Elementor #3035

So you want to be a music mogul:Hi there! I'm Cherie Hu — creator and owner of Water & Music, a newsletter, podcast and membership dedicated to unpacking big ideas and trends in music and technology. I'm also a freelance journalist who has written for Billboard, NPR Music, Forbes, Music Business Worldwide, Pitchfork and many other publications.As someone who has been covering the intersection of music, tech and business for the past five years, I'm a big fan of Dan's perspective on the dynamic and fast-moving hip-hop landscape, and have learned a lot from his writing on Trapital. I got to interview him for my podcast about the nexus of hip-hop and venture capital last March, and am super excited that we're working together again with this takeover!Today, Dan and I are sharing our perspective on the concept of “fantasy record labels.” For the uninitiated: Fantasy sports — in which viewers role-play as team coaches, assemble imaginary teams of their favorite athletes for a given sport and then compete in a league against other such teams based on these athletes’ real-life statistical performance — generate billions of dollars in sales and entry fees every year, and have transformed the culture around football, baseball, basketball and several other major sports.Some entrepreneurs are now making the case that the music industry could benefit from something similar for the recorded-music sector. Under a “fantasy label” model, fans could assemble imaginary label rosters of their favorite artists, and earn points for having the best-performing roster in real life based on a variety of metrics pulled from streaming and social platforms.No actual recording contracts would be inked; instead, the fantasy-label ecosystem would act as a sort of secondary market whereby fans and players earned virtual rewards from the tech platforms hosting the contests, rather than from the artists themselves. Those rewards could then be exchanged for physical goods such as music merchandise, or experiential goods such as meet-and-greets. And similar to sports, the fantasy-label experience could let music fans experience even just the surface level of being a corner-office record executive, representing and advocating for the world’s top talent.A few examples of fantasy-label apps out there today: FanLabel, based in Michigan, has raised $5.8M in financing to date and has all major labels on board as stakeholders. Artistory, based in Massachusetts, is also working on its own fantasy-label setup, known for now as Labl. And Fantasy Music Manager, based in Norway, has collaborated with several major festivals and music competitions in the country, including by:Larm, Øya Festival and the Melodi Grand Prix.The concept of a fantasy label is at least a decade old. One little-known fact about Next Big Sound — the well-known music-data platform that Pandora acquired five years ago — is that it actually started out in 2009 as an app for fantasy labels, one of the first of its kind. Focusing on new and unsigned acts, the platform attracted around 2,000 users within four months. But it didn’t gain much more traction after that, triggering a pivot to its now era-defining B2B offering of predictive data analytics to music-industry professionals.Why has no fantasy-label platform risen to mainstream popularity ever since, despite the concept’s inherent glamor and ample development activity from tech founders? I want to address this question in two parts. First, I’ll discuss the wider commercial and philosophical context of fantasy sports, and why there’s both an opportunity and an immense challenge in translating that context to music. Then, I’ll dive into the concrete mechanics of how some fantasy-label experiences work today, and why execution has historically been so difficult to pull off.Why fantasy music isn’t just another fantasy sportThe first fantasy sports leagues were founded in the 1960s, and fantasy sports at large have since expanded into a multibillion-dollar market with roughly 6% of the U.S. adult population participating in a given year, according to Nielsen. The most popular daily fantasy-sports platforms today, like FanDuel and DraftKings, each generate at least $10 million in annual revenue (they pull in many times more money in player entrance fees, but end up giving most of it away as prizes for winners).In contrast, the concept of a fantasy record label has emerged only in the past decade or so, and has generated virtually no revenue to date. And the appeal of the fantasy-label concept in 2020 may arguably be less about encouraging competition among artists, and more about strengthening fan engagement.In my mind, fantasy labels comprise part of a niche, but expanding, ecosystem of apps that try to give fans a tangible upside in their favorite artists’ successes. Other kinds of offerings within this ecosystem include artist-oriented blockchain and cryptocurrency startups, like Fanbase and Vezt; open platforms for buying stakes in artists’ future royalties, like Corite and Stampede Live; and secondary markets for trading “shares” in artists and songs, like Valyou X and the now-shuttered TastemakerX.Building a successful fantasy-label platform isn’t quite as simple as copying and pasting what’s already worked in the world of fantasy sports. There are two key differences between how fantasy sports and fantasy labels work that are reflected in their execution.The first difference is the transparency of the mechanisms by which real-world sports and music “games” play out. One potential reason why fantasy sports have grown substantially in recent years is that they provide a vast swath of observable, quantifiable and public data around which everyday players can strategize.In fact, a recent study in the Society for Industrial and Applied Mathematics Review suggested that success in fantasy sports relies more on skill than on luck, as the most seasoned players have deep expertise in sports statistics and in the effects of factors like injuries and even the weather on team and player performance. Moreover, in most sports games, skill and teamwork — which, again, are observable and measurable by