Switched on Pop - Taylor Swift and the music industry's next $20

Episode Date: January 20, 2023

Streaming feels like it's both at its height and on a precipice. Musicians are fed up at getting paid fractions of a penny, and the whole business model seems precarious. Switched On Pop co-host Charlie Harding was talking about the challenges for streaming future with my friend Nilay Patel, editor in chief of The Verge and host the podcast Decoder - a show about big ideas. And they taped a conversation about what’s next for streaming through the case study of Taylor Swift who has deftly navigated the transition from CDs to streaming, and whose era tour may mark the end of an era in music.  Learn more about your ad choices. Visit podcastchoices.com/adchoices

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So many musicians are fed up with the music streaming model, getting fractions of a fraction of a penny. And the whole business model just seems precarious. I was talking about this idea with my friend Nilai Patel. He's the editor-in-chief of The Verge and host of the podcast Decoder. It's a show about big ideas. And so we taped a conversation about what's going on in music streaming through the case study of Taylor Swift, who has definitely navigated the transition from the CD era into streaming and whose era tour may mark the end of an era in music. Here's my chat with Neelai on Decoder. I hope you enjoy it.

Hello and welcome to Decoder. I'm Nilai Patel, editor-in-chief of The Verge, and Decoder is my show about big ideas and other problems. So, I have this theory about the music industry. I think music is usually about five years ahead of the rest of the media in terms of its relationship to tech, whether that's new formats based on new technology 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 it is, because the music industry just moves that fast. I was talking about this with my friend Charlie Harding. He co-hosts the podcast Switched on Pop, and he said something really interesting to me. He thinks the Taylor Swift Era's 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. Charlie's theory is that Taylor is the one artist who has managed to seamlessly and successfully

transition between the different eras of the music business. She started out selling CDs like everyone else, and she fought against the streaming model in the mid-2010s. But now she's not only embrace streaming, but she's thriving in it, And she's one of the few artists committed to her music itself being valuable, not just as marketing for a universe of other products. But of course, she still has that universe of other products, whether that's final records or tickets to the ERAs tour. So Charlie and I are going to try walking through a brief history of the modern music business

and its ever-changing business models using Taylor Swift as a case study. You can map her big moves against the business of music over time, and then we can try to see if this really is the end of an era. And maybe more importantly, we can 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. As Charlie and I were talking, I realize the easiest way to think about the music industry is that it's permanently trying to find something to sell you for 20 bucks. That used to be the music itself on CDs for 20 bucks. Then it was all-access streaming for 20 bucks a month. Then it was merch. Maybe one day it'll be NFTs. It won't be NFTs. Who knows?

But the trick is finding the next 20 bucks because right now, the music itself is basically free. And that's pretty weird. And maybe that's the thing that needs to change. Okay. Charlie Harding from Switch on Pop. Here we go. 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 heirs of the music industry.

when they have begun, when they have ended, because she's inhabited a lot of them in a way that many artists have not and been able to go with the changes in a way that many artists have not. She's unusual in that the length of her career spans from the end of the CD era into the streaming era,

and she's in many ways at her height. She's still breaking records on charts. So, yeah, her career definitely is a good case study across the last almost 20 years. All right. So I think we have to just do 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. Amazing songwriter. Two, she is also an incredible capitalist money machine. And sometimes when you talk about that thing, it is presumed that you don't think she's also a good musician. I think she's a great musician. She's also just very good at making money.

Very savvy, yes. And also unusual because a lot of her peers to go off and make money do so primarily through means outside of music, all of the extra musical things. You know, start fashion lines, whatever it might be, restaurant chains. She's committed hard to the songwriting and music thing. And this next tour is set to supposedly maybe make her a billionaire. And that piece of it is, I think, the thing that makes her the most unusual, right? It's hard to think of another artist that actually, at this point, monetizes music itself as the primary richest revenue stream. I don't have insight into her taxes.

So obviously, she does, she's done a movie. She's got brand endorsements. Like everybody else, she's got all those things. But she leans the hardest into music. And certainly touring is doing really well for her. So that's the other thing I want to stipulate. The thing that is shocking to me, and if you go back and listen to other Decoder conversations like we had with Steve Boom, who runs out of Amazon music, it's shocking to me over and over again, how undervalued music itself is. So you go see an Avengers movie.

You might spend $20 on a ticket plus a popcorn, and then you might watch it on streaming, and you're paying an enormous amount of money for streaming services. or you might buy a movie on iTunes for $20 or $30. Music, the expectation is that it is effectively free. And even your Spotify monthly fee or your Apple Music monthly fee is cheaper than Netflix or HBO Max or whatever. 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 to me, where you expect more, you pay less and the artists are openly struggling is the most. usual thing about music, and then Taylor Shoeff transcends it all.

The marketplace of music is strange in that the consumers, I think, are pretty happy. The distributors are doing great, and the suppliers are extremely unhappy in general. And by suppliers, you mean the musicians themselves. I mean the musicians, yeah. There's no shortage of stories of artists, musicians, songwriters being short-shifted throughout the entirety of the music industry. It's not the nicest ocean to swim in. But at the current moment, yeah, there's a lot of unrest about how much people are getting paid,

especially when the average rate per song and streaming is declining for artists and has been for many years when 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 where to get music. You had to go to the store and buy a physical copy on a CD of a song. And that made everybody rich. And there were some weirdness with it, but the artist 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? So there was some that was similar. Now we have three big labels. Then we had four big labels. EMI eventually got Papa Universal. But, you know, so a lot of consolidation in the label side.

But obviously the big difference is that the whole industry was a physical goods business, as you said, buying CDs in stores. And now we 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. And so you had a whole different set of distributors, given that there was physical goods, and most of them have shut down. We no longer have our Virgin Megastore selling all of our CDs to us, our Tower Records. These companies have been replaced by technology distributors, Spotify, and then all of our big favorite tech overlords, Apple, Google, Amazon. Yeah, they are now the distributors of music. So there's some which is similar, especially the labels, they have sustained, but how we interacted with music and who distributed that music has radically changed.

