Will Square’s $297M Tidal Acquisition Change How Music Creators Are Paid?

Guest Takeover: Nathan took some well-deserved time off, so we invited Mario Gabriele from The Generalist to take his seat for the week! Mario was an active investor before he founded The Generalist—a community of 28,000 entrepreneurs, investors, and creators who receive weekly insights on the latest trends in business and tech. We’re so excited to get to share his brain with you this week.

If you like these takeovers let us know in the feedback and we’ll do more in the future!

Recommended Reading: Dan spoke to popular YouTuber Matt D’Avella about content creation, audience building, productivity, and burnout in this week’s Superorganizers. 

And now, onto the news…

Top Stories in the Passion Economy, 03/11/21

Square Acquires Tidal for $297M To Change How Music Creators are Paid

What Happened?

• Square, the mobile payments company run by Jack Dorsey is acquiring Tidal, a music streaming service owned by Jay-Z, and other artists including Beyoncé and Rihanna. Details are hazy, but Jack says he wants to use Square’s technology to explore new monetisation models for music creators.
• The acquisition is valued at $297 million and Jay-Z is set to join Square’s board. Jay-Z bought Tidal in 2015 for $56 million. 

jack@jack

Square is acquiring a majority ownership stake in TIDAL through a new joint venture, with the original artists becoming the second largest group of shareholders, and JAY-Z joining the Square board. Why would a music streaming company and a financial services company join forces?!

March 4th 2021, 8:04am EST

8k Retweets31k Likes

What this means: 

Mario:  

• Square’s payment infrastructure could be paired with Tidal’s extensive music catalog and artists relationships to set up new monetisation models for creators. 
• However, I am surprised that this is a worthwhile focus for Square. I think it's a great branding move but I don't get the business use case for it at this point.

Li:   

• They're definitely not acquiring Tidal for their user base. Their numbers are quite low compared to Spotify and Apple Music. 
• Square is planning to create an ecosystem of payment tools for artists—in the same way they’ve already built one for small businesses and individuals. 
• But there is a big difference between small businesses and artists. There is a very long tail of small businesses—millions and millions of individual merchants who are doing daily transactions—but the same cannot be said for the artist and music world. Here, only a few artists actually make any significant amount of money. Strategically, this feels like a shift in the type of customers that they're serving.

Mario: 

• Jack’s tweetstorm makes it sound like they’re trying to create a Patreon-style service. But that opportunity is just not big enough (yet) for a $100 billion market cap company like Square to care about. 

Li:

• Yes, but direct creator monetization is tricky in the music industry because of the fragmented copyrights. You have the composition (owned by the songwriter and/or their publisher) and the sound recording (owned by the artist and/or their label)

Mario:

• True, if most music creators don’t own their IP, Square’s monetization model ultimately benefits copyright holders i.e. record labels and not independent music creators. 
• It’s possible that the big opportunity Square is thinking about is using Tidal’s artist relationships for ticketing—which presumably wouldn’t run into as many IP issues. 

Li:    

• This could also be their foray into artists loans and providing capital to creators. But extending creator loans at scale in a hits-driven music business is precarious. Maybe they could use Tidal’s music consumption data to make those loans safer to underwrite.
• Yes, they're planning to help music creators monetize through ancillary revenue streams like merchandise rather than music streaming itself. 
• But even if they do this, the labels are still going to get a cut. Many musicians have 360 deals  that stipulate the labels get a share of all revenue streams, including merch and ticketing. 

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Top 40 Clubhouse Creators Form a Quasi-Union 

What Happened?

• Taylor Lorenz covered the recent formation of Audio Collective, a community of 40 popular Clubhouse creators who are planning to offer event planning, consulting, and support for brands who are building a presence on the platform.
• The founders plan to build on Clubhouse’s Creator Pilot Program and lobby for better content moderation policies, data insights, and monetization features. 

What this means:

Li:   

• Audio Collective sounds like part-union part-Type House. A community for emotional support, content creation tips, etc. but also lobbying for better moderation policies, data insights, and monetisation features. 

Mario:

• What do you think is missing in terms of moderation? Because hosts can now boot people who are disruptive. 

Li:    

• Currently, when you call people up on stage for a question you have no idea what they're going to ask. I think that's why Josh Constine has been using a side chat room for the rooms he hosts. Creators want high quality participants, but right now it's a crapshoot when they call someone onstage. 

Mario: 

• Clubhouse also really needs an analytics dashboard. Creators don't really know why certain conversations pull in more listeners and some don’t. Was there another really awesome room? Is it because the title was bad? Is it because the timing was inconvenient? 

