Taylor Swift and the music industry’s next $20

I have this theory that music is usually about five years ahead of the rest of media in terms of its relationship to tech — whether that’s new formats based on new tech, like vinyl to CDs, new business models like streaming, or simply being disrupted by new kinds of artists who use new forms of promotion, like TikTok, in unexpected ways. I’ve always thought that if you can wrap your head around what’s happening to the music industry, you can pretty much see the future of TV or movies or the news or whatever because the music industry just moves that fast.

I was talking about this with my friend Charlie Harding, the co-host of Switched on Pop, and he said that he thinks the upcoming Taylor Swift The Eras Tour is itself the end of an era in music — that the age of cheap streaming services is coming to an inevitable conclusion and that something has to change in order for the industry to sustain itself in the future. 

So, in this episode, Charlie and I walk through a brief history of the music business — which, despite its ever-changing business models, is permanently trying to find something to sell you for $20, whether that’s the music itself, all-access streaming, merch, and even NFTs — using Taylor Swift as a case study. We map her big moves against the business of music over time to try to see if this really is the end of an era. And maybe more importantly, to try and figure out if the music industry can sustain and support artists who are not Taylor Swift because streaming all by itself definitely cannot.

Whenever I think about the state of the music industry and its business, I find myself coming to talk to Charlie Harding. 

Taylor Swift, interestingly enough, is a great way of looking at the different eras of the music industry, of when they began and when they ended. She has inhabited a lot of them and been able to go with the changes in a way that many artists have not.

She is unusual in that the length of her career spans from the end of the CD era into the streaming era. In many ways, she is at her height and she’s still breaking records on charts. Her career is definitely a good case study across the last almost 20 years.

We have to add some stipulations before we begin a conversation on Taylor Swift. One, I think we both very much like Taylor Swift’s music and we think she’s a good musician.

Very much so. She’s an amazing songwriter.

Two, she is also an incredible capitalist money machine. She’s a great musician, she’s also just very good at making money.

She’s very savvy, yes. Also unusual, because a lot of her peers that go off and make money do so primarily through means outside of music — by starting fashion lines, restaurant chains, or whatever it might be. She has committed hard to the songwriting and music thing, and this next tour is set to supposedly maybe make her a billionaire.

I think that piece of it is the thing that makes her the most unusual. It’s hard to think of another artist at this point that actually monetizes music itself as the primary and richest revenue stream.

I don’t have insight into her taxes, but obviously she has done movies and she has brand endorsements. Like everybody else, she has all those things, but she leans the hardest into music. Touring is certainly doing really well for her.

That’s the other thing I want to stipulate. If you go back and listen to other Decoder conversations, like the one we had with Steve Boom from Amazon Music, it’s shocking to me how over and over again music itself is undervalued. If you go see an Avengers movie, you might spend $20 on a ticket plus popcorn, or if you watch it on streaming, you might spend an enormous amount of money for those streaming services. Maybe you buy a movie on iTunes for $20 or $30. 

With music, the expectation is that it is effectively free. Your Spotify or Apple Music monthly fee is cheaper than Netflix, HBO Max, or whatever else, and you get more. You get the entire catalog of recorded music, in a way that Netflix doesn’t have everything or HBO doesn’t have everything. That dynamic, where you expect more but pay less and the artists are openly struggling, is the most unusual thing about music to me. And then Taylor Swift transcends it all.

The marketplace of music is strange, in that the consumers are pretty happy, the distributors are doing great, and the suppliers are extremely unhappy in general.

By suppliers, you mean the musicians themselves?

I mean the musicians, yeah. There is no shortage of stories of artists, musicians, and songwriters being short-shrifted throughout the entirety of the music industry. It’s not the nicest ocean to swim in. 

At the current moment, there is a lot of unrest about how much people are getting paid, especially when the average rate per song in streaming is declining for artists, and has been for many years. It seems the only option is to go find radical alternatives and get into the world of crypto in order to survive in music. We definitely live in an era where the actual product is so devalued that all the people that make it are in a state of precarity.

I want to start all the way back then, with Taylor Swift in the CD era. To get music, you had to go to the store and buy a physical copy of a CD, and that made everybody rich. There was some weirdness with it, but the artists seemed happy with that arrangement. Talk to us about the CD era. Taylor Swift released her first album in 2006. What was the structure of the industry in the 2000s?

Well, it was similar yet different in many ways. We have three big labels now, but we had four at the time. EMI was eventually bought by Universal, so there was a lot of consolidation on the label side. 

The big difference is that the whole industry was a physical goods business; as you said, people were buying CDs in stores. We now live in an intellectual property business, where a lot of these things are never actually even printed. They just get put out for digital distribution. You had a whole different set of distributors, given that there were physical goods, but most of them have shut down. We no longer have our Virgin Megastores selling all of our CDs to us, or Tower Records.

These companies have been replaced by technology distributors — Spotify and all of our favorite tech overlords, like Apple, Google, and Amazon. They are now the distributors of music. There is so much that is similar, especially the labels that have sustained, but how we interact with music and who distributes that music has radically changed.

So Taylor Swift puts out her first CD in 2006. We were five years into the iTunes era at that point. The iPod is out, but Apple is still saying, “Rip. Mix. Burn.” in commercials. The industry is very mad at Apple for this, but the iPod’s ascendancy is there. People are still buying songs for 99 cents on iTunes, and people are still buying CDs in order to rip them onto their computers.

It was an interesting era to launch a music career, because it really was towards the death of the CD era. It wasn’t at its lowest, but it was dropping quickly. 1999 was the height and record profits were declining, yet CD sales were still very large at that point. They were the dominant form of revenue.

Taylor puts out her first record and she wants people to listen to it, so she has to go on radio and on tour. All of that was promotion for you to go spend $12 or $13 on a CD, or 99 cents on a song in the iTunes store. How much of that money went to her as the artist, in general? I don’t think we actually know, but if you were an artist at that time, how much of that money was coming to you?

Well, if you were on a label, you were going to be giving the majority of any revenue from that CD back to the label — as is still done today. You would get a small proportion, 20 percent or less. If you were a songwriter like Taylor Swift, you would also get a cut of the publishing royalties. 

The publishing royalties were smaller then, but you got them for every single song, whereas today, you only get publishing royalties when someone actually listens to a song. The royalty rights weren’t necessarily better, and it just depends on the structure of any given person’s deal, but things were much more assured. There was maybe a simplicity, a clarity, to how the business worked. If you contributed to an album, then you were paid out for someone buying the whole thing, even if you only contributed one song to it. A lot of songwriters liked that model.

It was probably very difficult for an indie artist, because distribution was more challenging then. It was hard to get national or global distribution without a label. You kept more of your revenues — if you own your music, you’re always better off — but it was much more challenging as an independent. Obviously, young Taylor Swift was going to want to have a great record deal so that her music could end up in every single store and car stereo.