So Taylor Schiff puts out her first CD in 2006. We're five years into the iTunes era at that point. The iPod is out. Apple is saying Rip Mix Burn in commercials. The industry is very mad at Apple for this. But, you know, 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 under their commercials. Yeah. It's an interesting era to launch a music career because it really is towards the death of the CD era. It's not at the low, but it is dropping quickly. 1999 was the height. And yeah, record profits are declining. And yet CD sales were still very, very large at that point. They were the dominant form of revenue.

So Taylor puts out her first record. She wants people to listen to it. She's got to go on radio and go on tour. And that is all promotion for you to go spend $12 or $13 to buy a CD or to spend $99 in the iTunes store to buy a song. How much of that money went to her as the artist? In general, I don't think we actually, we know. But if you're an artist at time, how much money is coming to you? Well, if you're on a label, you're going to be giving the majority of any revenue from that CD back to the label, as is still done today. you're going to get a small proportion, 20% or less. And if you're a songwriter, Taylor Swift is a songwriter,

you're also going to get a cut of the publishing royalties. And the publishing royalties were smaller then, but you got publishing royalties for every single song, whereas today you only get publishing royalties if someone actually listens to a song. So the royalty rates were necessarily better, and it just depends on the structure of any given person deal, but things were much more assured.

There was maybe a simplicity, a clarity to how the business worked. And if you contributed to an album, you got paid out for someone buying that whole thing, even if you only contributed one song to it. A lot of songwriters like that model. If you're an indie artist, it's probably very challenging because distribution was more challenging then, hard to get national or global distribution without a label. You obviously kept more of your reverend. news then and always if you if you own your music you're always better off but it was much more it was

much more challenging as an independent then so obviously you know young taylor swift is going to want to have a great record deal so that her music can end up in every single store so it can end up in your car stereo and so you kind of understand the value exchange there even if the label's taking too much money i think every artist has always thought their label takes too much money always but you're the artist your job is to show up right perhaps and perform songs work on your image the label's job is to promote you to manufacture CDs, truck those CDs to stores all over the country, manage their relationships with physical media distributed. It's very simple.

Yeah. Yeah. It's like a, they're a manufacturer, right, in a way that a label today is not a manufacturer, right? And that I'm just, what I'm getting at is they made things. They made physical things. A bunch of like tower records managers got to go to parties. So they would put your CDs at the front. of the store and so the back of the store. And there was some amount of value that you could see

as an artist, okay, they're working to sell my product. Right. Because they have a financial stake in the product, too. You could walk in the store and you could see that my thing was the most billboarded and you're seeing. Yeah, absolutely. There was a clarity. It just worked. It didn't work for everybody. Yeah. But especially for the biggest artists, it worked really well. But there are still cracks in the model, right? There's still major disputes between artists and the 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. Sure.

I mean, people are always going to be upset about their contracts and music because you could dispute me. And some of your listeners are going to dispute me. But music is not a technology business. Music is a art creation business, content creation business. I hate that word, but let's just say it. And the way you make more money is often either by getting your stuff to more people or being some middleman who gets a better, stronger contract. And so a lot of the best business people in this business are able to secure the most advantageous contracts, often very exploitative ones.

And there were no shortage of those throughout the entire history of recorded music. And all those folks who had secured really great deals and contracts that were making lots of money, they 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. I was one of those listeners. I was like, Napster is the future of the industry. And I think underneath that, right,

is a recognition from the listener that your relationship is with the artist. And I think that middle step of, we need to print CDs, we need to promote CDs, we need to sell CDs, We need to have relationship with retailers in order to have the CDs, even in the stores. That always seemed like, okay, this is a big chunk of revenue that should naturally go to the artist.

But instead, and this is us coming to the kind of the next era, instead all of that revenue went to zero. The industry crashed out because of piracy. Yeah, there was a nice moment where ringtones started to cushion some of the revenues. Basically, there was a moment where, yes, basically CDs tanked because everybody realized, I want to listen to all the music and I don't really want to pay for it. These are expensive, you know, from a listener point of view, no wonder we were unhappy. I was very budget constrained at that point in my life. I used to count the number of songs on an album to think about where am I going to put my money. It's like, if you got 15 songs, that's a lot more than the nine song record.

I'm not going to buy the nine song record because CDs at my life. local best spot were very expensive. And so, yeah, it's no wonder there was a better option. And to be fair, the big knock on the music industry during the CD era was that CDs were full of filler tracks, right, in order to make them look like a better

value than they were. Because they'd raised the prices when they went from vinyl and cassettes to CDs, and then they were more expensive. And so bands would have one hit single and then like a CD full of crap. And I could probably name a bunch of 90s. I think we're,

already at risk with the Taylor Swift fans. I don't have to meet a bunch of, like, 90s alternative band stands coming after us. You can throw a dart at like your average sort of radio smash 90s act, and their album is full of a bunch of filler. Yeah. That era ends, right? So we're no longer making all the money on CDs. The revenue for the industry has crashed because of piracy. For some reason, it's really hard to get a ringtone on a phone, so people will pay 99 cents for a ringtone.

That turns into a weird, interesting. institutional revenue moment for the industry. There's like a 10-year dark era, middle ages, where the industry is searching for the next thing. And ringtones was one of them. Any money they can get. I just wanted to before he completely turned to streaming, the revenue model for touring and all the other stuff that artists do was inverted at this time, right? You went on tour to promote your CD sales.

You gave, you let radio stations in this country play the music effectively for free because that would lead to CD sales. And that's all flipped now. Well, yeah, I mean, artist performers don't get paid off with radio streams unless they're a songwriter. They still don't. It's an unusual part of the licensing arrangement in the United States, which is not common elsewhere. But yeah, you were promoting the thing that you could sell. And now we live in a world where you make the thing and give it away basically for free. so that you hope that people will come and join you on tour where you're going to make all your money.

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

We'll get into how streamers swooped in and reinvented the industry and how Taylor Swift fought back after the break. Maria, you have a podcast now and you need to start acting like it. What's the first step as a podcaster? Well, you have to ask lots of questions. I'm Maria Sharpova, and I'm hosting a new podcast called Pretty Tough. Every week, I'm sitting down with trailblazing women at the top of their game to discuss ambition, work ethic, and the ups and downs that come on the path to achieving greatness. I have a few pretty tough questions for you. Okay.

