Music streaming's cautionary tale for creators
What happens when an industry drowns in a sea of sameness.
Amy X. Wang, senior music business editor at Rolling Stone, asked an interesting question last week: “Why do we still pay only $10 a month for music?”
As I realized after reading Wang’s article, the price of music streaming has indeed remained flat for a decade. Even though the “unlimited access to a catalog of 50 million songs” that music-streaming subscriptions offer us is “one of the most bang-for-your-buck options out there” exists in a world where an iPhone can set you back a smooth four figures and healthcare, housing and education are four times as much for us as they were for our parents.
In her piece, Wang wrote:
The music industry would welcome higher prices with open arms, as it’s griped about streaming’s meager payouts to rights-holders for a decade now. That’s on top of the fact that nearly every other type of subscription, from Netflix to Amazon Prime, has boosted fees over that same decade — sometimes more than once. Per the U.S. rate of inflation, even a $10 bag of apples in 2008 should cost somewhere around $12 today.
Music has become a commodity like gasoline, milk or electricity. “In music, if your favorite streaming service said they were going to raise prices, you could easily switch to a different one,” Russ Crupnick, managing director of music research firm MusicWatch, said to Wang. This is good news for consumers who can get comparable value without spending more; for businesses, it’s a problem that dogs executives who are responsible for returning profits to investors and shareholders. It’s a cautionary tale for creators too.
It’s no secret I believe that a subscription-supported business model for creative work promises the most sustainability for creators. More than once, I was a casualty of a media industry that’s succumbed to (or been swallowed by?) an ad-supported business model that often compels publishers and journalists to prioritize attention over quality.
My writer friends and I have all suppressed our ambitions to add more digital junk food to an all-you-can-consume buffet of addictive and outrage-inducing social products that value advertisers and algorithms over the well-being of the humans they rely on to fill their newsfeeds.
I’m also aware of the acute damage the myth of the starving artist has done to creativity. Social products have helped normalize a consumer expectation that creative work be free (although, as you know, it’s expensive to produce). Creators fear being labeled a sellout or grifter if they place a value on their creative work.
Personally, it took me a few years of trial and error (and the arrival of technology like Substack, which enables writers to publish premium newsletters like This Should Help) to figure out how to make subscriptions work for me. As I wrote in this Daily Reader:
Until recently, the majority of my days centered around producing work that was unrelated to the value my writing and worldview gives to my subscribers because I lacked the tech to get paid without integrating three or four tools into complicated workflow automations. It was easier to launch e-commerce, host webinars or offer services than it was to sustain a digital media business — even though that’s where my expertise and experience lie.
Music streaming is a tough nut to crack because each service offers the same songs and albums. What’s available on Apple Music is available on Spotify. Luckily, there are a few examples of industries or companies avoiding this sea of sameness that can serve as a rough blueprint for creators.
The video streamers
There is a litany of video streaming services on the market: Netflix, Hulu, Disney+, Apple TV+, Amazon, HBO Now, and CBS All Access plus newcomers Peacock (an NBC Universal product coming next April) and HBO Max (launching in May 2020). And each of them has something that the music streamers don’t: exclusive content offerings that help consumers justify their spend.
Disney+ launched to upwards of 10 million subscribers, as I reported in this Daily Reader, in large part to a family-friendly suite of classics, new releases, originals and more from Disney, Pixar, Marvel, Star Wars, and National Geographic that subscribers can’t get from any of the other services. 85 percent of the $13 billion Netflix spent on content last year was dedicated to original content. And they’re not alone. From reporting published in last Thursday’s Daily Reader:
Variety reported that Amazon’s planned Lord of the Rings project is believed to be the most expensive TV project of all time, on top of the $250 million rights to the Tolkien intellectual property. Disney+ flagship original The Mandalorian, a Star Wars spinoff, reportedly cost north of $15 million per episode, according to Variety, while Apple's Masters of the Air series, a World War II drama produced by Steven Spielberg, could cost as much as $20 million per episode.
Streaming services can competitively price their subscriptions because consumers don’t have access to this exclusive content outside of the platforms that own it. Chances are your creative work is exclusive to your business, giving you a similar competitive advantage the video-streaming services have.
The “closet in the cloud”
Rent the Runway’s Unlimited service has revolutionized the shopping experience for a generation of women who prefer to rent versus buy their clothing. For $159, subscribers can borrow up to four items at a time from an assortment of more than 15,000 styles from over 650 designers (Jennifer Hyman, RTR’s CEO and co-founder, calls it the “closet in the cloud”). The item can be swapped as often as subscribers want and RTR has earned a reputation as a company that meets their customers where they are. From “Rent the Runway's powerful partnerships playbook”:
In June 2019, RTR partnered with Nordstrom to expand its network of physical retail locations. The partnership enabled RTR subscribers to drop off their rentals in kiosks at select west-coast locations. Through RTR's partnership with West Elm a month later, 26 exclusive home bundles for the bedroom and living room, including decorative pillows, quilts, coverlets, shams, and more were available to subscribers to rent. RTR teamed up with WeWork last fall for a similar collaboration that placed drop-off boxes in the lobby of 15 WeWorks across the country for members can drop off rentals and immediately order new items to rent.