You understand the value exchange there, even if the label is taking too much money. I think every artist has always thought that their label takes too much money.

But you are the artist. Your job was to perhaps show up, perform songs, and work on your image. It was the label’s job to promote you, manufacture CDs, truck those CDs to stores all over the country, manage their relationships with physical media, and distribute it.

It’s very simple. Yeah.

They were a manufacturer in a way that a label today is not. What I’m getting at is that they made physical things. A bunch of Tower Records managers got to go to parties, so they would put your CDs at the front of the store instead of the back. There was some amount of value there that you could see as an artist. “Okay, they’re working to sell my product because they have a financial stake in the product too.”

Right. You could walk into the store and see that your thing was the most billboarded. Absolutely, there was clarity. It didn’t work for everybody, but for the biggest artists, it worked really well.

There are still cracks in the model, right? There are still major disputes between artists and their labels, and there are still lots of people saying, “Hey, this ride is coming to an end, especially around the move to internet distribution of music.”

Surely. People are always going to be upset about their contracts in music. You and some of your listeners can dispute this, but music is not a technology business. Music is an art creation business, a content creation business. I hate that word, but let’s just say it. The way you make more money is often either by getting your stuff to more people or by being some middleman who gets a better, stronger contract. 

A lot of the best people in this business are able to secure the most advantageous contracts, though often very exploitative ones, and there has been no shortage of those throughout the entire history of recorded music. All those folks who had secured really great deals and contracts, and who were making lots of money, were very upset by the piracy that started to take place around 2000. Listeners, on the other hand, were very pleased because they got everything all the time.

They got everything for free. I was one of those listeners. I was like, “Napster is the future of the industry!” I think underneath that is a recognition from the listener that your relationship is with the artist. I think that middle step of, “We need to print CDs, we need to promote CDs, we need to sell CDs, and we need to have a relationship with retailers in order to even have the CDs in the stores,” always seemed like a big chunk of revenue that should naturally go to the artist. But instead — and this is us coming to the next era — all of that revenue went to zero. The industry crashed out because of piracy.

There was a nice moment where ringtones started to cushion some of the revenues. 

Yes, CDs basically tanked because everybody realized, “I want to listen to all the music, and I don’t really want to pay for it.” CDs were expensive. From a listener point of view, no wonder we were unhappy. I was very budget-constrained at that point in my life, and I used to count the number of songs on an album to think about where I should put my money. If you got 15 songs, well, that’s a lot more than the nine-song record. I wasn’t going to buy the nine-song record because CDs at my local Best Buy were very expensive. So, yeah, it’s no wonder. There was a better option.

To be fair, the big knock on the music industry during the CD era was that CDs were full of filler tracks in order to make them look like a better value than they were. They had raised the prices when they went from vinyl and cassettes to CDs. They were more expensive, so bands would have a one-hit single and a CD full of crap. I could probably name a bunch of ‘90s bands here, but I think we’re already at risk with the Taylor Swift fans. We don’t need a bunch of ‘90s alternative band stans coming after us, but you could throw a dart at your average radio smash ‘90s act and their album would be full of a bunch of filler. 

So then that era ends and we’re no longer making all the money on CDs, the revenue for the industry has crashed because of piracy, and for some reason it’s really hard to get a ringtone on a phone, so people will pay 99 cents for a ringtone. That turned into a weird interstitial revenue moment for the industry.

There was like a 10-year dark era, the Middle Ages, where the industry was searching for the next thing. Ringtones was one of them.

Any money they could get. 

Now before we completely turned to streaming, the revenue model for touring and all the other stuff that artists did was inverted at that time. You went on tour to promote your CD sales and you let radio stations in this country play the music, effectively for free, because that would lead to CD sales. That’s all flipped now.

Well, yeah. Artists and performers didn’t get paid off with radio streams unless they were a songwriter. They still don’t. It’s an unusual part of the licensing arrangement in the United States, and it’s not common elsewhere. But yes, you were promoting the thing that you could sell. We now live in a world where you make the thing and give it away for basically free in the hopes that people will come and join you on your tour, and that’s where you’re going to make all your money.

Just to put a pin in it, highlight it, circle it, bold, italic, and underline that inversion. It used to be that you sold the music, and all the other stuff was just promotion for the music as this thing you sold. Now, here in 2023, the music is marketing for you selling everything else — your concert tickets, your merch, your NFTs, whatever it is. As we go through this chronology from the CD era until now, that is the inversion that Taylor Swift and every other artist has had to either navigate through or get destroyed by.

Yeah. She had bumps along the road doing so. She was very hesitant to participate in the new digital era, calling out the ways in which it was set up to exploit artists. She has voiced concern about digital music and streaming for over a decade, and she has taken some very important actions to show herself as an underdog being exploited by big tech companies that just want to take all the money.

Right. I want to talk about the arrival of streaming to music from about 2012 to 2017, and how Taylor Swift consistently pushed back against that business model. In this period she withheld albums from streaming at times, and removed her entire back catalog from Spotify. 

So Spotify arrived internationally in 2006, famously as a response to piracy, especially in European countries, where piracy completely destroyed the industry. The idea is that you have to just accept that people want access to everything all the time. What we can sell them is convenience, as opposed to the chaos of piracy. It’s just like, “You’re going to have to deal with it.” 

So Spotify launches in Europe, and what they sell you is convenience. You pay them the fee, and then you have access to an all-you-can-eat buffet of all the music in the world. The labels go along with this because functionally, they have no choice. It gets proven out in Europe over time. There were some smaller versions of this business that launched in the United States — RIP Rdio, which was a Verge favorite.

I loved Rdio.

It’s long gone. Spotify then launched in the United States in 2011. How did Spotify do at that moment? Did it seem like the future? I remember Steve Jobs saying, “People don’t want to rent their music. They want to buy their music. They want to own it. They want to have a relationship with it.” This was a religious war inside the tech and media industries. How did that war play out in the beginning?

Well, the most important thing was Spotify getting the buy-in from the entire industry. You don’t have a streaming service unless you have all the music. So, critically, Spotify is just deeply linked to the major labels. They get early options in Spotify and they get guaranteed payments per year early on, so they’re certain that many millions of dollars are going to come into their coffers, even if no one listens to the service. They are certainly desperate and in need of something at this point. They’re making a really big gamble about their future. 

It’s not often that a legacy company is able to navigate between the murky waters of a physical goods business to an intellectual property business. I mean, come on, Blockbuster? But the labels, they navigate it.

Do they know they’re navigating it? I think this is a question I always have. Do they know that their business is out the window? It met more needs for a smaller slice of people that were less discerning, and then it just took over everything because it was more convenient. It grew to be the whole market. But I don’t know if the music industry understood that it was gambling away its future in that way.

I think that they were smart to chase what the people were doing. It’s really hard to change behavior. So many people have tried to launch live audio experiences. It seems like every tech company has tried to do that in the last three years, and it doesn’t seem like people are pouring in to do lots and lots of live audio. I mean, we’ll find out. There are still lots of experiments out there, but it seems like it might have been a little blip in the pan when everyone was bored at their house during the worst parts of lockdown. 