Ready? Do not sugarcoat something for me. No, no. We'll dive into their stories and get valuable insights from top executives, actors, entrepreneurs, and other individuals who have inspired me so much in my own journey. Pretty tough is your front row seat to the women who have demonstrated the power in being unapologetic in their pursuits. I hope you'll join us. New episodes drop Wednesdays on YouTube or in your favorite podcast app. And we're back. 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 held her albums back from streaming at times. She actually removed her entire back catalog from Spotify. Spotify arrives internationally in 2006. Famously, Spotify is a response to piracy, especially in Europe and European countries. Piracy has completely destroyed the industry. And the idea is 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,

and just like you're going to have to deal with it. So Spotify launches in Europe, what they sell you is convenience. You pay them the fee. 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 are some smaller versions of this business that launch in the United States. RIP RDO, which was a version of favorite.

It's a long con. Spotify launches in the United States in 2011. How did Spotify, that moment. Did it seem like the future? Like, 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. I mean, you don't have a streaming service unless you have all the music. And so

critically, Spotify is deeply linked to the major labels, right? They, get early options in Spotify. They get guaranteed payments per year early on so that, you know, they're certain that many millions of dollars are going to come into their coffers, even if no one listens to this 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 all, 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, just 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, you know, live audio experiences. 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. No, we'll find out. I know there's still awesome experiments out there. But it seems like it might have been a little blip in the pan when everyone was board at their house and the worst parts of lockdown. So people's behavior was going in one direction, and that was, I want all the stuff, just give it to me. Now, obviously, there's always going to be collectors, and you can serve them too, by the way. I was a collector. I didn't want to rent. I wasn't into the streaming thing. I wasn't going to make playlist. I wanted all of my music that I've ever

had. And so, you know, 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 you could have them 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. And so 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. We're using her career to chart us through this era. She is putting out albums in this era, right? Fearless Speak Now. They come out in this era. era in this kind of time of big disruption, early streaming with people are still buying records. Do you think she as an artist understands that this change is coming and she's like changing

her strategy? Because we come all the way to now in midnight and like she's a master of marketing an album. Yeah. But at that time, like nobody knew it was going to happen. Is she following sort of the standard playbook or she evolving? Well, in the 2010s, with each record release, there seems to be a major dispute with the streamers. She wants to get better terms. She's able to use her clout to bring a lot of attention to areas where other artists are also unhappy about some of these streaming arrangements.

So, for example, for Taylor, a lot of her early records are released on CD. But by Red, you know, there's a lot of pressure to put things on streaming. And she says, no, I'm not going to put it up on Spotify. That's a sea change moment, right, for the industry. Because, until that second, streaming was this other thing that was happening. Everyone was putting their albums on streaming. People were having a great time exploring Spotify. And then she's like,

I've got a new record. And 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 that... Yeah, Metall, famously unhappy about the internet. But Adele, Coldplay, right? In the early 2010s,

artists are saying, hey, we're not down with this. Like, the economics of this don't make sense for us. Because it used to be that people spend 20 bucks an album. And if we sold a lot of albums, we made a lot of money. And now it's listens over time. And if a lot of people listen to our music, we're not sure how much we get paid. Yeah. Yeah, yeah. And she's acting as a voice for a number of quite unhappy folks at this time. The next decade of her life is basically one battle after another with streamers trying to make things better, right? Like in 2014, she removes her entire back catalog of music from Spotify. She's upset about the low streaming rates that you're talking about.

It's not clear who listen to it and how and it devalues fans and there's all kinds of ways that people are very unhappy with how people get paid out. And over time, as more music ends up on Spotify and people diversify their listening, there's more competition. The supply of music is growing, the overall proportion of revenues per artist per song has been declining. And so she's like, I'm out of here. I'm pulling my back catalog. And that's bold because by 2014, the wins are in the sales of streaming, right? It's just three years later that streaming becomes the predominant revenue source for recordings. And that revenue is going to the labels, not the artists. Well, you know, this is the thing. It's like, people want to be often mad at,

at Spotify, and there's 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 rights holders is a stand-in for, yeah, mostly labels. And depending on your deal with your label, you might not be getting very, you're seeing fractions of a fraction of a penny by the time it gets to you. So in 2014, 2017, this is the kind of the height of Taylor's fight with the streamers. She says Apple, it's a big fight with Apple Music, which wants to give Apple Music away for free for three months to new subscribers in order to build the user base. She's like, I'm not doing that.

I'm off. She publishes a watch. But here's the thing. That is the model of streaming. And it's that people don't get that it is this weird pooling model, right? Like Apple is basically saying, listen, in order to launch. 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. But that doesn't really make sense when you're like, yeah, but I sold you the thing now. Like they're listening to it now, so I should be getting paid now. Especially artists who also then finally actually 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. Like, no, I don't like that. But that is more or less how the streaming model works, is this.

Most of them are pooling. Some of them are doing pay per stream, but most are not. She doesn't want to participate in that model, and it's really easy to say to listeners, hey, this thing doesn't make any sense. But that is the business model that we've 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 the way I think most people think their streaming subscription works. I pay Spotify 15 bucks a month, and at the end of the month, Spotify looks at all the stuff I listen to and says, okay, you will essentially.

to Taylor Swift $10 and Guns and Roses $5, and it takes my $15, and it gives it to those artists in proportion to how I listen to music that month. Right. But that is not at all how it works. That would be nice and simple, but no, it doesn't work that way. What's going to happen is your subscription is going to get pooled together with all of the other subscriptions and all of the other listeners and all of their listening. And what Spotify is going to figure out is how much money came in from all of those subscriptions

every single time period. And they're going to take that. They're going to divide it by all of the listening of everybody, such that. Taylor Swift is going to get paid based on, does she command the most amount of listening on Spotify overall? And, you know, Eli, I know you love guns and roses. They're past their prime. They're past their prime. And, you know, say it's just you and three other people.

I'm not being fair to guns and roses, but just say it's you and three other people listening to guns and roses. You're listening. It's not going to give them each, you know, that nice $5. They're just not getting any streams and nobody, by the end when it's all divided out, very little revenue coming to guns and roses. I'm so sorry. So if there's a, let's say Spotify has 100 subscribers, make it easy. And I pay my $15 in and I spend 100% of my time listening to Guns and Roses. And the other 99 subscribers spend 100% of their time listening to Taylor Swift.