the public — play a more prominent role in determining the final score than commercial incentives do.The mainstream music industry is the complete opposite — in that opaque, behind-the-scenes politics and finances almost always outweigh any notion of “talent” or “skill” in determining an artist’s commercial success. Yes, artists’ streaming, sales and social metrics are accessible to any consumer, but not every artist has access to the same editorial gatekeepers, top-dollar collaborators or marketing budgets. Those kinds of factors can make or break the growth of a given album or song even more than surface-level consumption data, but have never been incorporated into fantasy-label calculations because that data just isn’t available at scale. (As some have pointed out, this is a crucial difference between the music and film industries, the latter of which makes the size of pre-marketing production budgets available to the public for all mainstream titles.)That said, if a fantasy-label platform focuses on “signing” emerging artists without significant budgets behind them, fans can influence the outcome much more easily. Herein lies the second conceptual difference between fantasy sports and music: the extent to which fans are detached from the product being speculated.For the most part, the influence between fantasy sports and real-life sports tournaments is one-directional: While the results of actual sports games directly influence those of fantasy sports contests by definition, the other direction is not true. Athletes and teams will play games the way they want to play them (or, hopefully, the way they’re coached), regardless of how the market wants them to be ranked.In contrast, it’s easier for fans to have a role in determining the outcome of a fantasy label contest, especially for emerging or unknown artists, because it’s just a matter of clicking a button and streaming. Unlike a sports game, the product on which fans are betting — namely, an artist or song — is accessible and shareable by practically anyone with an Internet connection. This proximity to influence can be good or bad, depending on whom you ask (more on that later).The problem of commodifying artists and defining successAdjacent to the music industry’s relative lack of transparency for fans and consumers is a more philosophical conundrum on the artist side: defining “success” in the first place.One core question that any fantasy-label platform needs to address in its product is how to measure and standardize the success of a given artist, let alone for a given fan-assembled label roster. This can be challenging, as vastly different artists will show up at the top of a commercial chart depending on what metrics or formats are being tracked.For instance, according to Nielsen Music, rappers dominated the top streaming charts of the 2010s, but were nowhere to be found on the decade’s top-10 radio charts. Given this situation, a fantasy-label platform that measures only streaming metrics would inherently alienate country and rock, which lag behind on streaming but perform more strongly on album sales and radio airplay than almost any other genre. In addition, given how fickle the music business is, fantasy labels that track artists’ performance week-by-week would yield different rankings from those that took a more longitudinal approach, e.g. measuring artists’ growth over the course of a year or even several years.In general, one of the biggest concerns from artists about the fantasy-label model is that it frames music as competitive, commodified and absolute in its value — when, in reality, the value fans get from their favorite artists is often more emotional, cultural and intangible. Reducing a song’s value to data-driven marketplace logic can feel especially devastating if that product was initially supposed to represent an artist’s vulnerable emotional state or grander creative vision, which is difficult to capture in a formula or algorithm.Commentators have voiced concerns about gamifying and commodifying human labor in the world of fantasy sports as well. As Christina Similien wrote for Ebony, the commodified athlete “does not exist once the game is over … When owners can no longer profit off them, they are discarded, traded for less than their worth and forgotten about.”The user experience: Contests, virtual rewards and promotionAll that being said, we’re still in the early stages of fantasy labels gaining any exposure in the first place, so the current user experiences out there are more benign.In Next Big Sound’s early fantasy-label days, users — or “moguls,” as the company called them — could show their approval for their favorite emerging artists by “signing” them to a roster of up to 10 acts of their choice. Today, FanLabel provides a similar experience: Through limited-time “contests,” fans can vote for the artists and songs that they think will be most successful over a given time period, then earn “virtual royalties” if they end up winning. Those virtual dollars can be exchanged for music merchandise, and soon for concert tickets and more intimate VIP experiences with artists. The ability for both fans and artists to create their own leagues and contests on the platform is also on the way.[Caption: Screenshots from the FanLabel app, taken by Cherie Hu on January 15, 2020.]