Music Subscription Is Broken. Earbits Has a Proposal to Fix It…

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’. 

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quotationmarksSubscription 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.

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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).

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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.

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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 [email protected] quotation-marks2

37 Responses

  1. V
    V

    Doesn’t joing or sharing something to listen an album create a false impression of someone liking the band? I’m talking about people who are being introduced to the band for the first time, which will happen to everyone once. Sorry, I sort-of skimmed the article…
    Also, at what point are friends going to get turned off of their friend’s recommendations because that friend wants to listen to music but everyone else gets spammed?

    Reply
    • jw
      jw

      ^ This. If my social feeds start getting spammed up by losers trying to earn “groovies,” they’re getting the big boot as quick as I can move my cursor across the screen.
      This system transforms what a “share” or a “follow” or whatever means, & assumes that it’s going to retain it’s current “value.” And that’s just not going to happen.
      This seems like the Facebook “like our band to hear this song” ploy… I’m not going to like any band BEFORE I’ve heard it. I’m not going to sign up for a band’s e-mail list IN ORDER TO stream their album. That’s just retarded. And completely undermines what a “like” or a “follow” or whatever IS, on a fundamental level. And it’s predicated on the idea that a “like,” whatever the motivation, or an e-mail sign-up, whatever the motivation, is always valueable, which… well, that’s oversimplfying it, for sure.
      It just doesn’t seem like this was thought through at all. But if you can raise some capital, more power to you, I guess.

      Reply
      • earbits
        earbits

        You do not have to Like or share artists before you’ve heard them. Features like that are a pet peeve of ours. Nor do you have to over-share in order to make great use of the site.
        You start with enough credits to listen to 50 tracks on demand, and you can listen to the radio as much as you want with no restrictions. Primarily, people listen to the radio. They only listen to tracks on-demand once they have already found something they like. If you listen to 3 hours of the radio and, at some point stumble on a band whose whole 10 song album you’d like to hear, you can simply share the song that made you want to listen to the whole album and you’ll have enough credits to listen to the whole thing. Or, perhaps you were actively sharing things you liked during your session, you’ll already have credits. The goal would be to have so many simple things that users can do to earn Groovies that they will not be saturating one place with content, and some of the actions can be completely revenue driven, like buying a concert ticket.
        Sharing a song by a band you thought was great, or joining a band’s fan page is something people already do, and it’s a tiny price to pay to have 100% commercial-free music at no cost. Frankly, if consumers are not willing to do that, they’re probably not our target market. Our whole business requires that we build a highly valuable music loving audience and are very effective at turning them into our artists’ fans and customers. People who do not want ads or commercials, or fees, and also do not want to give anything back to the ecosystem, are simply not a focus of ours.

        Reply
        • jw
          jw

          Ok, that makes sense. So you’re really depending on radio. And streaming an album is just a perk, & it’s not meant to be a service where users choose what they’re listening to the majority of the time, because that would require jumping through hoops all day, spamming your friends, etc. So really you’re competing with Spotify Radio, or with Pandora more than you’re competing with Spotify’s main streaming product.
          Is that a reasonable assessment? You listen to the radio, you hear something you like, you “like” it, you can listen to the album once, then you have to go back to radio. Just “like” something you wouldn’t otherwise “like,” I guess, in order to get more “groovies.”

          Reply
          • earbits
            earbits

            We do feel that radio is a more powerful format for discovery, but what we’ve learned is that you have to let people discover music in the way that’s right for them. The honest answer is that we don’t know what the right mix will be, or how people will grow to use the service. Perhaps it will lean toward radio, or maybe people prefer on-demand. It’s quite possible that people will listen to a lot of albums and either earn their Groovies, buy them, or a combination of both in order to avoid oversharing while saving a few bucks. Perhaps we’ll find that giving people 5x as many groovies for the actions they take still provides incredible value for artists while ensuring listeners don’t work too hard. Maybe there is so much value in the discovery aspect of radio, that we give you Groovies just for active listening sessions.
            These are the kinds of things that startups need to be able to try if we’re going to find solutions to our problems. One of the main problems in the industry is that companies are often hamstrung by their licensing agreements and can’t use the content in innovative ways, or are required to set very specific goals and forecasts that don’t leave room for experimentation or failure. Fortunately, no matter what happens with Groovies, we will gain valuable insights and be further down the road of understanding how to create value for content owners.