Guns and Roses gets $0.00. No, it's not that simple, Nealai. It's still not that simple. No, because it's the total amount of listening. Say you only listen to Guns and Roses for, I don't know, an hour that month. And everybody else listens to Taylor for like 24-7 the entire time. You have to think about it's not just which artist that I listen to is how much did you listen. And so for all the other people who are listening to playlists and just keep music on in the background forever, those people are, you know, potentially diluting the listening of fans who only listen really closely to one artist, but they only do it 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, you buy the CD. you got a bad record contract or not, but like I spent $20 and the artist and their label are going to fight over how much 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. It's great for fandoms to make sure that their money is really going to the people that they're listening to.

But for Spotify and all the other streamers, it's not great because it means you cannot 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? All of a sudden, if we had a pay per stream model, Spotify has to pay out seven times more during that winter season. And so they can't control their costs. Instead, what they do is they give out a proportion of their revenues. And they don't know how much listening is going to have happened during that time. And they don't know exactly how much revenue there's going to be in any given time period either.

So 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% of all the listening that happens on Spotify. And so we can predict our, you know, from the labels perspective, they know what kind of money they're going to bring in,

hopefully each quarter. But yeah, from the listener's point of view and the artist's point of view, you're like, this doesn't make any sense. Right, because 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. And I am curious and skeptical whether or not that simple or not that simple or

model could work. Because you said at the beginning here that, like, streaming feels like it's on the rocks. I mean, we've seen the massive devaluation of Netflix. We have seen tech stocks everywhere, struggling. But 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 just the natural business cycle of streaming.

And 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. Right? You know, like, people want higher payouts per stream. They want streams that are fair to artists, both that they actually are connected to your subscription. But the whole model feels utterly precarious because right now it feels like what needs to happen is subscription prices probably need to go up. There has to be massive cost cutting.

There has to be user growth and diversification of a business, which again, music is like, I don't know. like music's a tech business. AI tech companies, you know, come at me, fine, whatever. But it's not a tech business. And so that set of conditions is one in which it feels to me like we're on the precipice of a failed marketplace. So that's where we should come to now. Taylor's attempts to remake the music industry in the middle streaming period, you might call it,

all basically came to nothing. Maybe they came to a little more money for Taylor Swift, to more clout with the industry. But she withheld her new releases from Spotify. Now her news releases are on Spotify. She withheld her back catalog from Spotify and Apple Music. Now they're on Spotify and Apple Music. She got into a fight about Apple Music.

Now she's like one of the faces of Apple Music. Like at some point, she met the industry in the middle, probably on her terms. But even Taylor Swift could not get people to pay higher fees or subscribe to a music streaming service and pay for CDs over here. Eventually, she had to go where her listeners were. A lot of her actions have helped on the margins. She's in her contract negotiations with Universal, made sure that part of Universal's ownership with Spotify will eventually distribute out to artists if they were to sell it. Like, she's doing things that are pro artist, pro songwriter, but they are a bit more on the margins. Probably the most effective thing that she's done

is wage this ongoing war to raise awareness that, like, this. This whole thing's 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, you know, 20 years ago being like, I don't know if I should be doing this. Now, of course, it's legal now, but she has helped us question exactly how ethical it is when there is so much exploitation. So she's certainly raised awareness. But, yeah, all of her music's on the streaming platforms.

There's some bonus songs. You have to go buy a thing at a retailer still. Not all the music, but effectively all the music. Well, that's what she appears to have mastered, especially with Midnights and now this new tour, right? Is she is the centerpiece of actual demand from a very passionate fan base. And she, instead of pointing that fan base, that demand at merch or whatever it is, 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 set off a series of antitrust investigations into other Ticket Master's Monopoly, which is incredible. Right. Yeah. The question I have is like, so she's mastered sort of the album release cycle, right? She's got four versions of this album that make a clock. You got to go buy all four copies on vinyl. That's got to be very lucrative for her.

You still have the music on streaming. She's got a tour that everybody is dying to see. That's going to be very, very lucrative for her. Is the music on streaming? Is it still just marketing for that stuff? Or is that valuable to her now as well? Because when I say streaming's on the rocks, what I'm getting at is like that thing is still like 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's making sure that she's a rights holder, which is that she is trying to reclaim the right to all of her master recordings, which were sold, you know, without her permission by her former label. And her action has been to, well, I'm just going to re-record all my music. And hopefully my fans go and listen to my version versus the version that I don't own. Because, you know, as I said, if you are the rights holder, if you're the label, if you own the master recording,

there's a lot of money to be made. You can be paid out hundreds of millions, billions of dollars. There's no, there's no artist making billions of dollars as far as I'm aware through streaming. But that said, there certainly is 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 you own the majority of. Because then you're getting the full fraction of a penny rather than the tiny fraction of the penny. She certainly wants to own this asset both 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.

she's taking those actions. There's certainly the value of the music in advertising sync and you know, getting it synced in video and so on and whatnot. So 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, whether that's 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 just is, it's at a height,

but it's at a height that feels like can't keep going up. And when things can't keep going up in business cycles, you know, investors take note, disruptors take note. And there'll be something else at some other point, but 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, one, 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, it's still not the entire penny. Yeah. This whole episode actually started because our team was talking about Taylor and her masters, and 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 big dispute over her masters in 2019 and 2020 is another attempt for her to wrestle back control over her music and make more money from it. She's currently re-releasing all of her old albums. Taylor Swift's big dispute over her masters in 2019 and 2020, that's another attempt for her to wrestle back control over her music and make more money from 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 the big catalog sales we're seeing from artists like Neil Young and there's 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. Okay. Well, 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 and the music, the abstract concept of the song that anybody else could cover. And the master recording represents the

largest majority of the revenue and streaming, as it did in the physical goods era as well. And you want to own the most amount of that master recording as you possibly can, right? Now, here's the thing. If you're a music label, you're almost like a venture capitalist. Your job is going to make a ton of bets and hope that one of those funds all of the bets that fail and does so extremely well, it makes you a lot of money. And so what you do is you say, hey, I'm going to give you a little bit of advance, go make a record, you know, go make your little startup. And, you know, when it starts selling, we're going to take 90%. If it's anything like venture capital, it's that venture capital doesn't get as good terms as the music labels do.