RTR’s success is result of responding to consumer behavior and facilitating a one-of-a-kind experience. Lauren Goode wrote about her up-and-down experience as an RTR subscriber for Wired in March 2019:
Rent the Runway's monthly rental service — not for formalwear but for business attire — has been more useful than I could have imagined in this year of no-new-clothes. Since last May, I've been using the Update plan, which sends four clothes item each month. They arrive in a garment bag with a prepaid UPS label for returns. They smell delightful, and they are often things I never would have bought myself but finally have the ability to try.
Goode also featured the origin story of RTR’s monthly rental service:
Hyman says she noticed that customers had started to hack the system: They would rent something for a special event on Saturday night, then wear the outfit to work on Monday or Tuesday with a cardigan or blazer thrown over it to dress it down, then ship it back. Women started clamoring for a product that would serve their needs for the occasion that was actually most important to them: Going to work, and the other life stuff that happens five to seven days a week.
Subscription content and products, as Rent the Runway has discovered, are especially valuable to customers if they deliver an instant solution to a critical problem.
The new media pioneer
As I alluded earlier, the media industry has been in crisis for a few years now. Many digital publications, including the ones I worked at, rely on an ad-supported business model to generate revenue. And as Google and Facebook cornered the digital advertising market (taking the money journalists relied on to fund our work), we were faced with a choice: Write digital junk food that got performed well on social media but provided little service to readers until we eventually get laid off or pivot to new career paths.
In 2016, former colleagues Alex Mather and Adam Hansmann launched The Athletic, a subscription-based publisher of sports news for the “fan who follows a team, win or lose,” according to Mather.
In a profile by Ira Boudway for Bloomberg Businessweek:
The Athletic doesn’t want reporters racing to get a post-game quote from a head coach to plug into a game summary on deadline. The mandate is to report what can’t be found elsewhere—to get the back story on a trade, to break down the tactical move that tilted a game or the strategic shift that’s shaping a league, and to explore personalities. The standing order, from Mather, Hansmann, and Chief Content Officer Paul Fichtenbaum, a former editor of Sports Illustrated, is to “do the best work of your career.”
According to Boudway, “The Athletic’s goal isn’t for every story to reach the largest audience; it’s for each one to fill a niche.” And although The Athletic isn’t profitable yet, the product seems to be resonating with subscribers:
In August, Mather says, the Athletic crossed 600,000 subscribers. “We’ll end the year somewhere close to a million,” he says. The leader in digital journalism, the [New York] Times, has almost 3 million online-only subscribers, not including people who get just its crosswords and cooking services. The Wall Street Journal has 1.8 million, the Washington Post more than 1.5 million as of last year, and the Financial Times about 750,000. All four were founded in the 19th century and have carried a loyal readership into the internet age. The Athletic published its first story three and a half years ago.
Ad-supported business models require that media businesses react to the news cycle's lowest-hanging fruit. With independent, subscriber-supported publishing, however, writers can spend their days writing stories no one else is writing for people who value those stories enough to pay for them. Most importantly, writers own all their content and contacts which an impossibility on social media. Subscriptions, it seems, could be a lifeline for a media industry that’s been in crisis for a few years now.
Not all businesses exist to grow
A common criticism of subscription-supported businesses is that they’re hard to scale. What gets forgotten in a lot of conversations about the business of creativity though is that, unless your creative work is backed by investors or advertisers, growth isn’t the point.
Our culture implicitly and explicitly questions the viability of your creative work if you’re not earning more profit, creating more products, attracting more customers, hiring more employees, hosting more events or renting more office space. Bigger is better, right?
It’s likely you’ll reach a threshold in your creative business where growth doesn’t serve you anymore. When you know how much revenue your creative business needs to cover your expenses, guarantee a profit and reward you with an honorable income that allows you to create meaningful work and enjoy a fulfilling life, then you can scale and optimize it for enough instead of figuring out how to acquire more. (Paul Jarvis wrote an excellent book on this concept called Company of One.)
Here’s the bottom line: For subscriptions to work, creators must offer consumers a service or experience they can’t get anywhere else. If you can achieve that, then the internet enables you to profit from a small niche paying you in a way physical products and professional services are unable to. Creators can scale to enough much faster charging a monthly or yearly fee for premium content than they can from selling one-off products or serving individual clients.
When Wordpress introduced subscriptions for anyone with a paid Wordpress site or users of the company’s Jetpack toolkit, I wrote:
The past few years have seen a surge in software specifically designed for creators to monetize their creative publications, podcasts and video channels.
There’s Patreon, which enables creators to offer exclusive benefits to fans in exchange for payments from “patrons” of the creator’s work. I’m biased towards Substack, the technology I use to publish This Should Help, because it’s purpose-built to serve professional writers who are serious about publishing paid newsletters. Mighty Networks is a superior alternative to Facebook Groups for creators who want to host membership communities away from noisy social media platforms. Buy Me a Coffee is another tool I use to accept one-time and monthly support from fans who are uninterested in subscribing to the newsletter but want to fund my work nonetheless.
As a result, creators can focus on delivering meaningful value instead of digital junk food that generates cheap engagement but lacks substance. Most importantly, they’re no longer beholden to [social products] that enable creativity but devalue the creators behind it.
The key, as with all business models, is hit the sweet spot between the cost to make, brand, market and sell your work and how much revenue you can generate from it.