Tech’s Integrations with Music, and Monetization Strategies for Content Creators and Their Musical Counterparts

In just the past few months, significant integrations between social platforms and the music business have formed in rapid succession. Perhaps because of TikTok, the inadvertent music discovery platform that has been dealing with royalties questions since its arrival in the Western markets, other tech platforms have begun including music strategy as part of their product strategy: In September, Facebook announced licensing deals with major record labels for Facebook Gaming, and Amazon released an option to allow Amazon Music artists to link their Twitch profiles for cross-platform live streaming; Twitch itself then launched Soundtrack, a Spotify-like music library for its creators, in October, and has recently been in discussions to acquire licensing rights for recorded music; industry incumbent Spotify also announced a new partnership this month in the form of a new Discovery Mode, through which it plans to work with record labels to increase artist discoverability and hopes to discount its royalty payments.

The largest mover these past few months, however, has to be Snapchat’s parent company, Snap Inc. Snap went on a licensing shopping spree back in August, closing deals with a number of large record labels including Universal Music and Warner Music group. In October, the company launched Sounds, a music feature that allows users to include recorded music or record their own sounds in their snaps, leading industry watchers to speculate about a TikTok rivalry. Then last week, Snap Inc. announced its acquisition of mobile music app Voisey, opening the door for content creators to create music from scratch through a designated service. The Voisey acquisition, as reported by Business Insider, would provide an avenue into a larger music strategy:

The Voisey app looks and feels strikingly similar to TikTok, with the app opening straight into vertical video and musical backing.

The twist is a focus on music creation. Users can pick from a repository of user-created backing beats, hit record, and overlay the track with their vocals and post it all as a 60-second clip…

The deal may signal major new music-creation features for the Snapchat app. Earlier Snap acquisitions have been precursors for new features, with the acquisition of PlayCanvas in 2018 heralding a push into lightweight games.

Surely enough, new features have come swiftly. Snap’s push to enable content creators to create better content has come in parallel with its push to enable content creators to better monetize. On Monday, the company announced Spotlight:

Spotlight is striking because it differentiates the relationship between the Snapchat platform and its content creators from that of other platforms and their creators. In its commentary on Spotlight’s release, Bloomberg aptly captures this distinction in philosophy for monetization of the platform-creator relationship:

On Snapchat, which hit 249 million daily active users in the third quarter, likes are private, there is no re-sharing of videos and displaying follower numbers is optional. Without those metrics, though, it’s harder for users to get popular, noticed by brands and hired to create sponsored content - the main way young social media stars make a living. [Snap Inc. CEO Evan] Spiegel wants Spotlight to reward popular videos without their creators having to worry about consistency or the number of followers.

For content creators, a monetization strategy in which the platform compensates completely for the most popular content (in this case $1 million per day) is clearly different from the ad or sponsorship-driven strategy they would encounter on YouTube, TikTok, or any other platform for that matter. Painted in a different light, Spotlight will be a test to see if platforms can incentivize creators in a way that they can control.

Content Creators versus Music Creators

Mark Mulligan, the founder of Midia research, alluded to the state of today’s creator landscape in his exchange with Business Insider for the Voisey acquisition news release:

We are on the verge of a revolution in music creation with the boundaries between creator and audience blurring like never before.

Indeed, anyone can be a content creator today and, since the rise of the “bedroom producer” in the early 2000s, anyone can be a music creator as well. I define content creators as users who film TikTok videos, send Snaps, or otherwise create the primary form of content that is shared on a platform, and I define music creators or artists as those who create music, regardless of if they are active users of a given social platform. This distinction is important, because as platforms have added features that enable users to better create and monetize content through access to quality music, music creators have not seen that translate into more monetization opportunities.