There's no founder-friendly music labels out there. I don't think so. I mean, they would all say they are. And there are plenty of places where they deserve credit. In terms of their ownership stakes, no. of course not. It's, it's, you are entering a deal where you are hopefully successful and then funding all of the other things that are not successful. Like, that's usually the best outcome. And so if you are doing well later in your career, you might say 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, they'll listen to all of that music. And so many artists will do this. They will renegotiate their deals, they'll get better rights, so on and whatnot. In her case, she doesn't have any ability to do so, because, you know, because it's owned by a financial family fund that doesn't want to give it to her. And so she's not going to buy it. So she's just recreating it. And that's an age-old thing that so many different artists have done.

Oftentimes you can buy greatest hits records, and it's actually not the greatest hits. It's re-recordings of the greatest hits so that the person who got the 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. So this is nothing new. The greatest hits record is a really interesting example. Right. In the CD era, you want to buy a greatest hits record because it's all killer, no filler, right? Yes. It's just like all the best stuff. That's what I call music. Here we go. You can make an entire business of curation in that way. Inside of that, you might make some ancillary deals to do records or whatever. Taylor's, that's not what she's doing. She's just saying, here's speak now, Taylor's version. Off we go. And her fans have instant access. She's not asking them to buy the record again.

Right, right. And that to me is, like, fascinating that she's able to pull it off in that way, because there's no secondary transaction. There's just click on this one instead of that one, and her fans are all doing it. Well, it's both because she is putting out vinyl. Vinyl is a small but meaningfully growing share of the music revenue pie. And so she knows that super fans will buy not just vinyl, but the super deluxe vinyl version of the thing. and you get the collectors and the blah, blah, blah, blah, blah. And so, like, 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, right? Every single time that people do stream these songs, now she gets more of the share of that stream if they go and listen to Taylor's version. And this is just part of a much larger trend of the financialization of music catalogs. There are public funds now that you can invest in music publishing because many ways, would say that one of the things that streaming has done has created a situation where there are forecastable, projectable revenues that say, hey, this is how many people are listening to this music. They've been growing. They're listening in this kind of way. We can probably model some kind of churn based off of if you're listening to great music from the 50s and 60s, those fans aren't

going to stick around forever. And so your model, it's very dark. I'm sorry, but I'm sure it's in the models, right? It's like, how long is this fan going to last? And there's been a financialization of music catalogs. Many people are selling their catalogs for multiples of over 10 and are able to cash out back to sort of venture capital model. They're able to get them. They're able to exit. They're able to exit and say, hey, I got 200 million bucks for my entire music catalog. And some people want to be on either side of this. They want to exit or they actually believe in the system and they think that those revenues in the future are going to be very valuable. The question is, do we keep listening in this way? Best streaming keep on working. I don't mean to be a firebrand here and bet against the

I'm not, I don't think, I think betting against streaming is perhaps unwise, but it also does seem like given that every supplier at the moment, every musician is extremely unhappy, and it seems like prices need to go up, and it seems like, uh, this whole thing feels like a little bit on the edge. Uh, it's happening at, right, Warner discovery. It's happening at Netflix. I am openly curious. I do not say that with any sort of anything. There's, there's no darker cynicism there, but I'm really curious about whether or not, the reality of those forecastable revenues from licensing and music catalogs will play out. I just think that there has been 20 years of the streaming business. And is there going to be another 20? I don't know. So what I would not bet against is the Internet and the expectation that in particular an entire generation has not been raised with, that all the music is on YouTube. Right? I mean, you can't take that away.

You can't put that genie back in the bottle that just by Googling the name of the song, you can probably find a way to listen to it. Ish. I mean, just, I mean, it is important to note that the entire music catalog is not available. Like, if you want to listen to the most popular songs from the 1930s and 40s, something that I have to do in my job, oftentimes the only place to find them is from vinyl collectors who on YouTube, to your point, have uploaded.

themselves playing the vinyl. That'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. Like, Google does not organize the world's information and make it universally accessible. Microfeasches do that. There's 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 license. And then things just disappear and you no longer have them. there is so much music, even though there's more music than ever, there's so much historical music, which is not available. I think it's important to say that. That's really interesting to me because the thesis of this conversation is we've had 20 years of streaming and this model seems like it's teetering. And Spotify is the only major streamer that is not subsidized by a larger tech company. Like Apple music is going to be fine because the iPhone is fine. Amazon is going to, Amazon is going to be fine because Amazon is fine. YouTube is going to be fine because Google exists.

Spotify is to make it on its own. own and they have been pretty obvious, pretty explicit with their own investors that renting music from labels and then selling it for pennies is like not a great business model. And that's why they want to do podcasts. And that's why they have like original video. And they keep trying to get. They're not a music company anymore. Now they're an audio company. It's like if music was working, you could keep leaning harder into it. But it's not it's not the future of that business. I mean, 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.

You know, Microsoft has failed a million times. Where is Groove? Where is Zoom? Where is Xbox music? Like, it's very possible that someone might need this company because music, to your point, you can't bet against the internet. Like, as much as the streaming model may not be a good business, music, 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, to help them sell everything in cardboard boxes, whatever it might be. And so I'm not bidding against streaming. I'm not bidding 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 kind of miracle that I don't understand. Yeah. I think actually one thing that's very funny as I look back on covering tech for last 10 years is how much user growth these companies achieved just by launching in additional countries. And then when they ran out of countries, their growth stopped. Yeah, that's what I'm saying. You've got to find another planet for other reasons, unfortunately.

Many reasons to find another planet Elon. And the music industry obviously top of the list. And I've 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. Obviously, you know Spotify fund in Sweden. But your user growth in countries that have lower base income and people are more sensitivity to price fluctuations. It's just there is only so far you can go and you're not. not going to get the U.S. consumer everywhere you go around the world. It becomes harder and harder to eke more dollars out of the rest of the globe. And I also think the mathematics of the

model get really weird once you're talking about share of listening on a global basis. Yeah. 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. So, yeah, you don't, yeah, David Hasselhoff is still doing well. in Germany. He's there a big of Germany. That's the Eds decoder, everybody. We settled the most important debate. Is David Hasselhoff, rich in Germany?