Li: 

• Yeah, I agree! 
• It's also interesting how quickly this happened: Clubhouse has only been around for a year and yet creators have decided that they're going to band together and create this quasi-union. This took years on other UGC platforms. 
• It's partially driven by the creator economy zeitgeist and how creators are at the forefront of what platforms pay attention to now. This is underscored by Clubhouse's messaging around creator monetisation for their Creator Pilot Program. I think it has created awareness among popular Clubhouse creators that they should be engaged in the decisions that the platform makes and should actively participate in these conversations.

Mario:  

• It's great for Clubhouse to have these proactive communities of top creators. They’ll help attract higher profile people and better quality events to the platform. 

Li:

• But I don’t see these 40 creators in the Audio Collective having outsized influence over Clubhouse. 

Mario:

• Don’t they each have over one million followers?

Li:   

• But those million people probably overlap among them. Also, many of them got to a million because of auto suggestions. 
• I think for a UGC platform, it's in the platform's best interest to somewhat commoditise their creators. Strategically, I don't think Clubhouse will (or should) let the Audio Collective have that much sway over their roadmap or decisions.

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Soundcloud Is Adopting Fan-Powered Payments For 100,000 Indie Music Creators 

What Happened? 

• Fan powered payments divide the subscription revenue of an individual user among the artists that user has streamed. This benefits small artists with dedicated fans who primarily use the platform to listen to their music.
• Incumbents like Spotify and Apple Music use a pro rata payment model which collects subscription revenue from all users into a single pot, and then divides it according to artist streaming volume. This tends to favor superstars who end up receiving the bulk of the revenue on the platform.  
• Confused? Here’s a great primer. 

What this means:

Li:

• The fan-powered payment model benefits the emerging middle class of music creators. 
• In music, we tend to listen to catchy pop songs on repeat. But the content that tends to go viral is not necessarily the content that fans want to support financially. 
• My understanding is that platforms have considered this model before but it's very difficult to compute payouts on an individual subscriber level.
• But clearly they have the ability to do so. Apple has its Replay playlists and Spotify has its Wrapped playlists  at the end of the year. So they are already using individual consumption data. 

Mario: 

• Some emerging artists are getting 5x more under the new model because it’s based on each individual’s subscription being divided based on their own consumption. Say 50% of my plays are Taylor Swift and 50% are Li's music, then my $9.99 subscription gets paid out equally to Taylor and Li. Under the previous model even if I listened to Li half the time, my money probably wouldn’t go to her. It would get aggregated into a pot and go to the artist with the most streams overall.
• In the new model, artists who play niche genres like jazz and classical will get better payouts.

Li:

• I agree! 

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The Creator Economy’s LA Exodus

What Happened? 

• Jake and Logan Paul, along with many other creators based in Los Angeles, are moving out of the city.
• According to them, the lack of networking opportunities and a thriving creator community due to the pandemic does not justify the high cost of living.
• This mirrors a similar exodus of the tech industry from SF. 

What this means:

Mario:

• Creators are having their Miami moment! Li, what do you think made LA a hub for creators in the first place? 

Li:   

• They all came to LA because of the network effects of the entertainment industry.
• Many content creators actually have traditional entertainment industry aspirations. Once creators reach a certain level of success, they sign with an agent to explore other opportunities. 
• I think it makes sense because their presence on social media is not diversified. Creators are one algorithm change away from not being relevant anymore. So I think they need to have as many touch points with consumers as possible.

Mario:  

• Maybe this exodus indicates they don't aspire towards traditional Hollywood success anymore. Maybe with the rise of YouTube and TikTok, the next generation of creators have found something that is even more desirable. 
• The remote-work friendly nature of content creation means they can do the job from anywhere without having to navigate Hollywood politics. 

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NFT News Roundup: Music Creator 3LAU Records Highest Value NFT Sale Ever 

What Happened? 

• Here’s a roundup of the latest NFT related news: 
• EDM DJ Justin Blau aka 3LAU recently held the highest value NFT sale ever, valued at $11.7 million. The most expensive NFT sold for $3.6 million. It included a custom song, access to unreleased music, custom artwork, and alternate versions of his new album’s 11 original songs. 
• The Popular “Deal With It” GIF is being sold as an NFT by creator Ryder Rippswith through Foundation. Opening bids start at $8000. 
• Popular music creator Grimes sold 10 pieces of digital art worth $6 million as NFTs through Nifty Gateway.
• Viral creator and serial prankster Elijah Daniels launched the Clout Market, with 8 parody NFTs based on influencers and celebrities. 

Latest Updates On Mark Cuban’s Clubhouse Competitor 

What Happened? 