    • earbits
      earbits

      I think my answer below addresses most of this, but essentially it does not take a ton of sharing or support to earn enough Groovies to have a great experience combining our free radio with our Groovies-supported on-demand play. I have been using the new site for over a week, do not feel at all that I’ve been sharing too much music, and I have a ton of credits saved up. I find that if you simply share the tracks you really love when they come on, and not even all of them, you’ll have enough credits to support plenty of on-demand listening. We specifically eliminated the tit-for-tat feeling that you had to share specifically when you’re queuing up tracks. That’s why it’s not a like-gate, and is instead a credit system. Also, I should note that, since launching 4 days ago, we have had only one Groovie complaint, while our on-site feedback score has gone up and most people have said that Groovies are really cool.

      Reply
  2. Casey
    Casey

    I have always considered and always will consider music tastes and habits private. This ideology would essentially eliminate that. I’d much rather pay $10 a month to Rhapsody.

    Reply
    • earbits
      earbits

      The goal is that you can earn Groovies for a wide variety of things that add value and aren’t outside of your normal behvaior. If you discover an artist on Earbits, see that they’re playing nearby next week and buy a concert ticket, we could reward Groovies for that. If you subscribe to a band on Youtube because that’s your normal thing, you could earn Groovies for that. Whatever you do to engage with the artists on our site in a meaningful way could generate Groovies, and that’s simply our way of showing the artists how people are using their music, engaging with them, connecting, and how we help them create meaningful results.
      We also have the opportunity to let people buy Groovies, which could put money directly into the artists’ pockets, if there are people who would prefer to pay for them. But our #1 priority is engaging our free listeners in a way that creates value for the artists. Sharing will be just one small way that people can connect with our artists.

      Reply
    • earbits
      earbits

      Earbits is a marketing company for artists and labels. We have many of the same bells and whistles as other direct-to-fan platforms but with our own built in audience consuming hours of music and being introduced to all kinds of new artists. Our singular focus is on turning our listeners into fans and customers of the bands on our platform through our tools, along with our data and other services. We sell upgraded marketing capabilities to artists, labels and concert promoters. The campaign that Daniel Whittington ran, which generated $147 in sales for him, cost $58.

      Reply
  3. Visitor
    Visitor

    “Subscription fees for streaming music services cost consumers three times what they used to spend annually on recorded music”
    Which is one of the — many — reasons why we don’t need streaming services.

    Reply
    • visitor wrong
      visitor wrong

      Not sure how much cheaper you need to be than $10 a month to access vast libraries of music at home and on the go. Streaming has got to be part of the picture. As long as CD’s last and if people want to keep buying downloads, good for them.
      Earbits: This is a cute idea, but I don’t suspect the majors have licensed this very unique business model?

      Reply
      • earbits
        earbits

        We have been contacted by three of the four major labels, all interested in hearing about what we do. Our approach is not to push a licensing deal uphill with them, but to keep driving value for unsigned and independent artists and proving that our approach works. If they want to play ball one day, great. We believe that, if they don’t, we still have incredible potential to achieve scale and we have no problem staying singularly focused on forwarding the careers of independents.

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      • Visitor
        Visitor

        “Streaming has got to be part of the picture”
        Not at all.
        You have to understand that streaming was a reaction to mainstream piracy. Remove mainstream piracy, and no artist in her/his right mind will want to stream.
        The only difference between streaming and piracy from an artist’s point of view is that you can say no to streaming.
        And that’s what you should do…

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        • econ
          econ

          Wrong, for the most part.
          Yes, artists would prefer streaming over piracy. But every artist in their right mind wants streaming because there simply is NO BETTER WAY to enable music discovery for those interested in music discovery.
          Fact is, 95% of people have no interest in music discovery whatsoever – they are happy to hear new things by accident. The remaining 5% have to put SOME effort into music discovery because the days of radio helping in that regard have been gone for 20 years. The idea that any people are going to shell out more than a token amount of money on a monthly basis for music discovery is completely insane.
          There’s two reasons “artists” don’t make money in this business – either they can’t get their product exposed or they can get exposure but their product doesn’t appeal to many people. The idea that people were heavily downloading copies of music THEY NEVER HEARD is ludicrous; the number of people who did that is statistically insignificant.

          Streaming services are deserving of SOME of the criticism they get, but the idea that they have retarded industry revenue is, well, retarded.

          Reply
  4. Ghost of Rick Ross
    Ghost of Rick Ross

    “Subscription fees for streaming music services cost consumers three times what they used to spend annually on recorded music”
    Based on what data Joey?