After the break, let's get into talking about what's coming next for this industry. If there's any glimmers of hope for the next era. Immigration may be Donald Trump's signature issue. President Trump is now targeting predominantly democratic cities for ice raids and deportations. Dozens of protesters clashing with

immigration and customs enforcement agents in Minneapolis Tuesday. We will begin the process of returning millions and millions of criminal aliens back to the places from which they came. But what we want to do in this space is talk about America and politics beyond the current president. So what do most Americans think about deportation and border security, period? I think that Americans are definitely against the kind of violent displays that we've seen in the street from ICE. When it comes to the question of deportation, the answer is more complicated. My sense is that people want border at the border.

They don't like the idea of having no idea who's coming into the United States at any given time. The view on immigration from the bottom up instead of the top down. That's this week on America Actually. Every Saturday in your audio and video feeds. And we're back. Okay. Let's talk about the future of music now and the trends we're seeing. We've laid out a case now for here's the change that happened in the industry.

here's how Taylor Swift and her record releases kind of like fit into it and her disputes. But then there's like the next stuff, the actual threats. And the one that just comes to mind for me immediately and instantly is TikTok, which it seems like in the past two years, especially the past two years, has remodeled the music industry. Right. And you just suddenly get like, I was joking when we were doing our prep for the show like I've been trying to escape Fleetwood Macs since I was a teenager and I they just

won't go away. Oh, sorry. And you just, you just need to save, you just need a safe space of Guns and Rose's fans making only Guns and Rose's content. I just need guitar solo, and that's true. I am on guitar solo TikTok. Okay. Yeah, yeah.

Look, I'm not, I recognize that it is beautifully made music. The last thing I want is like the, the, the Fleetwood Mac Army coming from me. That's not for you. That's fine. beautifully made music. I understand they are all dating each other and you can just hear the pain. I find it tedious and boring. I'm sorry.

There's so much. Okay, I know we have to talk about the power of TikTok and why it has been the most profound and radical fastest change I've ever seen to the music industry. But I also think that the algorithm is overblown because it thinks the switched on pop TikTok account is an intercovery smoker who is really into a bunch of very dated movie references and Charlie I think the algorithm might be better than you think. Yeah, maybe I don't know myself, but maybe it's because there's so many different people in

the team using it or something. But no, it's like way off. But yeah, TikTok is profound. It has very meaningfully shifted what's happening in music. Colleagues of ours at vox.com had a great story about the TikTok to Spotify pipeline. Things that blow up on TikTok go to Spotify, things that are streamed on Spotify, then are going on to Billboard's charts. And so 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. And so now we live in a world where people can blow up on TikTok overnight and negotiate very favorable terms with a label because they've already built an audience.

A&Rs, whose job it is to go and find new talent, are surfing TikTok. They're also going to shows. They're doing their old style stuff as well, but they have more data and more tools than ever to figure out what is bubbling up. And so 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 create stars potentially, it is getting more difficult. There is more content on TikTok than there ever has been before, so it's harder and harder

to break out every single day. There is some concern that people are only listening to music on TikTok. They need to listen to the really fast-spin-up version really quickly that get played on TikTok instead of the real one that is a major trend we've reported about it on Switchdown Pop because that's their engagement with the music and that 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, and they're going to have to figure out how to succeed in that, on the streaming side.

And 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 whenever you want. And 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, and, you know, the Instagram Reels puzzle and the YouTube Shorts puzzle. the services are built on music, like audio trends. Totally. There are dances.

There are memes. There's all the stuff happening. Yes. And it requires participation and buy-in from the various music rights holders to say people can make remixes and sinks of our songs. But it's unclear like 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 it? that because my my instinct is they're like yeah here's this license to see if your little tiki

talkie works and now they're at the end of a period and they're like oh it worked really well you've got to pay us more money i think that the label's response to tic-tok and realizing it's essential nature it indicates how far the industry has come if 20 years ago there was a no streaming ever or 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. And now there's much more, it seems to be a mentality of how can we get this stuff out there so that people hear it so that we can monetize it later down the stream. Because it's marketing. That's what I keep coming back to, right? If the songs are

just marketing for tour tickets, then you should put the songs everywhere you can all the time. Yeah. Part of what you're saying, you know, is like music is more valuable. viable than it's ever been. It might be undervalued financially, but in terms of value as humans, it is so essential to us. It's 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 very, very, very, very small. It's a small elite group of people they get to have a successful music career. And there's not a lot of folks in the middle class of streaming. As much as the streamers

would like to say there is, it's very, very, very challenging to be able to make a living without streaming hundreds and hundreds of thousands of songs. But yeah, so people aren't getting paid enough. That's sure. But culturally, the power is it fuels trends that are observed by billions of people within days, right? This is why tech companies want to own this asset, even if you can't really monetize it that successfully. It is being monetized. There's a lot of money flowing.

I don't mean to say that there's zero money. It's just like you can't do so in a way where the cost of creation and properly paying people for their work. That whole thing doesn't make sense. Yeah. That to me is the thing that might, change it in the TikTok context is something that you already briefly mentioned, which is people are developing their own audiences before they ever go to a label and sign a deal.

So they already have leverage. And the labels themselves are saying, we're not going to sign an unsigned artist. That value exchange they did at the beginning in the CD era where they fronted a bunch of money to an unknown artist and then spent a bunch of money on promotion and cocktail parties for Tower Records, Middle Management Retail employees, right? That's all out the window. You can't be an unknown artist. Now they're saying, you need a following.

We want to look at how many Instagram followers you have, how many Twitter followers. We got to see how big your TikTok is before we ever sign the deal. The era of the unknown, unsigned person discovered by major label, a person who's not been on social media, unless you're like a famous person, Nepo Baby. That's not being discovered. No, no, no, no. It's not happening anymore. No, no, no. Like, yeah, you got to make it on your own. You got to go enter the content creator world and build your identity off that.

