Digital scarcity in music: A practical introduction

This members-only article dives into the rise of digital scarcity — one of five major music-tech pivots happening in the music industry now.

Why talk about digital scarcity now?

Scarcity is the state of being in limited, short supply. The term carries serious weight in the COVID-19 pandemic, as ventilators and other essential medical equipment are in short supply across the U.S.

But in a different way, the concept of scarcity is also what has kept the music industry running for years — and whose absence poses a potential existential threat to artists’ careers.

Touring is a conglomeration of many forms of scarcity. An artist might appear in a given city only once a year, to play a show that will never happen again. They might sell tour-exclusive merch on-site, or offer a select number of fans the often-expensive opportunity to chat during meet-and-greet sessions. The geographic and temporal window within which a fan can see an artist’s tour, let alone meet them directly, are inherently limited.

In contrast, thanks to both piracy and streaming, many fans think digital music should be free and ubiquitous — i.e. the opposite of scarce.

Even streaming services themselves tend to prefer ubiquity over scarcity. For example, Spotify’s Chief R&D Officer Gustav Söderström once said the company is “solving the user’s problems by being everywhere.” As a result, scarcity tactics for digital music, such as streaming exclusive and “album apps” that limit the reach of a given song or album, tend to fall short of making a significant impact on culture.

Many artists feel pressured to achieve the same level of ubiquity as the services that monetize their work. This burden is ever more amplified in a world without touring. The online media landscape is noisier than ever, further compelling artists to release content at a faster pace (livestreaming being a prime example).

The problem, as any artist active online will tell you, is that ubiquity and exposure don’t always get you paid. The gravity of the current situation for artists is that in real time, they’re forced to shift from a low-volume, high-margin model of physical scarcity to a high-volume, low-margin model of digital ubiquity. In exchange for losing their touring revenue, artists are making more content for less money.

How can we narrow this value gap and build a more sustainable, standalone digital economy around music? As I argued last week, we may have to stop taking music’s ubiquity as given, and experiment more with forms of digital-only scarcity. This applies not only to recordings, but also to the surge in livestreaming and community-building happening across the industry.

A framework for digital scarcity in music

Scarcity in the traditional music industry comes in three primary forms:

• Events that are difficult to replicate (e.g. concerts or pop-up shops).
• Relationships and connections with otherwise inaccessible celebrities (e.g. fan meet-and-greets).
• Physical objects (e.g. limited-edition merchandise or vinyl box sets).

These forms become scarce through three primary tactics:

• Time (e.g. making an album or merch line available only for a certain period of time).
• Number (e.g. manufacturing only 100 special-edition vinyl records or tour T-shirts).
• Location (e.g. making a concert or album available only in select markets).

Again, touring is such an effective moneymaker for artists because it combines many kinds of scarcity into one experience.

What do these kinds of scarcity look like in the digital music world today? Let’s go through them one-by-one:

1. Digitally scarce events

This form of digital scarcity is likely the easiest to understand nowadays, as artists and event organizers are scrambling for the best technology to replace brick-and-mortar shows.

In its current form, the music livestreaming economy is reaching a saturation point. It’s not even that there’s “too much” of it — that would be like arguing that there’s “too much music,” with which I disagree. It’s that there’s no infrastructure for fan discovery nor for artist compensation. As a result, everyone feels overwhelmed.

To be fair, there is some money flowing around. The biggest livestreaming concerts have each raised five- to six-figure funds from viewers for charity. But large in-person gatherings might not go back to a “normal” schedule until mid- to late 2021. In the meantime, we need some kind of standalone live economy online to ensure artists can be properly compensated.

As most artists are going live for free, the online tipping culture popularized by Twitch, YouNow and many Asian companies like Tencent Music now has mainstream attention. But beyond what Mat Dryhurst called “e-busking,” apps like Cadenza, Moment House, Maestro, Looped and soon Facebook are letting artists charge admission to their livestreams, more akin to the physically scarce, brick-and-mortar touring model. The likes of Patreon and Twitch also give artists the ability to tie livestreams to recurring, paid subscriptions or memberships, which could be more appropriate for those looking to build out a dedicated, serial livestreaming experience long-term for a select group of loyal fans.