Sticking with Snap as an example: the company is distributing $1 million daily to the content creators of popular videos through Spotlight, but it’s not clear how the creators of sounds that are widely popularized through the platform will be compensated, if at all. As explained in a post on Spotlight’s earnings distribution, the daily funds are given out based on a given video’s popularity on the Spotlight feed. Snapchat’s algorithms determine popularity by considering a variety of factors, including favorites, shares, watch time and skips (which affect popularity negatively). If Snap has been investing so heavily in music features, music must be important to the quality of a Snap - yet neither the current compensation model nor the popularity algorithm as described take the music creator’s contribution into account.

Snap’s acquisition of Voisey is unlikely to impact the platform’s compensation model, either - as it currently stands, musicians do not generate any revenue through Voisey. From the music app’s FAQ:

Currently Voisey is not a revenue generating platform and makes no money. Our focus is entirely on empowering creativity and building a community. We do anticipate generating revenue at some point in the future and this will most likely be through advertising or in app purchases. We are currently supported entirely by investors...

No plans are currently in place for [royalty payments], however updates to the [End User License Agreement] will be made before any changes to the service are made.

The biggest counterargument to the lack of monetization capabilities on social platforms, of course, is that musicians can make money through royalty payments. Yet this is difficult to measure. With all the licensing deals large platforms have made, it would be easy to assume that recording artists were getting paid heftily. The reality, as any industry insider would know, is that it depends. Depending on the distributor, music label, and the social platform in question, royalty payments can vary widely. Data in the music industry is notoriously opaque, contributing to confusion on what the fair market value for a stream of music or usage of a sound should be.

Even with scantily available data, the differences between payouts to musicians and content creators are striking. According to Forbes, the top 5 native TikTok content creators have each earned more than $2.6 million on average in the past year on the platform. Meanwhile, royalty payments from TikTok via a large music distributor like DistroKid are, by one account, about $1 for every 300 videos that use a given sound. Assuming the DistroKid payout rate is typical of most artists’ on the platform, Doja Cat, whose sounds have been used in more than 31.5 million videos as of this month, could be projected to have earned approximately $105,000 for all of her sounds on TikTok, 38 times less than what Charli D’Amelio, a content creator who has frequently used Doja Cat’s sounds, has made on the platform. All this, of course, is to assume that a musician has a distributor or record label to handle royalty payments in the first place - artists who upload music to TikTok directly don’t get compensated for those sounds at all!

Beyond the Social Platform

Most musicians, while frustrated with the available monetization opportunities on-platform, argue that the value in establishing a presence on platforms like TikTok or Voisey is not so much the monetization opportunity but the discoverability potential that it brings. I wrote my last post on the power of TikTok in creating institutional newcomers from viral dance challenges, and Voisey has seen similar success - Olivia Knight, known as “poutyface” on the platform, signed a record deal with Island Records / Warner Chappell this year after having gone viral on during the app’s beta phase in 2019.

For what it’s worth, the same can be said of content creators, who find success monetizing through sponsorships, advertising and marketing. Addison Rae Easterling, who, according to the aforementioned Forbes article, was the highest paid TikToker this past year, was projected to have earned more than two-thirds of her $5 million income through a pair of endorsement deals from Reebok and Daniel Wellington. Confronted with these numbers, it makes sense why Snapchat prices its most popular content at $1million a day.

Success stories exist, but signing a record deal is much more difficult than partnering with an advertiser. Access to a financially successful career in music is extremely limited, as the industry is currently dominated by three large record labels (Universal Music Group, Sony Music Entertainment, and Warner Music Group) that together occupy the majority share in the global music market; the opportunity to create a line of personal merchandise or partner with a sponsor for an advertisement campaign is much more accessible in comparison.

To be compensated fairly for the benefits that music can bring to social platforms of all kinds is an omnipresent issue that is very much relevant today. For record labels, this has manifested in slapping copyright claims on platforms that have avoided licensing agreements, something that Twitch users experienced in the latter half of the year. For artists, the issue has spurred an increased development in tactics to monetize cross-platform, whether that is promoting Spotify or SoundCloud accounts to monetize full streams or conducting live streams or virtual concerts. In a world in which the ever-increasing use of technology continues to drive connectivity, these integrations are changing the way artists think about their business and the way users interact with music in their everyday life.