People’s behavior was going in one direction, and that was, “I want all the stuff, just give it to me.” Now, obviously, there are always going to be collectors. You can serve them too, by the way. I was a collector. I didn’t want to rent, and I wasn’t into the streaming thing. I wasn’t going to make playlists. I wanted all of my music that I’ve ever had.

For some of us, they even created tools that would help you export your music, so that you could grab your entire MP3 library and all your ripped CDs and carry them with you. That helped persuade me eventually, but most of us were just trying to listen to everything that we wanted whenever we wanted. They were smart to follow what the crowd was doing. They just had to figure out how to monetize it.

We’re looking at Taylor Swift and using her career to chart us through this era. Her albums Fearless and Speak Now came out in this time of big disruption, with early streaming and people still buying records. Do you think she, as an artist, understood that this change was coming and was changing her strategy? Because all the way up to Midnights, she has been a master of marketing an album, but nobody knew at the time that this was going to happen. Is she following the standard playbook or is she evolving?

Well in the 2010s, with each record release, there seemed to be a major dispute with the streamers. She wanted to get better terms, and she was able to use her clout to bring a lot of attention to areas where other artists were also unhappy about some of these streaming arrangements. A lot of her early records were released on CD, but by Red, there was a lot of pressure to put things on streaming. She said, “No, I’m not going to put it up on Spotify.”

That’s a sea change moment for the industry, because until that second, streaming was this other thing that was happening. Everyone was putting their albums on streaming, and people were having a great time exploring Spotify. Then she was like, “I have a new record, but if you want to listen to it, you have to pay for it.”

Yeah, I mean Metallica was also unhappy at the time, but they didn’t have the same amount of clout.

Metallica: famously unhappy about the internet. Yes, in the early 2010s, artists like Adele and Coldplay were also saying, “Hey, we’re not down with this. The economics of this don’t make sense for us. It used to be that people spent $20 on an album, and if we sold a lot of albums, then we made a lot of money. Now it’s listens over time. Even if a lot of people listen to our music, we’re not sure how much we are getting paid.”

Yeah. She was acting as a voice for a number of quite unhappy folks at that time. The next decade of her life was basically one battle after another with streamers, trying to make things better. In 2014, she removed her entire back catalog of music from Spotify. She was upset about the low streaming rates that you’re talking about. It’s not clear who listens to it and how, it devalues fans, there were all kinds of ways that people were very unhappy with how they got paid out. 

Over time, as more music ended up on Spotify and people diversified their listening, there was more competition. The supply of music was growing, and the overall proportion of revenues per artist per song had been declining. She was like, “I’m out of here. I’m pulling my back catalog.” That was bold, because by 2014, the winds were in the sails of streaming. It was just three years later that streaming became the predominant revenue source for recordings.

That revenue was going to the labels, not the artists.

Well, this is the thing. It’s like, “Ugh.” People often want to be mad at Spotify, and there are very reasonable objections to be had, but Spotify is right to say that they pay out billions of dollars per year to rights-holders. The vast majority of Spotify’s revenue goes to rights-holders, and yes, rights-holders are a stand-in mostly for labels. Depending on the deal with your label, you might only be seeing fractions of a fraction of a penny by the time it gets to you.

In 2014 to 2017, this was kind of the height of Taylor’s fight with the streamers. She got into a big fight with Apple Music, which wanted to give Apple Music away to new subscribers for free for three months in order to build a user base. She was like, “I’m not doing that. I’m off.”

Nilay, here’s the thing: that is the model of streaming. People don’t get that it is this weird pooling model. Apple’s basically saying, “Listen, in order to launch a streaming service, we need a ton of users. Once they sign up, there’s going to be a whole pool of money, and you’re going to get it later.” 

That doesn’t really make sense when you’re like, “Yes, but I sold you the thing now and they’re listening to it now, so I should be getting paid now.” This goes especially for artists who finally get their royalty payment many quarters later. They’re just like, “I don’t understand, big tech company. You’re already worth a trillion dollars. I don’t like this.” 

That is more or less how the streaming model works. Most of them are pooling, some of them are doing pay per stream, but most are not. She didn’t want to participate in that model. It’s really easy to say to listeners, “Hey, this thing doesn’t make any sense,” but that is the business model that we have all bought into, whether or not we’re conscious of it.

Let’s just be more explicit about that to make it really clear for people. Here’s how I think most people think their streaming subscription works. I pay Spotify $15 a month. At the end of the month, Spotify looks at all the stuff I listened to and says, “Okay, you listened to $10 of Taylor Swift and $5 of Guns N’ Roses,” and then takes my $15 and gives to those artists in proportion to how much I listened to their music that month. That is not at all how it works.

That would be nice and simple, but no, that is not at all how it works. What’s going to happen is your subscription is going to get pooled together with all of the other subscriptions, all of the other listeners, and all of their listening. What Spotify is going to figure out is how much money came in from all of those subscriptions every single time period, and then they’re going to take that and divide it by all of the listening of everybody, such that Taylor Swift is going to get paid based on, “Does she command the highest amount of listening on Spotify overall?” Nilay, I know you love Guns N’ Roses.

I’m doing my best for the boys here.

They’re past their prime. I’m not being fair to Guns N’ Roses here, but let’s just say it’s only you and three other people listening to them. Each of you listening is not going to give them that nice $5. They’re just not getting any streams, and by the end, when it’s all divided out, very little revenue comes to Guns N’ Roses. I’m so sorry.

Let’s say Spotify has 100 subscribers, just to make it easy. I pay my $15 in and I spend 100 percent of my time listening to Guns N’ Roses; the other 99 subscribers pay their $15 in and spend 100 percent of their time listening to Taylor Swift. Do Guns N’ Roses get $0?

No, it’s not that simple, Nilay.

It’s still not that simple?

No, because it’s the total amount of listening. Say you only listen to Guns N’ Roses for an hour that month, but everybody else listens to Taylor for like 24 / 7, the entire time. It’s not just which artists you listened to, it’s how much you listened. For all the other people who are listening to playlists and keeping music on in the background forever, those people are potentially diluting the listening of fans who only listen really closely to one artist for an hour or two a day.

That to me seems like the most opaque part of this entire thing. Everybody gets it. You go to the store, you spend $20 to buy the CD. Bad record contract or not, you still spent $20 and the artist and their label can now fight over how much of that $20 they get.

Many people are arguing for a pay-per-stream model. It’s simple, it makes sense, it’s great for indie artists who are often devalued, and it’s great for fandoms to make sure that their money is really going to the people that they’re listening to. 