    Reply
    • Central Scrutinizer
      Central Scrutinizer

      Good question. Even though I agree with the idea that $10 a month is more than the average consumer spends or spent on music (hence the continued existence of free ad-based services) some additional facts would help bolster the argument.
      “consumers” which ones? a demographic breakdown would help.
      “used to spend” what time frame are we talking about? the 2000s? the ’90s? the ’80s?
      Isn’t recorded music sales different than streaming sales?

      Reply
    • earbits
      earbits

      Sorry, should have cited sources. The US Census Bureau has reported that the average consumer spends about $42-$43 per year on recorded music for the past 3 years. Spotify’s premium subscription is $120 per year, just shy of 3x that amount.
      http://www.statista.com/statistics/191044/us-consumer-spending-on-recorded-music-since-2002/
      The $3.60 value of a Facebook fan stat came from a Vitrue study, but I think the $1.50+ that Danial Whittington earned from Earbits-specific fans is more telling.
      http://www.adweek.com/news/technology/value-fan-social-media-360-102063

      Reply
      • Max
        Max

        Spotify premium is for fanatic listeners… fanatic listners spend WAY more than average… infact fanatic listners are probably the ones that put the average amount of money spent at 40-43 as opposed to 20-23. Spotify is free for regular listeners.

        Reply
  5. musicman
    musicman

    I’m sure your heart is in the right place but yet another option for discovering or streaming music on the internet just seems like adding to the confusion. I think people are just overwhelmed by all of the options. Funny, people discovered new music just fine pre-internet and the business was thriving.

    Reply
    • earbits
      earbits

      I am with you, but it’s important to note that while there are dozens of great streaming products, right now there are no great streaming companies. The business fundamentals of all the major players are not sound. Right now there are tons of options for consumers, but not a single one of them is guaranteed to be around in 3 years.

      Reply
  6. Jeff Robinson
    Jeff Robinson

    “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. ”
    A program like ‘Morning Becomes Eclectic’ from the days of Chris Douridas offered viewpoint. Specific feel and style, artistically programmed from someone with an ‘aesthetic’.
    People supported KCRW to support that.
    Commercial radio, since the Telecom Act of 1996 lost this concept. Billing NTR for songs added to your ‘national’ playlist as a corporate broadcaster undermines the ‘art’. Sales staff used to sell commercial time prior to 1996. Since 1996, all air-time is for sale.
    The internet has a problem, the everyman doesn’t have a viewpoint. At their core, they are opportunistic and will take the path of least resistance.
    If this company wants to exploit users and create ‘social currency’, do nothing more than make these users ‘famous’ or ‘viral’. Incentive-ize them, then monetize them.
    It still won’t be artistic or offering a concise viewpoint (which is interesting and should be the goal), but it may create more interaction.

    Reply
    • earbits
      earbits

      There is nothing to say that curation cannot be an increasing focus of the platform down the road, and there can be countless approaches to it. Incentivizing people to take action when they discover something great does not preclude us from fostering that discovery in any number of ways. That being said, the format you’re talking about facilitates gate keeping that blocks perfectly good artists from being heard, and that’s not something we’re interested in. We want to create an amazing experience, but we want to be inclusive to every artist with a high quality recording. That will definitely require different, and maybe even a variety of, approaches.

      Reply
      • Jeff Robinson
        Jeff Robinson

        “That being said, the format you’re talking about facilitates gate keeping that blocks perfectly good artists from being heard, and that’s not something we’re interested in.”
        Hmmm, digital distributors are already using automated services like ‘Hit Song Science’ to parse 125,000 indie releases a year and where does that get in the curation process?
        They use an algorithm and the process is automated. Trusting a user with no experience to peruse drek like Mumford & Sons wannabes gives the amateur way too much power. I’m open to see it work, but having seen so many music services start up, license music and then sell business and licensed catalog over the past 15 years, it’s appalling yet another would try to do the same thing. In 3 years time, find this post and issue a follow-up on where your multi-million dollar start-up is at that time. My guess, is that you will be looking for buyers because all you will have is licensed catalog to sell.

        Reply
  7. Visitor
    Visitor

    If the platform is directed towards developing indies, why not hire an MD to run the radio format more like college/community radio. I know plenty of indies that would be willing to drop $50 to promote their music to an online radio streaming service that helps develop interested consumers. If you could protect the privacy of the listeners while also providing market research feedback to the artists, I think it would be a great way for artists to ‘tour smarter, not harder’ and develop new markets more effectively. It would also incentivize active and supportive listeners to go see those artists when they come through their towns to not only consume the live show, but also earn ‘groovies’. I think for younger target markets this could work very well.

