New Rails for The Music Industry
Platforms exercise autocratic control over artists’ careers—but it doesn’t have to be this way.
Hey there, it’s Yash. I know its been a while since I last published something—been working on some projects that have consumed all my time and frankly, all my intellectual curiosity—any wisdom on how to balance ‘thinking’ and ‘doing’ shall be greatly appreciated.
Anyway - art is long and life is short (Conrad!) so instead of sitting on this essay which I have done for a very long time, I finally cleaned it up and made it all tidy and nice to read—let’s get straight into it!
Historically, value has always accrued towards the center of the music industry. There have been a group of select stakeholders who have acted as gatekeeping intermediaries separating artists and fans. Major record labels controlled the means of production and distribution pre-Napster. Streaming services and social platforms control the channels of discovery post-Napster.
Admittedly, these intermediaries solved artists’ problems initially and added value to their creative careers. Record labels helped finance the production and distribution of music when the industry was essentially a manufacturing business. Subsequently, streaming services (with Spotify at the helm) “saved” the industry by legitimizing the digital consumption of music — which was a piracy driven wild west in the wake of Napster.
In both these eras, intermediaries initially arose to solve a genuine need that music creators had. This helped them grow in size and influence, and consequently become powerful determinants of social and financial success for creators who wanted to succeed within their ecosystem. As they experienced growth however, platforms’ priorities shifted. For instance - early creator economy startups added genuine value to creators’ careers. They democratized the creation and distribution of content. But as the creator economy converged with the attention economy, creator empowerment made way for advertiser appeasement. Creative content was relegated to being a conduit for eyeballs and resultant advertising revenue.
As the middle class of creators grows, product and business decisions made by a select group of executives can tangibly affect the livelihoods of many. The defining problem of the creator economy (and music industry) today is that these decisions are autocratically imposed on creators who have no say in how these decisions are made and have no freedom to leave if these decisions don’t make sense for their creative enterprises.
In 1970, Albert Hirschman formulated the Exit, Voice, and Loyalty framework for stakeholders in any kind of ecosystem to address and potentially resolve their concerns. Applying Hirschman’s framework, creators should either have the ability to voice their grievances, raise proposals, and tangibly affect decision-making within these platforms, or be free to exit these platforms—taking their content and audience with them wherever they wish to go.
The current rails on which the music industry and the broader creator economy is built on don’t allow this. Let’s take Spotify for example: Musicians on Spotify have no way to voice their concerns or tangibly affect change within Spotify. A few executives are making decisions that tangibly affect millions of music creators.
Moreover, if these music creators wish to leave Spotify, they can’t really do that either. Their audience is locked in within the Spotify ecosystem. Besides vague information about where their audience is based and which songs they listen to, music creators have NO IDEA who these people actually are. There’s no way to shift platforms without losing a huge part of their listenership.
This is problematic. Many platforms owe their success and multibillion dollar valuations to the middle class of creators who house their content and communities within their walled gardens. It is only reasonable then, that the next generation of creator platforms are democratically governed (voice!) and interoperably structured (exit!)
Side Note: Of course, the incentives driving the attention economy may still not align with the ones needed to build creator-friendly products and services. Would things have been different at Spotify if product and business decisions were made by artists? Perhaps. Perhaps not. But one can’t help but wonder what Spotify would’ve looked like if it were built to serve music creators instead of serving advertisers who want to target music fans.
Okay, I know where you think this essay is going. Let me assure you, it’s not.
Yes, intermediaries are universally vilified in the music industry. It is cool to dunk on Spotify within artist communities and every music industry conference has a minimum of three enthusiastic founders promising to disintermediate the music industry. But the reality is that intermediaries are not the problem. The way they are governed and the incentives driving the ecosystem they operate in are the problem. Companies are autocratically governed by executives who are incentivized to make decisions that benefit Wall Street - not music creators. Spotify may enthusiastically state “x number of artists made $50,000 a year through our platform!!” (which seems to be an effective marketing strategy?) Wall Street however, evaluates performance based on user time spent in-app - not creators making a living.
tl;dr - platforms initially arose as valuable intermediaries empowering creators at first. But these platforms are autocratically governed and have made decisions that align with the attention economy and not the creator economy. Executives autocratically decided to appease advertisers and Wall Street instead of creators, leading us to a scenario where all creative content is merely seen as a virtual ad space, devaluing individual creators in the process. Artists have been forced to become entertainers - leading to a cultural downward spiral.
To realign incentives in a way that is mutually beneficial for creators and platforms and to incentivise executives to make decisions that actually empower creators, we need to fundamentally change how projects in the music industry are governed. Instead of striving for a music industry free of intermediaries, we need to enable an ecosystem where intermediaries are democratically governed. Instead of going from a peaceful dictatorship to a free but belligerent nation run by rogue army generals, let’s gradually transition towards a more transparent and democratic music industry.
To do this we need new democratically governed rails for the music industry to be built on. And we finally have the technology to do it.
Protocols, not platforms
A powerful antidote to platform autocracy could be: decentralized open-source protocols enabled by web3. Through open-source + decentrally governed protocols, the music industry could be restructured as a healthy and competitive ecosystem of interoperable artist tools built on top of platform-agnostic rails.
Let’s tackle open-source first.