For Spotify and all the other streamers, it’s not great, because it means you can’t control your costs. Right? Music listening may be seasonal. What if during the holidays all we do is listen to Mariah Carey, and we listen to her seven times as much as we listen to all other music throughout the rest of the year? If we had a pay-per-stream model, all of a sudden Spotify would have to pay out seven times more than it’s used to during that winter season. They can’t control their costs. Instead, what they do is they give out a proportion of their revenues. They don’t know how much listening is going to happen during that time, and they don’t know exactly how much revenue there’s going to be in any given time period either.

For the labels, it’s very clear. They’re like, “Great, we know that revenues are growing. We kind of know what they are. We know we’re going to get a proportion of that. We know that we own over 70 percent of all the listening that happens on Spotify.” From the labels’ perspective, they can predict what kind of money they’re going to hopefully bring in each quarter. From the listener’s and the artist’s point of view, it’s like, “What? This doesn’t make any sense.”

Well, I want my money to go to the artist as directly as possible.

Yes, exactly.

But because of the structure of the industry, that relationship has all but disintegrated.

I am curious and skeptical whether or not that simpler model could work. You said at the beginning here that streaming feels like it’s on the rocks. We have seen the massive devaluation of Netflix. We have seen tech stocks everywhere struggling. There has been a realization that many of these streaming platforms, which had been valued as tech companies, are actually just digital media companies, and they’re trying to figure out how to pull in revenue after a decade of growth that has been funded by low interest rates and the natural business cycle of streaming. 

Spotify is one of the only major music streaming platforms not owned by a big tech company, and people want them to disentangle their revenues and their costs in a way that could sink the business — a business which already doesn’t make money. People want higher payouts per stream, and they want streams that are fair to artists and actually connected to their subscription. 

The whole model feels utterly precarious right now. It feels like what probably needs to happen is subscription prices need to go up, there has to be massive cost-cutting, and there has to be user growth and diversification of business — which again, I don’t think music is a tech business. AI tech companies come at me, fine, whatever, but it’s not a tech business. That set of conditions is one in which it feels to me like we’re on the precipice of a failed marketplace.

That’s where we should come to now. Taylor’s attempts to remake the music industry in the middle streaming period, as you might call it, all basically came to nothing, besides maybe a little more money or clout with the industry. She withheld her new releases from Spotify, but now her new releases are on Spotify. She withheld her back catalog from Spotify and Apple Music, but now they’re on Spotify and Apple Music. She got into a fight about Apple Music, but now she’s one of the faces of Apple Music. At some point, she met the industry in the middle. It was probably on her terms, but even Taylor Swift could not get people to pay higher fees or subscribe to a music streaming service while also paying for CDs. She eventually had to go to where her listeners were.

A lot of her actions have helped on the margins. She’s in her contract negotiations with Universal, and made sure that part of Universal’s ownership with Spotify will eventually distribute out to artists if they were to sell it. She’s doing things that are pro-artist and pro-songwriter, but they are a bit more on the margins. 

Probably the most effective thing that she has done is wage this ongoing war to raise awareness that this whole thing is not fair, such that maybe when you go to listen while you’re streaming, you still have a little bit of that ick feeling you might have had if you were on Napster 20 years ago like, “I don’t know if I should be doing this.” Of course it’s legal now, but she has helped us question exactly how ethical it is when there is so much exploitation. She has certainly raised awareness, but yeah, all of her music is on the streaming platforms. There are still some bonus songs where you have to go buy a thing at a retailer. So not all the music, but effectively.

Well, that’s what she appears to have mastered, especially with Midnights and this new tour. She is the centerpiece of actual demand from a very passionate fan base, and instead of pointing that fan base’s demand at merch or whatever, she points it at music making. She points it at her own music and she points it obviously at this tour, which has enough demand to bring down Ticketmaster — and to set off a series of antitrust investigations into whether Ticketmaster is a monopoly, which is incredible.

She has mastered the album release cycle. She has four versions of this album that make a clock, and you have to buy all four copies on vinyl. You still have the music on streaming, but she also has a tour that everybody is dying to see. That is going to be very, very lucrative for her. Is the music on streaming still just marketing for that stuff, or is that valuable to her now as well? When I say streaming is on the rocks, what I’m getting at is that it’s still not as valuable to anyone as it should be.

It should be more valued, but there is certainly money to be made. Spotify and others pay billions of dollars to rights-holders, and she is making sure that she’s a rights-holder. She is trying to reclaim the rights to all of her master recordings, which were sold without her permission by her former label. Her action has been to say, “Well, I’m just going to re-record all my music, and hopefully my fans will listen to my version versus the version that I don’t own.” 

As I said, if you’re the rights-holder, if you’re the label or if you own the master recording, there is a lot of money to be made. You can be paid out in hundreds of millions, billions of dollars. There are no artists making billions of dollars through streaming as far as I’m aware, but that said, there is certainly money to be made. Independent artists can fare well in this ecosystem if they get hundreds of millions of people to go listen to a song which they own the majority of, because then they’re getting the full fraction of a penny, rather than a tiny fraction of the fraction of a penny. 

She certainly wants to own this asset for the amount of money that can be made in streaming. There are some very meaningful, projectable revenues that can be made if you own all of your recordings, so she is taking those actions. There’s certainly the value of the music in advertising sync and getting it synced in video and so on. It’s not that the music is worth nothing, it’s that most people are being compensated very poorly and have a barrage of bad contracts that they have not had any say in, whether those are the contracts that were signed between the majors and the streamers or the contract that they signed with their label. There are just endless ways in which people have gotten the short end of the stick here, and she wants to have the biggest stick in the game and own as much of her music legacy as she possibly can. 

Streaming is currently very much still a part of that. It’s at a height, but it’s a height that feels like it can’t keep going up. When things can’t keep going up in business cycles, investors take note and disruptors take note, and there will be something else at some other point. She wants to own every piece as much as she can, as long as this thing is still working for the rights-holders.

I have to say, there’s something very dystopian in a business context about saying she wants to own the whole fraction of a penny. It’s still not the entire penny. 

This whole episode actually started because our team was talking about Taylor and her masters. We were looking at the number of legacy artists that are selling off their catalogs for huge amounts of money to private equity companies, who all think they’re going to make massive returns on owning those catalogs of music.

Taylor Swift’s dispute over her masters in 2019 and 2020, is another attempt for her to wrestle back control over her music, and get more money for it. She’s currently re-releasing all of her old albums. Walk us through why Taylor wants to re-record her songs, and how this connects to the big catalog sales we’re seeing from artists like Neil Young, and there was a report about Dr Dre over the weekend.

Dude, music licensing is so freaking complicated.

I feel like I always force you into this every time you’re on our show. Welcome to the business show, Charlie.

We have to talk about music licensing. Music broadly has two big licenses. One is the sound recording, called the master, which Taylor wants to own. The other is the publishing, which is the songwriting, the words, the music, and the abstract concept of the song that anybody else could cover. The master recording represents the largest majority of the revenue in streaming, as it did in the physical goods era as well. You want to own the most amount of that master recording as you possibly can. 