2. Digitally scarce relationships

It’s also becoming more common for artists to engineer digital scarcity around their fan relationships.

This alludes to one of the other major music-tech pivots hapepning now: the shift from lean-back aggregation to direct-to-fan outreach. Amidst a wider reckoning with the harsh economics of a mass-market, aggregation-driven streaming model, artists are gravitating towards channels with a more immediate revenue impact. Both artists and fans also crave more direct, human connection, which is impossible to set up on a lean-back streaming interface.

Artists cancelled their VIP fan meet-and-greet sessions en masse alongside their tours. Generalist platforms like Twitch, Instagram and Patreon have somewhat filled that gap. But some other apps draw direct inspiration from offline meet-and-greets in their design.

The likes of Looped, Chatalyze and Fundo enable artists and fans to chat one-on-one via an interface that resembled FaceTime, with features such as an appointment calendar, an interactive queue and the ability to take and share screenshots from chats on social media. Cameo and Encore‘s new Music Messages platform make this level of intimacy available on-demand. In all these cases, artists get to set their availability and price.

3. Digitally scarce objects

The concept of digitally scarce objects in music is still early-stage and unproven. In fact, most online discussions about digitally scarce goods have involved a controversial technological innovation: blockchain.

I won’t elaborate too much on the nuts and bolts of blockchain here. In short, the technology aligns well with digital scarcity because it prevents forgery, and verifies and tracks ownership in a transparent, decentralized and tamper-proof manner.

For inspiration, the worlds of visual art and fashion have several experiments already underway with blockchain-enabled scarcity. Startups like DADA.nyc and SuperRare use blockchain as a tool to help users collect limited-edition digital artworks. In May 2019, digital fashion house The Fabricant worked with blockchain startup Dapper Labs (the company behind CryptoKitties) to sell one “copy” of the world’s first digital-only dress, Iridescence, for $9,500.

Warner Music Group invested in Dapper Labs four months later, signaling the potential to apply similar principles of blockchain-enabled scarcity to digital merch for artists. For instance, an artist could use blockchain to enable only a thousand downloads of their latest album or merch drop. Fanaply has already put this concept into practice, building digital collectibles and trading cards for the likes of Coachella and Travis Scott’s Fortnite show. (One major flaw is that you can get their collectibles for free, and regardless of whether you actually attended the event in real time.)

Other startups offer digitally-scarce music goods with no blockchain in sight. Landmrk has worked with Lauv and Big Beat Records on campaigns that geo-fence new music or merch drops in specific locations. In this model, fans can access only the content that’s “local” to them.

OurSong allows fans to buy artist-branded trading cards using their in-app currency OurCoin. The cards also act as fans’ admission into private messaging groups, which the artists themselves run. Featured talent on the app so far, mostly from Asia, include Julia Wu, Kimberley Chen and ChynaHouse.

Note that OurSong is a subsidiary of Taiwanese music-streaming platform KKBOX. This highlights how services like Spotify and Apple Music could play a role in building ways for artists and fans to communicate with each other, instead of sticking only with an aggregation-driven, lean-back model.

Challenges in growing digitally-scarce models

The technological seeds for digital scarcity in music were planted long ago. The biggest obstacle it faces today is more cultural: Striking a delicate balance between asserting value and being mindful of accessibility and inclusion. This is especially important in the context of the COVID-19 pandemic, when millions of people are unemployed and have less disposable income.

Livestreamed concerts also rely on a complex web of negotiations with rights holders and tech platforms — hence why you don’t see many large-scale festivals going 100% virtual in the interim. As we’ve seen with streaming exclusives, piracy of supposedly scarce digital content also remains a legitimate legal concern. (This is one area where blockchain technology could be genuinely useful.)

These challenges are not impossible to surmount though, and more and more working creators demand their solutions. In a noisy digital environment where everyone is trying to be everywhere, scarcity can help generate buzz — and pays.