The following guest post comes from Joey Flores, CEO of Earbits, an indie-focused radio and on-demand service with a plan to fix the subscription fee, rotating ad, and other typical ‘monetizers’.
Subscription fees for streaming music services cost consumers three times what they used to spend annually on recorded music. Most streaming music services are also plagued with intrusive ads and commercials that generate a pittance of revenue both per stream and in aggregate. Remember, 70 percent of all streaming music listeners do not pay.
If you read Digital Music News, you already know there is a growing struggle between streaming services, record labels, publishers and artists, all of whom seem to be playing tug-of-war for the same fractions of a cent that are created when you monetize music using ads and commercials. Meanwhile, artists and labels throw away dollars on marketing channels and tools that don’t work.
Let’s face it: a much better solution is needed.
Last week, our company Earbits announced Groovies, a social currency designed to solve the problem that artists and labels aren’t getting enough value from streaming music. Groovies is the first social currency that empowers listeners to earn ad-free streaming music by taking actions that support artists and labels. (Groovies accompany our new on-demand listening options and the ability for all Earbits artists to collect mailing list signups. We still offer radio-style streaming).
For those of you not familiar with Earbits, we are a direct-to-fan marketing platform for artists and labels that believes the best way to drive maximum value through our tools is to build them on top of an engaging music experience for consumers. We like to say, while everybody in music marketing is trying to build a better mousetrap, none of them has any cheese. Earbits is building cheese.
So, when you wake up every morning thinking about how to create more value for artists through your platform, you come to entirely different decisions than you do when you’re worried about how to sell more ads and subscriptions.
Several months ago, we noticed that our listeners wanted on-demand listening capabilities. When they hear an artist they like, they want to listen to more tracks by them before deciding to join a mailing list. They wanted to listen to the artist they discovered yesterday, and repetition of this kind will breed stronger connections between the listeners and fans. We recognized the importance of meeting this need, but we were apprehensive to provide free, on-demand listening.
We asked ourselves, how can we guarantee that artists get more value out of on-demand listening without sacrificing the user experience? And we think Groovies are one part of the solution.
Here’s how the currency works.
Users earn credits when they do things that help the artists and labels. Sharing a track across social media earns 100, while joining a Facebook fan page or mailing list earns 50. These numbers are bound to change, and we have dozens of ideas for other value-creating actions that users can earn Groovies for, such as checking into concerts, making purchases, or reviewing an album.
Yes, it’s still a limitation on listeners, but it doesn’t force sponsors on them, or try to convert people who will never pay for a subscription into doing so. Frankly, most of them are already taking these actions, and we’re applying a value to it, which has the added benefit of increasing the perceived value of on-demand streaming.
How is this better than hard cash in artists’ pockets?
Luckily, it’s not a question of one or the other. We have seen Earbits put more cash in artists’ pockets on a per stream basis than any streaming service we know, but not through ad- or subscription-supported royalties. We generate real fans, true music loving consumers, and they buy music. But this isn’t a hunch.
Last year, through 4,000 ‘spins’ on Earbits, Daniel Whittington acquired 91 fans. With email and Facebook outreach he pointed them to his Bandcamp page, where his album was available as name-your-own-price. The 91 Earbits fans opted to pay $147 for Daniel’s music.
On any other streaming service, 4,000 spins earns an artist between $4 and $20. They get paid once, it often goes through several hands before it gets to the artist, and that’s it. On Earbits, not only did Daniel earn $147, but he has 91 contactable fans ready to hear about his next release, to support him on Kickstarter, and more.
Groovies ensure that this value goes up in exchange for the new on-demand access.
If a user wants to listen to a 10 song album, they need 100 Groovies. That comes from joining the artists’ mailing list and Facebook page (50 Groovies each), or sharing the track on social media (100 Groovies). The secret sauce will need to be figured out, but the simple fact is, 10 streams generates between 1 and 5 cents for artists on other platforms. On Earbits, it’s worth a social share or two new ways to contact our listeners. We’ve seen that be worth over $1.50 in real money already, with studies showing Facebook fans as worth $3.60 or more.
Of course, I would be remiss if I did not mention that it would be easy to dismiss Groovies as another attempt to gamify music and put points on top of something that doesn’t need them, an approach that hasn’t worked for other services.
But the difference between gamifying a music service and Groovies is simple. Other than the few Groovies new users get for registering, Groovies will only be applied to things that help artists and labels. Groovies are not about making Earbits more sticky, although that will probably be a nice benefit. The social currency is about rewarding free listeners for doing things that create value for content owners.
We think there are millions more people who care about supporting artists than those who want to play games on their music service, and this new release is the first step in cracking the code on creating value from free streaming listeners.
We know that moves like this can be met with reactions of all kinds, but we’re used to it. There’s not a lot of faith for startups in the music industry and we’re prepared to keep putting our money where our mouth is when it comes to proving out our vision. We’ve been watching the debate about streaming music andvalue for artists play out on Digital Music News, and we know that this is a tough crowd.
We thank Paul for letting us talk a bit about our approach. If you have questions, comments or ideas about Groovies, we are always ready to listen. You can email me directly at firstname.lastname@example.org.