Now here’s the thing. If you’re a music label, you’re almost like a venture capitalist. Your job is to go make a ton of bets and hope that one of those will fund all of the bets that fail, and that it does so extremely well and makes you a lot of money. What you do is you say, “Hey, we’re going to give you a little bit of an advance. Go make a record. Go make your little startup, and when it starts selling, we’re going to take 90 percent.” If it’s anything like venture capital, it’s that venture capital doesn’t get terms as good as the music labels do.

There are no founder-friendly music labels out there.

I don’t think so. I mean, they would all say they are. There are plenty of places where they deserve credit, but in terms of their ownership stakes, no, of course not. You are entering a deal where you are hopefully successful and then funding all of the other things that are not successful. That’s usually the best outcome. 

If you are doing well later in your career, you might say to the label, “Hey, before I renegotiate a deal with you, I would like to own my masters — not only of my current catalog, but also my back catalog, because all my fans still listen to all of that music.” Many artists will do this, renegotiate their deals, get better rights, and so on. In her case, she doesn’t have any ability to do so because it is owned by a financial family fund that doesn’t want to give it to her.

She’s not going to buy it, so she’s just recreating it, and that is an age-old thing that so many different artists have done. Oftentimes you can buy greatest hits records, and it’s not actually the greatest hits, it’s re-recordings of the greatest hits. So the person who took that bad record deal in the past, who does have the right to the songwriting, can re-record it and make more money off that record. This is nothing new.

The greatest hits record is a really interesting example. In the CD era, you wanted to buy a greatest hits record because it was all killer, no filler, right?

It’s all the best stuff. It’s like, “That’s what I call music. Here we go!” You can make an entire business of curation in that way. Then inside of that, you might make some ancillary deals to re-record or whatever. That is not what Taylor is doing. She’s saying, “Here’s Speak Now (Taylor’s Version), off we go,” and now her fans have instant access. She’s not asking them to buy the record again. It is fascinating to me that she is able to pull it off in this way, because there is no secondary transaction. It’s just, “Click on this one instead of that one,” and her fans are all doing it.

Right. It’s both, because she is putting out vinyl. Vinyl is a small but meaningfully growing share of the music revenue pie. She knows that super fans will buy not only vinyl, but also the super deluxe vinyl version of the collectors’ thing and blah, blah. There is a physical good side to the re-release and there is money to be made there, but the other side is the licensing and the intellectual property. Now every single time that people stream these songs, she gets more of the share of that stream if they listen to Taylor’s version. This is just part of a much larger trend of the financialization of music catalogs. 

There are public funds now where you can invest in music publishing. Many would say that one of the things that streaming has done is it has created a situation where there are forecastable, projectable revenues that say, “Hey, this is how many people are listening to this music. They have been growing and they are listening in this way. We can probably model some churn based on if they’re listening to great music from the ‘50s or ‘60s. Those fans aren’t going to stick around forever.” That’s very dark. I’m sorry, but I’m sure it’s in the models. It’s like, “How long is this fandom going to last?” There has been a financialization of music catalogs, and many people are selling their catalogs for multiples of over 10. They are able to get out of there and cash out on the venture capital model. They’re able to get their…

Their exit.

They’re able to exit and say, “Hey, I got $200 million for my entire music catalog.” Some people want to be on either side of this. They want to exit or they actually believe in this system and think that those revenues in the future are going to be very valuable. The question is, do we keep listening in this way? Does streaming keep on working? 

I don’t mean to be a firebrand here and bet against it. I think betting against streaming is perhaps unwise, but given that every supplier and musician is extremely unhappy at the moment, it seems like prices need to go up and it seems like this whole thing is a little bit on the edge. It’s happening at Warner Discovery. It’s happening at Netflix. I am openly curious — and I do not say that with any sort of darker cynicism — whether or not the reality of those forecastable revenues from licensing and music catalogs will play out. There have been 20 years of the streaming business. Are there going to be another 20? I don’t know.

What I would not bet against is the internet and the expectation, which an entire generation has now been raised with, that all the music is on YouTube. I mean, you can’t take that away. You can’t put that genie back in the bottle. Just by Googling the name of the song, you can probably find a way to listen to it.

Ish? I mean, it is important to note that the entire music catalog is not available. If you want to listen to the most popular songs from the ‘30s and ‘40s — something that I have to do in my job — oftentimes the only place to find them is from vinyl collectors who are on YouTube, to your point, and have uploaded themselves playing the vinyl. It’s the only way that you can hear these songs. The music that we are able to listen to is music that can be monetized.

It’s part of the great scheme. Google does not organize the world’s information and make it universally accessible. Microfiches do that. So much information is not accessible. All of the movie streamers do not give you all the movies. They give you the movies that they have licensed, then things just disappear and you no longer have them. Even though there’s more music than ever, there is so much historical music that is not available. I think it’s important to say that.

That’s really interesting to me, because the thesis of this conversation is that we have had 20 years of streaming and this model seems like it’s teetering. Spotify is the only major streamer that is not subsidized by a larger tech company. Apple Music is going to be fine because the iPhone is fine, right?

Amazon Music is going to be fine because Amazon is fine. YouTube is going to be fine because Google exists. Spotify has to make it on its own. They have been pretty obvious and pretty explicit with their own investors that renting music from labels and then selling it for pennies is not a great business model. That’s why they want to do podcasts and why they have original videos. They keep trying to get somewhere else.

They’re not a music company anymore. Now they’re an audio company. If music was working, you could keep leaning harder into it, but it’s not the future of that business. I mean, depending on what happens in the stock market in the coming year, I think it’s very possible that they become an acquisition target for a tech company that needs a streamer. 

Microsoft has failed a few times. Where is Groove? Where is Zune? Where is Xbox Music? It’s very possible that someone might need this company because with music, to your point, you can’t bet against the internet. As much as this streaming model may not be a good business, music is a really essential part of our culture. People do not want it to be taken away from them and big tech companies know that. It’s a part of their portfolio to help them sell phones, or to help them sell everything in cardboard boxes or whatever it might be.

I’m not betting against streaming and I’m not betting against music, but the business model itself feels like it is one that is certainly not sustainable in the extremely long term without either raising prices a lot, creating magic user growth by finding another planet of humans that haven’t subscribed to a service yet, or some other miracle that I don’t understand.

One thing that is very funny, as I look back on covering tech for the last 10 years, is how much user growth these companies achieved just by launching in additional countries. Then when they ran out of countries, their growth stopped.

That’s what I’m saying. You have to find another planet, for other reasons too, unfortunately.

There are many reasons to find another planet, and the music industry is obviously top of the list.

I have always found those models to be a bit optimistic, because most other countries do not look like the GDP of the United States, where many of these tech companies get founded — though obviously Spotify was founded in Sweden. There is only so far you can go with user growth in countries that have lower base income and where people have more sensitivity to price fluctuations. You’re not going to get the US consumer everywhere you go around the world. It gets harder and harder to eke more dollars out of the rest of the globe.