Open source protocols have existed since the early internet days. We still use them every single day with our email—which uses the SMTP protocol. Open-source protocols are inherently interoperable. It’s what makes our gmail account accessible whether or not we use the Gmail App, Apple Mail, Outlook, or Superhuman. Google can’t force us to use its own services to access our Gmail account. This seemingly minor thing actually has powerful downstream effects on the creator economy. We are currently seeing how this plays out in the newsletter space first-hand: Because newsletter writers communicate via email, they have complete ownership over their audience rather than the publishing platform they use. If I’m not satisfied with Substack (the platform I’m using to publish this essay), I can just export my email list and go elsewhere pretty easily—moving on to alternative platforms like Ghost, or Revue—bringing all of you along with me. In other words, if I’m not happy, I can leave.
But the same is not true for Spotify—if a music creator on Spotify wants to move to another platform or if Spotify decides to deplatform them, it entails losing their entire audience on Spotify. Yes, they can draft a fiery post dissing Spotify on their socials and maybe a few devout fans will follow them to their new platform of choice. But there is a loss involved. A loss painful enough to keep them toiling away within Spotify’s serfdom, complying with its rules, however arbitrary they may be.
Open-source protocols could enable a music industry built on radically different rails. Instead of having their audience owned and controlled by autocratic platforms, music creators using open-source protocols could own their audience and communicate with them through their preferred content format, on their own terms, through the platform of their choice.
Moreover, an open-source world is an artist-friendly world. Artist-facing tools and platforms are incentivized to compete based on value propositions that better serve creators because they can’t impose features that lock them in. Rather than forcing creators to stay, they have to actually focus on building compelling products and services that make them want to stay. Open-source protocols promote a healthy, diverse, and competitive ecosystem. Creators benefit as a result.
Now, you’re probably thinking: if open source protocols are SO great and have existed since our web1 days, why did centralized web2 platforms win? Why would anyone choose autocratic platforms over democratic protocols?
Because of governance.
It turns out that building anything in a truly democratized way is really really hard. Allocating capital and coordinating labor in a democratic way was chaotic and inefficient as internet projects scaled. Without the technology for efficient governance, democracies were susceptible to indecision and inaction. Like a giant never-ending university group project.
This collective analysis paralysis is a problem web2 autocracies didn’t have. If Daniel Ek joins Clubhouse and likes what he sees, he can ask his team to build or acquire a similar product and execute all this in a very short amount of time. The same isn’t true for decentralized projects. Historically, decentralized projects just haven’t been able to innovate with the same speed and decisiveness as centralized platforms. Web2 platforms ‘won’ because nobody could figure out how to solve the governance problem in an economically feasible way.
With web3 however, we finally have the technology to make decentralized governance work at scale.
While the consumer-facing application of web3 like music NFTs might make the news, the really exciting potential of web3 is its ability to radically change how organizations are governed in the music industry. Tokenized governance enables projects to be built in a truly democratized way. Smart contracts enable the efficient allocation of capital and labor, at scale.
Web3 enables an internet-native way of organizing labor and capital at scale. An ecosystem of Decentralized Autonomous Organizations, owned and operated by a community of participants, governed based on transparently encoded rules.
For the sake of brevity (which seems to be an increasingly bleak goal at this point), I encourage you to check out Water & Music’s report on the state of Music DAOs for a more comprehensive look at the decentralized governance landscape in music – it contains a database of 30+ music DAOs and a detailed breakdown of how they operate – including governance.
Let’s take Audius as a simplified illustration. It is a decentralized music streaming service that bestows governance rights (among other perks) to $AUDIO holders, giving them a say in how the platform develops. Every user has the ability to influence product-level decisions, making Audius more community-led and operated compared to its centrally operated counterparts such as Spotify, which has an executive team steering these same decisions.
Audius is just one of many decentralized projects that have been emerging recently, as web3 moves beyond early adopters. The appeal is clear—decentralized platform governance ensures that decisions made by social networks are taken transparently and collectively.
Beyond obvious merits however, we do need to be aware of some current limitations. Even Vitalik Buterin highlighted that DAO governance is often plagued with some of the same challenges that we currently grapple with in our legacy (democratic?) governments—problems such as low voter turnouts, bribes, a lack of representativeness, centralization, and rigid constitutions.
Moreover, there is a local group of people who argue that democracy/decentralization might actually not be the most conducive for innovation. Oftentimes people don’t really know what they want and it takes an autocratic visionary (Steve Jobs at Apple the most cited example) to really drive disruptive innovation i.e. make something that people didn’t know they wanted. (I encourage you to read Jesse Walden’s brilliant essay on Progressive Decentralization if you wish to scratch this itch.)
My view on this is that we finally have the technology to experiment with internet-native governance models and it's going to take a while before we figure out best practices. Different degrees of decentralization <-> centralization might work for different projects, just like some businesses are better off being structured as an LLC rather than a C-corp. These are minor operational hiccups that could and probably will be overcome in the future.
Intermediaries that play a decisive role in determining the social and financial fate of music creators. But a lack of interoperability or democracy keep music creators locked-in within these walled-gardens, in a neo-feudal state of work. Today however, as more individuals make their living through streaming services and social platforms, there seems to be a palpable shift in the air. Music creators are disillusioned. Many are questioning the outsized influence of DSPs and social media platforms over their careers. It is not unreasonable to expect that as the impact of these platforms over creators’ careers increases, their autocratic control over creators’ outcomes should decrease. New rails i.e. open-source and decentrally governed networks could usher in this next era of the music industry and broader creator economy.