    Reply
  8. hippydog
    hippydog

    Just a few random comments 🙂
    1.) I love the fact your going after the indie market. I think the market for any type of digital service is pretty crowded right now, ‘proving yourself’ in the indie market I think is the much smarter way to go.. If the idea/process works, the majors will come around.. If its REALLY good, then it wont matter..

    2.) I like the “idea” of it, I do hope it works!
    but
    its a confusing/cluttered idea.. anything that takes ‘paragraphs’ to explain is going to hurt you on the ‘buy in’ from both artists and the public..
    3.) part I dont like is when any ‘new’ service tries to compare itself to something existing by bashing it..
    EG: saying that ‘artists are not getting enough value from streaming music”, and then saying your service doesnt pay out either? soo. streaming music doesnt pay enough, and your solution is to pay even less?
    4.) be honest with the people..
    dont couch your words in meaningless tech Speak
    example “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.”
    Seriously? worst double speak ever 😉
    how about “this is our platform, this is how we make money, and this is how you make money. and this is what will bring in the consumer … be that honest and simple”

    Reply
    • earbits
      earbits

      I agree with you on focusing on indies, and that the larger industry will not sit idly by as our platform begins generating thousands of fans and customers for unsigned and independent artists. I also agree that the what and why of Groovies needs to be explained in simple terms. We definitely have some learning to do on messaging this concept.
      As for the rest, we have spent the better part of 3 years dealing with messaging issues and our struggle with bias against “pay for play” radio. The fact is that the only similarity our company has to any streaming service is that consumers listen to hours of music on our platform, but everything else is identical to direct-to-fan services, from our fan acquisition tools and merchandise integration, to the reporting we provide and our singular focus on treating artists and labels like clients. We could say we’re a streaming service that charges artists or labels, but we’re not. We’re a direct to fan platform with a strong focus on the consumer experience. It’s not double speak, it’s our vision.

      Reply
      • Jeff Robinson
        Jeff Robinson

        A quick question here, will you be relying on artists to submit, then license their material to you or will you be relying on Independent Digital Distributors like Iris, The Orchard, CDBaby and others to aggregate and license their material to you?

        Indie distributors allow you one-stop shopping- which makes them middlemen to your process.

        Will you allow for an artist to claim their music and personnally curate their material once it’s sent to you by a digital distributor if that’s the route you go? That would facilitate a direct-to-fan experience.

        Reply
    • Jeff Robinson
      Jeff Robinson

      “dont couch your words in meaningless tech Speak”
      Absolutely priceless Venture Capitalist mistake, made chronically when talking about this derivative crap on the internet.
      LOVE IT.

      Reply
  9. AnAmusedGeek
    AnAmusedGeek

    Hmm – I’m not sure how I feel about ‘groovies’. They seem very close to the gold coin/like-this systems in social games.

    Personally (and you guys know I’m not a musician…), I think the fact that earbits is not ad focused is the big win here. By having a service that focuses on its musicians, and not on advertising revenue, you open the doors for a lot of interesting options.

    Traditional systems seem focused on making money via ads/subscriptions first, and supporting artists second. Since earbits derives its revenue from promotion and management (I think – did I read that part right?) they can be more directly focused on whats good for the artists ?

    I honestly think the time is right for artist focused ad networks (maybe something like project wonderful?), and industry run streaming/discovery services. These could focus delivering value to the artist, as well as hit that ‘hip, swinging music martket’ demographic people like apple seem to want.

    It’ll be interesting to see how earbits does…
    Good Luck!

    Reply
  10. R.P.
    R.P.

    It may not be perfect yet, but they are on to something here. Will keep watching. Thanks DMN for some real news and info. Finallllyyy!

    Reply
  11. DH
    DH

    Everything from interesting to hilarious posted here.
    We’re on the cusp (if not smack dab in the middle) of yet another “tech”‘tonic’ shift in the music biz. Piano rolls, yada, etc..
    The big pink elephant in the room that everyone is missing and Earbits is short sightedly ignoring and/or capitalizing on is;
    what and where is the “sale” you ultimately point consumers to? a Walmart CD? an Amazon or iTunes download? a subscription service?
    –the CD will soon become a revenue dry bed
    –downloads will enevitably succomb to flat fee on-demand streaming
    –subscription services and internet radio are overtaxed with rights aquisition and payouts are arguably pityful
    The entire system is on the verge of imploding. I appreciate your efforts, investment, and passion Earbits–so Godspeed making a go of it.
    Tis bitchin’ times times on most fronts. But not unlike a funeral home, you’ve chosen to err on the supply side. There will never be any shortage of wanna beez.

    Reply

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