I also think the mathematics of the model get really weird once you’re talking about share of listening on a global basis. If you’re the biggest artist in Germany, you should still be rich, even if your share of listening minutes is not…

The share of listening minutes is divided by national pools. David Hasselhoff is still doing well in Germany.

We’re done. That’s Decoder everybody. We have settled the most important debate: Is David Hasselhoff rich in Germany?

Let’s talk about the future of music now, and the new trends we’re seeing, the things that are coming next. I think we have laid out a case now for the change that has happened in the industry and how Taylor Swift and her record releases fit into it and her disputes. Then there’s the next stuff, like the actual threats. 

The one that comes to mind for me immediately and instantly is TikTok. It seems like in the past two years especially, it has remodeled the music industry. I was joking when we were doing our prep for the show that I have been trying to escape Fleetwood Mac since I was a teenager, and they just won’t go away. They won’t stop being around me, and it’s TikTok.

You just need a safe space of Guns N’ Roses fans making only Guns N’ Roses content.

I just need guitar solos. And that is true; I am on guitar solo TikTok. Look, I recognize that it is beautifully made music. The last thing I want is the Fleetwood Mac army coming for me.

It’s not for you. That’s fine.

It’s beautifully made music, and I understand that they were all dating each other and you can just hear the pain, but I find it tedious and boring.

There’s so much. I know we have to talk about the power of TikTok and why it has been the most profound, radical, and fastest change I have ever seen in the music industry, but I also think that the algorithm is overblown. It thinks the Switched on Pop TikTok account is an in-recovery smoker who is really into a bunch of very dated movie references.

Charlie, I think the algorithm might be better than you think.

Maybe I don’t know myself. Maybe it’s because there are so many different people on the team using it or something, but no, it’s way off. TikTok is profound, and it has very meaningfully shifted what is happening in music. Colleagues of ours at Vox had a great story about the TikTok to Spotify pipeline. Things that blow up on TikTok go to Spotify, and things that are streamed on Spotify then go onto Billboard charts.

It was almost like the launch of MTV in terms of a new place for people to be able to make hits with audiences that had been underappreciated, mostly young people hanging out on their phones. Now we live in a world where people can blow up on TikTok overnight and negotiate very favorable terms with a label because they have already built an audience. The talent scouts whose job it is to go and find new talent are surfing TikTok.

They’re also going to shows and doing their old style stuff as well, but they have more data and tools than ever to figure out what is bubbling up. The music industry has certainly bet a lot of its time there. In terms of it being a threat, though, I think it’s more a new pathway to potentially create stars. It is getting more difficult because there is more content on TikTok than there ever has been before, so it is becoming harder and harder to break out every single day.

There is some concern that people are only listening to music on TikTok, and that they need to listen to the really fast, sped-up version instead of the real one — which is a major trend we have reported about on Switched on Pop, because that is their engagement with music. Perhaps TikTok is going to launch its own music service, but that would still put them in the world of just being yet another streamer. They would have to figure out how to succeed on the streaming side. Part of doing so would require getting permission from all of the labels to be able to play all songs, all the time, all the way through on demand, and whenever you want. They don’t have exactly that license right now, as far as I understand.

That’s actually maybe the most interesting piece of the TikTok puzzle, the Instagram Reels puzzle, and the YouTube Shorts puzzle. The services are built on music, like audio trends, dances, and memes. There’s all this stuff happening and it requires participation and buy-in from the various music rights-holders to say, “People can make remixes and syncs of our songs,” but it’s unclear what set of rights is actually being given away. Sometimes the music disappears. Do we have a sense of how that works and if the labels are happy with that? My instinct is that they’re like, “Yeah, here’s this license to see if your little ticky-tockie works,” and now they’re at the end of a period and they’re like, “Oh, it worked really well. You have to pay us more money.”

I think that the labels’ response to TikTok and realizing its essential nature indicates how far the industry has come. If 20 years ago there was a, “No streaming ever, we’re only ever going to sell CDs,” to the, “I don’t want to hear a minute-long test version of a song,” before you buy it on iTunes, there was a lot of holding back of their intellectual property. Now there’s much more. It seems to be a mentality of, “How can we get this stuff out there so that people can hear it and we can monetize it later down the stream?”

Because it’s marketing. This is what I keep coming back to. If the songs are just marketing for tour tickets, then you should put the songs everywhere you can all the time.

Part of what you’re saying, Nilay, is that music is more valuable than it has ever been. It might be undervalued financially, but in terms of value as humans, it is so essential to us. It has become the centerpiece of our social media. That’s amazing.

And yet, not all the people are as rich as they should be.

That is true. When you start getting into the number of people who are actually getting wealthy off of the streaming model, it’s a very, very small, elite group of people that get to have a successful music career. There are not as many folks in the middle class of streaming as the streamers would like to say there are. It’s very challenging to be able to make a living without streaming hundreds of thousands of songs.

People aren’t getting paid enough. That’s for sure. But culturally? It fuels trends that are observed by billions of people within days. This is why tech companies want to own this asset, even if they can’t really monetize it that successfully. I don’t mean to say that there’s zero money. It is being monetized, and there is a lot of money flowing. It’s just that you can’t do so in a way where there is the cost of creation and you’re properly paying people for their work. That whole thing doesn’t make sense.

That to me is the thing that might change it in the TikTok context. It’s something that you already briefly mentioned, which is that people are developing their own audiences before they ever go to a label and sign a deal. They already have leverage. The labels themselves are saying, “We’re not going to sign an unsigned artist.” The value exchange they did at the beginning in the CD era, where they fronted a bunch of money to an unknown artist and spent a bunch of money on promotion and cocktail parties for Tower Records middle management retail employees, that is all out the window.

You can’t be an unknown artist, no.

Now they’re saying, “You need a following. We want to look at how many Instagram or Twitter followers you have. We have to see how big your TikTok is before we ever sign the deal.”

The era of the unknown, unsigned person who has not been on social media being discovered by a major label is over, unless you’re a famous person or nepo baby.

Then you’re not being discovered.

No, no, no. It’s not happening anymore. You have to make it on your own. You have to enter the content creator world and build your identity off that. I mean Charlie Puth was a YouTuber. Justin Bieber was a YouTuber. Shawn Mendes was a Vine star. People use these platforms to hopefully up-level off of those platforms into places where they can secure more acclaim, revenue, et cetera.

I’ll bring this back to Taylor Swift, because she did live through these eras. She was the product of a Nashville system and she did not have a built-in fan base when she released her first record. Now she has a massive fan base that she commands. She is very online herself, for better or worse, and she understands the rhythms and the dynamics of her fandom and how it interacts with other fandoms.

Then that’s why she ends up crashing Ticketmaster, because she understands exactly how to leverage those fans into tickets.

When you see how she has made that shift, are there any other artists who have managed to pull that off? Are there any other artists that have done it differently or better than she has?