“Once you ‘sign’ an artist or song to your label, we immediately provide you with a ‘promote’ button and issue additional virtual royalties to you for promoting that artist or record,” Jeff Sloan, CEO of FanLabel, told me in an interview. In fact, in his eyes, fans influencing the outcome of these contests is a good thing, to the point where it’s literally built into the product. “Candidly speaking, it’s not going to influence artists’ streams that much if you’re pitting Drake against Ariana Grande,” said Sloan. “But if we have contests featuring more local or emerging artists, that’s where it could have an impact.”Sloan also claims that the benefits of deeper fan engagement through fantasy labels should outweigh any concerns about artists becoming too commodified. “This is a new form of music discovery that’s driven by micro-influencers,” he said. “It’s social sharing with a real purpose, and for artists it’s another channel for them to engage directly with the consuming public.”Fantasy Music Manager, which was developed by a Norwegian software studio and marketing agency, offers a channel for fans to express support for their favorite artists at music festivals and other events. The app has partnered with a number of Norwegian festivals so far, including the Øya Festival and by:Larm, the latter of which got more than 2,500 unique players to sign up for the fantasy experience and vote on their favorite performers.If you download the Fantasy Music Manager app today, though, you’ll notice that there’s only one contest available: a fantasy version of the Norwegian singing competition Melodi Grand Prix (MGP), which is hosted annually on public broadcaster Norsk Rikskringkasting (NRK) and whose winner represents Norway in the annual Eurovision Song Contest.As you’re reading this, MGP is currently in its semifinal round, with Semifinal 2 taking place this Saturday, January 18. Each semifinal consists of two contestants battling against each other in a duel. Users on the Fantasy Music Manager app can pick which contestant they think will win the duels; view each singer’s stats around Spotify popularity, social-media presence and public reception of their previous live performances in the competition; and earn points for choosing the right winners in each round, climbing up the ranks on a global leaderboard. There are also options for users to pick which contestants should win superlatives like “best voice,” “best stage performance,” “best outfit” or even “most out of tune.” As depicted in the screenshots below, there are nearly 1,000 players signed up to compete in the fantasy MGP semifinal this weekend.[Caption: Screenshots from the Fantasy Music Manager app, taken by Cherie Hu on January 16, 2020.]To me, it makes more sense to build a fantasy-type experience around music festivals or competitions like The Voice, American Idol and Rhythm + Flow than around the general phenomenon of artists’ success in the wider music industry. Singing competitions are similar to sports games, in that they have a clear ending and a clear winner decided by a process of elimination of a curated selection of contestants over time. Festivals, while not incorporating this process of elimination, also have a natural end point as well as a limited roster of artists, making it logistically easier to organize contests.Some people argue that this model could even revitalize and service the music-media sector, especially in the context of the dwindling market for concert and album reviews. As Simen Idsøe Eidsvåg, creative director at Sesong 1 (the marketing agency behind the Fantasy Music Manager app), wrote in an op-ed for the Norwegian newspaper Dagens Næringsliv: “At a time when newspapers and blogs are stepping down on reviews, we chose to review every single concert at by:Larm.”Caveat: Who really wants to build a fantasy label?It turns out, however, that the biggest bottleneck to fantasy labels growing this year might be the same as for any consumer-facing software app: the market, not the artists.Spending time to dig through a selection of artists and assemble one’s own “ideal” label roster is still a rather niche behavior among music consumers, assuming that that behavior would even exist on its own. “Over and over again, people say they want to hear new and emerging artists, but the listening data across Spotify, YouTube and Pandora shows that a vanishingly small percentage of listeners want to wade through a lot of music that isn’t already curated for them,” Alex White, co-founder of Next Big Sound and VP, Content & Programming at Pandora, told me in an interview. “It’s one of the most contradictory parts of building a consumer app in music, and it’s often hard for the music industry to think clearly about the general population’s passion for emerging acts.”That said, Sloan claims that 90% of FanLabel’s users are not superfans, or even avid fans of any artist in general. “We’re targeting the broader public interest with these contests, and want to keep it light, digestible, fun and not overly serious,” he told me.There’s also a potential growth obstacle in the fact that the value artists and labels get from a fantasy-label experience is primarily market research and fan engagement anyway, which already exists in multiple forms outside a new fantasy software app. In fact, the argument could be made that fans already do wield enormous, measurable influence on the social and tech platforms that currently exist, and that it may be worth trying to glean more insights from the way people already interact with music online, instead of trying to instigate a new behavior from scratch.“What I had been most interested in with the fantasy-label concept was the concept of collective intelligence and the wisdom of crowds,” said White. “Imagine if you had one million ‘A&Rs’ around the country or the world supporting the artists they thought were going to be big, and then those A&Rs ended up becoming more powerful than the biggest record labels in the world.”Fantasy labels are just one of several potential ways to identify these decentralized music tastemakers. While that goal of activating influencers and tastemakers is certainly relevant and important for the music industry’s future, the specific application of fantasy-sports tactics to do the job has yet to be proven.----Thank you so much for reading! If you’re interested in following more of my thoughts on music, tech and business, you can subscribe to my newsletter Water & Music by clicking here. Here are some of the most popular Water & Music articles from the past year:Why are none of the top 10 music-video debuts in YouTube history from hip-hop artists?What COLORS and RCA Records can teach us about music merch campaignsThe state of music-tech startups, through the lens of its top investorsWhat Stem’s upheaval reveals about music distribution’s new “middle tier”Decoding 8tracks’ demise, and what it reveals about the state of music streamingI’m also on Twitter, Instagram and LinkedIn. Cheers! :)