I mean, Charlie Puth was a YouTuber. Justin Bieber was a YouTuber, right? Sean Mendez was a Vine star, right? People use these platforms to hopefully up-level off of those platforms into places where they can secure more acclaim revenue, etc., etc. So I'll bring this back to Taylor Swift. She did live through these eras, right? She was the product of a Nashville system. 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's herself very online for better or worse. And I say that, like, for better or worse for all of us to be that. Oh, all of us. No, no, yeah. Like all of us can use a break, including Taylor. But she's very online. She understands the rhythms and the dynamics.

and the dynamics of her fandom and how it interacts with other fandom. Deeply. Yeah. And then, right, that's why you end up crashing Ticketmaster because she understands exactly how to leverage those fans into tickets. Right. When you see how she's made that shift,

are there any other artists who've managed to pull that off? Or 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 of the visuals match up in interesting ways, but 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've got to

get completely a mesh in this thing and see all of it to be able to understand the references that are happening in any given moment. And so 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.

So I think that the worlds in which fandoms are emphasized have definitely done well in this model. When you are the 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 that can you do it again? So I think there's just more and more scrutiny that can you generate multiple viral hits? And this is the story of big content creators that has been coming in. out over the years of how actually truly demanding it is because you need to be on 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. So it is not easy. Are there any artists that jump out to you that have pulled this off besides the Justin Bieber's

and Charlie Pooze to the world? I interviewed the artist Tai Verdes a year into the pandemic and he broke out his entire career on TikTok. and there's no shortage of other people that have done so. There are, you know, hundreds of people who have been signed now off of the platform to label deals. Fortunately, a lot of them don't then translate into fan bases that will come out and buy tickets to shows. And 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% of those artists that broke out on TikTok

in the sort of 2020 window have gone on to create a successful tour. career when people showing up and buying tickets. So what I'm getting at is that the marketing funnel is really hard. It's getting harder because if all of these things are marketing funnels for other places, like if TikTok is so that you can get to Spotify so that someone will follow you so that eventually maybe they're going to your merch page and buying some merch than buying a ticket and then showing up at your, like you are having to convert people from place to place to place and those platforms don't want you leaving.

Right. Like, TikTok isn't like, hey, here's the link to page to, like, 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 what breakout viral successes from TikTok will turn into a multi-decade career like Taylor Swift's. Yeah. Like, that is the big question. The only one that I would put money on right now is Lil Nas-X.

If you, like, pick one, I would pick that one. 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, like, blanket, ubiquitous everywhere in media artists. Yeah. So he's transcended the platform. But yeah, definitely. And, like, another just sort of, like, nuclear bright talent, right? Like, he's a master of the platforms, but then he makes compelling and well produced. And he's like Taylor is a brilliant at understanding.

where the culture is at and how to say something or do something on the edge of acceptability within certain communities to then cause uproar, backlash, embrace. He creates whole media cycles

off of the things that he makes. And that's why I'm saying, like, you know, it's way more than TikTok. It's like he gets human psychology. He doesn't just get the TikTok platform. Yeah. As like an old school punk rock guy, like there's a part of me

that's deeply vibes with his ability to be subversive. Yeah. And it transcends the fact that he broke out on TikTok, you know. And I think that's the thing that leads to, like, the lasting impact. Like, you can get your one robot nursery rhyme to go viral on TikTok. And then you don't have any other moves. And there's 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. And then I want to, we are compelled to talk about NFTs and other glimmers of change that might be coming. Okay, okay. you were talking about, okay, you go viral on TikTok, and then all your fans go listen to you on Spotify, and then they might go buy a t-shirt, and then they might end up buying a tour. That's to get you all the way down to,

okay, now I'm just handing you 20 bucks again, right? Or in the case of Taylor Swift, $6,000 ticket for a four-seat or whatever, right? Like, we're all just trying to get back to I'm giving you 20 bucks, as directly as I can, back to the CD era. And so if the CD era was, I'm buying the music for 20 bucks, and then concert tickets are cheap because they promote the CDs, That made sense. Now we're in this inversion where the music is effectively free to listen to.

And the artist wants her 20 bucks for a concert ticket. Taylor has mastered this inversion. She creates demand for her actual physical albums, merch, and her tours. But the model of getting that 20 bucks from touring isn't working for everyone, especially smaller artists. They 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. Oh, yeah.

I think Doolipa has been on tour for five years. Like, she just, like, won't stop it. And it's this massive spectacle. It looks amazing, the future in a solid tour. But she's, like, permanently on tour. And that thing is, that tour, I think it actually is finally over. But she was effectively permanently on tour. And it was generating tons of media for her on social.

And it just created a sensation. But it was a huge, expensive stadium tour. And you just have to front the money to put that on. and the army of semi-trucks and grips and lighting techs and all the people to do it. And you've got to hope people are going to show up. And if you do a leap, other people show up, there are lots of artists this past summer who had to cancel their tours because they couldn't make the math work. Santa Gold, Sean Mendez, Animal Collective, right? They're all complaining.

Like, this is too much. To get the 20 bucks at the end, we have to front too much money. It's too hard. And there's no guarantee of return. And that seems like that conversion. funnel is it works for the artist it works for and then for everyone else it's too expensive to even make the thing that is worth asking for the money for yeah i think there's there's 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 like mismatches of supply and demand in the case of touring there are way more artists than ever that want a tour at the moment because they had to hold back during COVID. There's huge supply strain constraints. There are huge issues, the price of fuel that are increasing costs. Everything has just become more expensive in our world with inflation. And so the basic math of going on tour doesn't make sense because of all of those macro indicators, but also because there's more artists ever than ever that want to go on tour, not just because of this holdup, but because they realize like this is the place where

we are going to monetize. This is how we're going to bring all of our money in. And 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, yeah, I would book Harry Styles for 30 years of a residency or, you know, put Taylor Swift on tour forever if I were a ticket master because there's 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. And 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 Sirius XM, which promotes the things on their radio. Like, that is a monopoly. That's a whole other show that we can get to get some other point. But if the point of the big streaming inversion, was we're going to move the $20 transaction from you pay for the song to you pay for the experience.