Certainly, the most successful are the K-pop groups. They are so excellent at turning music into whole worlds. Taylor Swift is known for planting Easter eggs and all the visuals match up in interesting ways, but in the world of K-pop, there are concepts and character arcs that last over many albums. It’s often like the Marvel Cinematic Universe. You have to get completely enmeshed in this thing and see all of it to be able to understand the references that are happening in any given moment. 

I think a lot of folks are looking to K-pop. Certainly, BTS fans are really upset that Ticketmaster is getting an antitrust look at this moment from Taylor Swift sales when they have been complaining about the same issues for many years. I think that the worlds in which fandoms are emphasized have definitely done well in this model.

When you are a young artist trying to come up, and you’re like, “I need to build an audience on TikTok so I can go to a label and have some leverage to get back from the label what I want,” how big of an audience do you need? What do you think a label is looking for?

In 2020, you could have one breakout song that had hundreds of millions of streams on it on TikTok. Now I think that there is a realization of, “Can you do it again?” I think there’s just more and more scrutiny of whether you can generate multiple viral hits. This is the story of big content creators that has been coming out over the years of how actually truly demanding it is. You need to be posting many times a day, and you need to be figuring out how to create whole moments every single week in order to maintain attention when there’s so much other material that people could be focused on. It is not easy.

Are there any artists that jump out to you that have pulled this off besides the Justin Biebers and Charlie Puths of the world?

I interviewed the artist Tai Verdes a year into the pandemic and he broke out his entire career on TikTok. There is no shortage of other people that have done so. There are hundreds of people who have been signed now off of the platform to label deals. 

Unfortunately, a lot of them don’t then translate into fan bases that will come out and buy tickets to shows. That is ultimately the place where you’re most likely to be making your money. A report from our colleagues at Vox showed that less than 10 percent of those artists that broke out on TikTok in the 2020 window have gone on to create a successful touring career with people showing up and buying tickets. 

What I’m getting at is that the marketing funnel is really hard. And it’s getting harder because all of these things are marketing funnels for other places. You use TikTok to get someone to follow your Spotify, then they eventually go to your merch page, then they buy some merch, then they go buy a ticket, and then they eventually show up at your tour, et cetera. You are having to convert people from place to place to place to place, and those platforms don’t want you leaving. TikTok isn’t like, “Hey, here’s the link to a page to be able to easily go and check out all this other stuff.” It’s not going to do that until it has to.

So yes, there are other breakout stars, and there are more and more of them every single day. The thing that we are looking for is which breakout viral successes from TikTok will turn into a multi-decade career like Taylor Swift’s. That is the big question.

Honestly, the only one that I would put money on right now is Lil Nas X. If I had to pick one, I would pick him.

I would pick Lil Nas X as well. It’s funny, I obviously think of him as a TikTok artist, but he’s actually a blanket, ubiquitous, everywhere-in-media artist. He has transcended the platform. But yeah, definitely.

He’s another nuclear, bright talent. He is a master of the platforms, and he makes compelling and well-produced content.

He, like Taylor, is brilliant at understanding where the culture is at and how to say or do something on the edge of acceptability within certain communities, to then cause uproar, backlash, and embrace. He creates whole media cycles off of the things that he makes. That’s why I’m saying it’s way more than TikTok. It’s like he gets human psychology. He doesn’t just get the TikTok platform.

As an old-school punk rock guy, there is a part of me that deeply vibes with his ability to be subversive, and it transcends the fact that he broke out on TikTok. I think that’s the thing that leads to lasting impact. You can get your one robot nursery rhyme to go viral on TikTok, but then you don’t have any other moves. There are so many robot nursery rhymes that go viral on TikTok and then they kind of go nowhere. 

I want to talk about that conversion funnel real quick. Then we are compelled to talk about NFTs and other glimmers of change that might be coming.

Okay, okay.

You were talking about how if you go viral on TikTok, then all of your fans will go listen to you on Spotify, then they might go buy a T-shirt, then they might end up buying a tour ticket. That’s to get you all the way down to, “Okay, now I’m just handing you $20 again.” Or in the case of Taylor Swift, $6,000  for a ticket for a floor seat or whatever.

Sure, sure.

We’re all just trying to get back to, “I’m giving you $20 as directly as I can.” So if the CD era was, “I’m buying the music for $20, and then concert tickets are cheap because they promote the CDs,” then that made sense. Now we’re in this inversion where the music is effectively free to listen to, and the artist wants your $20 for a concert ticket.

Taylor Swift has mastered this inversion, creating demand for her actual physical albums, merch, and her tours. But the model of getting that $20 from touring isn’t working for everyone. Especially smaller artists that can’t front the money for a huge spectacular stage show.  

The expectation from the fans now is that you’re going to mount a spectacle. I think Dua Lipa has been on tour for five years. She just won’t stop. It’s this massive spectacle, the Future Nostalgia Tour looks amazing, but she’s like permanently on tour. Well, I think that tour is actually finally over, but she was effectively permanently on tour, and it was generating tons of media for her on social. It just created a sensation, but it was a huge, expensive stadium tour. You just have to front the money to put that on, and the army of semi trucks, grips, lighting techs, and all the people to do it. Then you just have to hope that people are going to show up. 

If you’re Dua Lipa, a lot of people will show up, but there were lots of artists this past summer who had to cancel their tours because they couldn’t make the math work. Santigold, Shawn Mendes, Animal Collective, they’re all complaining like, “This is too much. To get the $20 at the end, we have to front too much money. It’s too hard and there’s no guarantee of return.” That seems like that conversion funnel works for the artists it works for, but then for everyone else it’s too expensive to even make the thing that is worth asking for the money for.

I think there are many places in the whole music industry, in all aspects of it, that are struggling. I think a lot of it has to do with, frankly, mismatches of supply and demand. 

In the case of touring, there are way more artists than ever that want to tour at the moment because they had to hold back during COVID-19. There’s huge supply strain constraints. The price of fuel is an increasing cost. Everything has just become more expensive in our world with inflation. So the basic math of going on tour doesn’t make sense not only because of all of those macro indicators, but also because there are more artists than ever that want to go on tour. Not just because of this holdup, but because they realize that this is the place where they are going to monetize. This is how they’re going to bring all of their money in.

So when everybody wants to do that at the exact same time, all of the venues and all the promoters are now in a place where… I mean, I would book Harry Styles for 30 years of residency or put Taylor Swift on tour forever if I were Ticketmaster, because there is so much potential revenue to be made off of ticketing fees in those scenarios. But yes, it’s just another place where the economics are not in the favor at all of the people producing the material. Fans are also quite unhappy with a lot of these ticketing issues as well, obviously.