• The Verge recently revealed some key features on Fireside—the Clubhouse competitor being built by Mark Cuban and Falon Fatemi. 
• Fireside is exclusive to a curated slate of  creators, unlike Clubhouse which is free for all. (provided you have an invite)
• Fireside focuses on interactivity. Members in the room can ask questions and type in comments. They can also react with emojis and sounds. (Applause, for example.)
• Monetisation is prioritized as well. Fireside gives creators the ability to host exclusive rooms for select audiences. 
• Conversations are natively recorded and will also be hosted on traditional podcasting platforms like Apple Podcasts and Spotify. 

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Netflix’s Foray Into Short-form Content

What Happened? 

• Netflix is launching Fast Laughs, a TikTok-like short-form video interface within the Netflix app with snippets from Netflix's content catalog. 
• The interface is akin to TikTok or Instagram Reels. Users can add shows to their watch later list. 
• The app contains snippets from shows like Big Mouth and stand up specials from comedians like Jerry Seinfeld. 

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Bytedance Is Working On A Clubhouse Clone In China

What Happened?

• TikTok’s parent company ByteDance is working on a Clubhouse competitor for China, where Clubhouse has been banned since early February. 
• This has led to a wave of companies building Clubhouse competitors that comply with stricter content moderation and government oversight within the great firewall: Xiaomi’s Mi Talk is currently in invite-only beta. Another one is Lizhi’s Zhiya which has been launched in 2018. 

Influencer Agency Fohr Launches A Platform Connecting Brands With Creators  

What Happened?

• Influencer marketing agency Fohr is helping brands connect with influencers through their ‘Ambassador Management Platform.’ 
• They help brands build a platform which is akin to a human resources ‘Careers’ portal that influencers can use to apply for prospective partnership opportunities.  
• It is currently being used by brands like Costco, American Eagle, Sephora, and others. 

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Snapchat Is Focussing On Small Businesses For Advertising Revenue

What Happened?

• Snapchat is partnering with Gannett, a publication used by 10,000 small businesses to advertise their products and services. Through the partnership, Gannett will help these small businesses advertise on Snapchat. 
• It’s important to note that Snapchat does not permit creators to post sponsored content through its Spotlight program. 

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TikTok Is Adding An Interactive Q&A Feature

What Happened? 

• TikTok is adding a Q&A feature that lets fans mark their comments as questions, which creators can respond to through text or a video. 
• The feature is available for livestreams as well as regular posts. 

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Charli D’Amelio Is Collaborating With Bracelet Brand Pura Vida

What Happened?

• Celebrity creator Charli D’Amelio is partnering with Pura Vida, a California-based brand that manufactures string and charm bracelets. The promotional campaign involves a #ShowUsYourHappy challenge on TikTok. 
• Currently, Charli has 109 million followers on TikTok and her endorsements have proven to be powerful. 

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Coursera Made $293.5M In Revenue and $67M In Net Losses in 2020 

What Happened? 

• Coursera’s recent S-1 filing gives us a chance to observe the economics of the edtech boom. The company recorded a revenue of $293.5 million, a 59% increase since last year. However, it’s losses (calculated on an EBITDA basis) were $39.8 million, compared to $26.9 million last year. 

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Clubhouse Media Group Is Acquiring Popular Meme Aggregator ‘The Tinder Blog’

What Happened? 

• The Tinder Blog, a popular meme account on Instagram with 4.2 million followers, is being acquired by Clubhouse Media Group, an influencer marketing agency. 

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Passion Economy Financings: 

• Looped, a platform enabling interactive live events, recently raised $7.7 million. The platform has sold 300,000 tickets for events hosted by 1000 creators. Some of them include: Billie Eilish, Shawn Mendes, BTS, and other celebrities. 
• Hopin, a virtual events platform, recently raised a $400 million Series C funding round led by Andreessen Horowitz and General Catalyst. The platform is valued at $5.65 billion. Currently, the platform has an annual recurring revenue (ARR) of $70 million. 
• Elenas, a Colombian social commerce platform raised a $6 million Series A funding round led by Leo Capital, FJ Labs, Alpha4 Ventures, and Meesho. The platform has seen an uptick in sellers who are looking for an additional revenue stream because of pandemic induced layoffs. It has paid out $7 million to its sellers to-date. 
• Maestro, a platform that offers tools for creators to monetise their livestreams, recently raised a $15 million funding round led by NetEase and Sony Music Entertainment. The platform has helped celebrities like Katy Perry, Post Malone, Billie Eilish, and others facilitate $5 million in sales by embedding monetisation features in their livestreams.