To me, it's yet more evidence that this thing is on a precipice. Everyone's mad at Ticketmaster, and you can't, like, do a leap it needs to go home. Right. At some point, she should, like, see her family. That just seems very untenable to me. Well, and there's been countless stories of the ways in which being on the road is immensely unhealthy and greater awareness of the ways in which it is terrible. It's just really bad for one's mental health to be infinitely on the road, completely displaced.

And kind of 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, you know, people's expectations, I think, 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. And that's creating this upward spiral of, I want a better show. I want it in bigger places. I want it to be look grander. So ticket prices are going up, right?

And so more people want to get out on the road and capture more of those ticket prices. And there's a limit on venues and they're all seems monopolistically controlled. Oh, it's tenuous. Yeah. Again, I will say, like, and I think the style of particularly pot music right now does not lend itself to like the intimate club show. I know you just, you just want your rockers, CBGB. look man i came up in an era and you just a guitar solo and i'd smoke you small room with 300 people in it it is like perfect um but i recognize i'm a dinosaur and that's fine it's it's okay i i cover pop but i also

love to shred on the guitar so yeah late in this episode i've just been totally actually the last half hour of this episode is you just doing a solo i don't know if we prepped you for that what a little what a little let's talk about the last 20 dollars that the industry thinks it might be asking for, which is NFTs, right? If the structure of this episode is how are they going to ask you for 20 bucks? 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, right? It's NFTs, it's blockchain tokens, it's whatever universe the DJs

want to put together. It's all out there. Whatever clubbanger 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 Ayoki told us why he's doing the Aokiverse. There is a sense that 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 that might return royalties to me. There's a lot of promise there. What do you think of it? Well, I was immediately skeptical during the lockdown period in which all of a sudden, everybody in music was like, you got to join this live chat.

We're talking about crypto. It's the future of music. Again, it stood as an admission of like, we can't sell this stuff. The music's not valuable. It's going to be the AI generated image of the music that you have the NFT to, which will be valuable. I'm like, that is, I mean, talk about convoluted, right? If we think that the payout structure of streaming is convoluted, I don't understand the fan model in which, especially the digital imagery side of NFTs, which 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, when I asked Charlie to explain music licensing, there's a sigh, right? And Charlie was like, well, there's two parts of the song. There's a publishing this. It's the exact same sigh when people have to explain NFT copyright. Like 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. But the one place of hope that I see is that the value of most digital products at this moment, NFTs has declined so much. It actually does create an opportunity where there is, you know, small collectibles that anybody can participate in. So moving outside of the million-dollar NFT to the $20 NFT. And so maybe there is an opportunity for more collectible items in this sense. And there's just countless ways that people are trying to use these, you know, including, you know, ownership of actual music, being able to have an exclusive license to music, weird pictures of jiffs that were made by an AI. You know, there's many versions of this story. And 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.

And I don't want to deny that it could come from that ecosystem. I've just not been happy to see how the mad rush of everybody and printing funny little pictures happened. It was, yeah, major sigh. So I think something could happen there. And certainly the larger world of if and when a very compelling virtual reality in which many people, many, many, many, I know there's millions of people, but, you know, becomes a mainstream product. If and when that happens, music will be at the centerpiece. And that is a huge part of why Apple is betting on Atmos. And there's all kinds of things that are happening in music to lead into that potential future world in which music will be essential.

And if so, I think this is where all these headphones buying up these music catalogs, they 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's all just gets written by AI's and so 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. how it's like obvious. I don't know. It's like the baseline expectation. I think all of us having the Metaverse. Oh, look, I see the NFT thing as the music industry saw something else it could sell. Yeah. Because it cannot sell music in that one-to-one transaction, it is forever on the hunt for the 20 bucks. Like, more than anything, it's on the hunt for the 20 bucks. and Taylor Swift has found the 20 bucks in selling clocks and selling shoes and like all the other stuff that she's managed to sell and now very expensive tour tickets.

And she has not yet had to make that turn. But sort of the midline artist, they're desperate for the next thing they can sell. And obviously, in NFT is you don't have to front the cost of a tour. You don't have to manufacture clocks. You can just make a copy of a digital object and sell it again. Right. So you see why there's interest there. Like, 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's 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 continuing to connect with, you know, fandoms, there's always going to be a world of people making music, 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, you know, artists that are just getting going, just trying. I think a lot of those might actually never even come close to collecting 20 bucks because I think a lot of the ways that listening might shift towards the people who are less interested in music is just towards the, hey, I'm going to put on the chill playlist and the chill playlist is like background and helps 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, right?

There are people getting better label deals than ever before because they are building their own fan bases. 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, but for people that do make great more middle class livings by doing Patreon and other subscriber-based tools that kind of exists at a hybrid of music and other. and other content. I mean, it's like the bigger internet story, right? Just that you can find the more interesting, beautiful, special little something. I hope that that thing can also survive so that

whoever has been able to have the time to develop that talent can keep on doing it. Yeah. Charlie, this is great. I love having you on the show. I love talking about the business and music with you, even though I just wanted to be guitar solos. If you are... 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're here first. And that thing's me, I mean, we are putting that in the Metaverse right away.

That's going to happen. Charlie, this is amazing. Thank you so much. Thank you, Eli. Thanks again to Charlie Harding for joining Decoder. If you liked this episode, you are really going to like his show switched on pop. It's also part of the Vox Media Podcast Network. You can find it wherever you found Decoder.

As always, I'd love to hear what you think of the show. you can email us at Decoder at Theverge.com or hit me up directly. I'm just Neely at theverge.com. If you like Decoder, please share it with your friends and subscribe wherever you get your podcasts. And if you really like the show, hit us with that five-star review. As many of you have learned, if you tweet at me about the show, I will almost certainly retweet with you. I'm at Reckless on Twitter. Decoder is a production of The Verge and part of the Box Media Podcast Network. This week's episode was produced by Hadley Robinson, Creighton D. Simone, and Jack McDermott,

was edited by Kelly Wright. The Decoder Music is by Breakmaster's cylinder. our editorial director is Brook Mentors and our executive director is Elmore Donovan. We'll see you next time. Convierre your passion in a business with Shopify and bathe records of ventas with the form of pay with a better conversion of the world.

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