Right, because Ticketmaster is owned by Live Nation, which owns all the venues, and that is all part of the same company that owns SiriusXM, which promotes the things on the radio. That is a monopoly. That’s a whole other show that we can get to some other time. If the point of the big streaming inversion was, “We’re going to move the $20 transaction from you paying for the song to you paying for the experience,” that to me is yet more evidence that this thing is on a precipice. Everyone is mad at Ticketmaster, and like, Dua Lipa needs to go home. At some point, she should go see her family. That just seems very untenable to me.

There have been countless stories of the ways in which being on the road is immensely unhealthy, and greater awareness of the ways in which it’s just really bad for one’s mental health to be infinitely on the road and completely displaced. Like the streaming model, there is going to be a cap on the amount of concerts that people are going to go to. 

To your point, I think people’s expectations are rightly rising because they see something so spectacular, especially when you can go on YouTube and see a clip of the thing which was spectacular. Your expectation is, “This better be amazing.” That’s creating this upward spiral of, “I want a better show. I want it in bigger places. I want it to look grander.” So ticket prices are going up, and so more people want to get out on the road and capture more of those ticket prices. There’s a limit on venues and they all seem monopolistically controlled. It’s tenuous.

Again, I will say, I think the style of pop music in particular right now does not lend itself to the intimate club show.

You just want your rockers, CBGB…

Look, man, I came up in an era where a guitar solo in a small, smokey room with 300 people is perfect. I recognize I’m a dinosaur and that’s fine.

I cover pop, but I also love to shred on the guitar. So yeah. It’s a little late in this episode.

Actually the last half hour of this episode is you just doing a solo. I don’t know if we prepped you for that.

Let’s talk about the last $20 that the industry thinks it might be asking for.

Which is NFTs. If the structure of this episode is, “How are they going to ask you for $20?” First it was CDs, now it’s tours and merch. The next thing, or at least the promise of the next thing from some very motivated members of the industry, is crypto shit. It’s NFTs, it’s blockchain tokens, it’s whatever universe the DJs want to put together. It’s all out there. Whatever club banger metaverse that you think you might be in, they’re going to have you in it. Does that stuff seem viable to you? 

We’ve had some guests on to talk about why they’re doing it. Steve Aoki told us why he’s doing the Aokiverse. There is a sense that, “Okay, if I can’t go on tour forever, I can still find something to sell digitally for $20 that might be worth money and the secondary sales might return royalties to me.” There’s a lot of promise there. What do you think of it?

I was immediately skeptical during the lockdown period in which all of a sudden everybody in music was like, “You have to join this live chat. We’re talking about crypto. It’s the future of music.” Again, it stood as an admission of, “We can’t sell this stuff. The music’s not valuable. It’s going to be this AI-generated image of the music that you have the NFT to which will be valuable.” I mean, talk about convoluted. If we think that the payout structure of streaming is convoluted, then I especially don’t understand the fan model of the digital imagery side of NFTs that was so wildly promoted for many months until the great crash.

I actually want to instruct the listener. If you go back in this episode to when I asked Charlie to explain music licensing, there was a sigh. Charlie was like, “Well, there are two parts of the song. There’s publishing and this, et cetera” It’s the exact same sigh when people have to explain NFT copyright. It literally is the same. We should just do a mashup of that sigh across all episodes. It’s the same one.

I have to say, I’m not following it too closely because it’s such a complex ecosystem. I think you have to live and breathe in it to really see the opportunities because it’s moving so quickly. 

The one place of hope that I see is that the value of most digital products at this moment, the NFTs, has declined so much. It actually does create an opportunity where there are small collectibles that anybody can participate in. So moving outside of the $1 million NFT to the $20 NFT, maybe there is an opportunity for more collectible items in this sense.

There are just countless ways that people are trying to use these, including ownership of actual music, being able to have an exclusive license to music, or weird pictures of gifs that were made by an AI. There are many versions of this story. If we’re at this moment in a 20-year cycle where everyone is unhappy with how this model is working, outside of probably the labels, then there is opportunity for someone to do something very creative and disruptive. I don’t want to deny that it could come from that ecosystem. I have just not been happy to see how the mad rush of everybody into printing funny little pictures happened. Yeah, major sigh.

So I think something could happen there. If and when virtual reality becomes a compelling, mainstream product for many, many people, music will certainly be at the centerpiece . That is a huge part of why Apple is betting on Atmos. There are all kinds of things that are happening in music to lead into that potential future world in which music will be essential. 

If so, I think this is where all the hedge funds buying up these music catalogs will have been overwhelmingly right, and they will shove it in our faces and say, “Look, this stuff was worth a hundred times more than what you thought it was, because when you’re in these virtual worlds, all you want to do is have some great background music going on.” Unless that all just gets written by AIs, then maybe not.

When I think of the promise of the Metaverse, what I think about is a private equity firm collecting royalty checks on streaming Neil Young’s back catalog to me. It’s obvious. I don’t know. That’s the baseline expectation I think all of us have of the metaverse.

Look, I see the NFT as a thing the music industry saw it could sell. Since it cannot sell music in that one-to-one transaction, it is forever on the hunt for the $20. Taylor Swift has found the $20 in selling clocks, shoes, and all of the other stuff that she’s managed to sell, and now very expensive tour tickets. She has not yet had to make that turn, but the midline artist is desperate for the next thing they can sell. Obviously, with an NFT, you don’t have to front the cost of a tour and you don’t have to manufacture clocks. You can just make a copy of a digital object and sell it again. You see why there’s interest there. The logic of it makes sense. The utility of it, I think, is lacking. 

Just to put a cap on this episode, what are the markers you see of positive change?

Music is weird in that it seems utterly ubiquitous, but it’s actually consumed the most by, and obsessed over the most by, a fairly small group of people. I think that in continuing to connect with fandoms, there is always going to be a world of people making music and playing music for people because we love human connection. 

But that share of the 100,000 songs a day that are being uploaded to Spotify from artists that are just getting going, I think a lot of those might actually never even come close to collecting $20. I think that the listening might shift towards the people who are less interested in music, but, “Hey, I’m going to put on a chill playlist, and the chill playlist is background to help me study.” I think a meaningful amount of revenue could be lost there.

The most exciting thing in music is that people control more of their destiny. There are people getting better label deals than ever before because they are building their own fanbases. There are all kinds of new ways to participate. I mean, it puts us a bit more into the world and conversation of content creators. There are people that make middle-class livings by doing Patreon and other subscriber-based tools that kind of exist at a hybrid of music and other content. I mean, it’s like the bigger internet story, in that you can find more interesting, beautiful, and special little things. I hope those things can also survive so that whoever has been able to have the time to develop that talent can keep on doing it.

Charlie, this was great. I love having you on the show. I love talking about the business of music with you, even though I just want it to be guitar solos.

We can talk. Well, if you want to do a “20 best guitar solos of all time” conversation, we can start a whole new podcast on that. I am here for it.

Okay. You heard it here first. I mean, we are putting that in the metaverse right away.

That’s going to happen. Charlie, this was amazing. Thank you so much.

Thank you, Nilay.