms have managed to rebuild a way where [labels] can recoup a lot of that money that was flying out the door in the decades prior to that. So I totally get it [why they haven’t challenged the typical streaming model more regularly].

“There’s only 300-and-some million people in the US. At some point, everybody knows about Spotify; They’re either paying for it, or they have the ad-supported version. There just [won’t be] any more people to pull out credit cards.”

But now you can look at all the numbers, the curves, in terms of [global streaming] subscriber growth, and there’s a saturation point, right? There’s only 300-and-some million people in the US. At some point, everybody on Earth, or at least everybody in the US, knows about Spotify. They’re either paying for it, or they have the ad-supported version. There just [won’t be] any more people to pull out credit cards. And so the amount of money that you’re going to make monthly from that casual fan base is capped.

And so the obvious [next step], if you want to keep growing revenue, is to start thinking about alternative monetization strategies. That’s where our audience comes in.

Four or five years ago, when we started Audius, folks, on the whole, were, ‘No – shut up! We’re finally just getting the train back on the tracks – things are finally stable! Why would we want to rock the boat?’

But now, it’s like, okay, things are so stable that maybe they’re [becoming] flat from a revenue perspective. So if we want to get that [growth curve] going again, we need to figure out new ways to add revenue.

Very importantly, Audius is massively non-competitive with existing DSPs. And I think that’s how the labels think about these things, too: You’ve got to grow the pie, it can’t be a zero-sum scenario.

Tricky question: What is Audius’ most solid USP? As the music industry starts to turn towards a discussion about the ‘super fan’ being ripe with economic possibility, what’s stopping a Spotify or an Apple Music etc. from launching elements of what you’re talking about: locked off areas of their services for more passionate fan bases, for an additional price?

I think you’re exactly right. I’m sure all the existing services will try to do something to this effect. But honestly, I am very confident where Audius sits in the ecosystem, [so] that won’t be a problem.

At the end of the day, candidly, whatever grows the [streaming revenue] ecosystem is better for everyone, including Audius. If a third party [DSP] decides to add [Audius-like elements for superfans], I don’t think it’ll necessarily work super well; I don’t think they’ll have the same level of engagement [as Audius], or the data transparency [we have] in terms of knowing which of your fans are superfans, being able to engage on that deeper level, having the transparency of what [individual superfans] pay, and have [that money] go straight to you as an artist, in a matter of seconds.

When it comes to Web 3.0, the space moves quickly. It’s really, really hard to stay on top of that, especially if you’re a Web 2.0 company.

MBW’s podcasts are supported by Voly Music. Voly’s platform enables music industry professionals from all sectors to manage a tour’s budgets, forecasts, track expenses, approve invoices and make payments 24/7, 365 days a year. For more information and to sign up to a free trial of the platform, visit VolyMusic.com.