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Web3 meets Y2K? How nostalgia is driving Web3 music acquisitions

First shared by @cheriehu in #web3

On #web3, we discussed the latest instance of what has to be the most bizarre music/tech trend of recent months: early 2000s music companies pivoting into Web3.

“……….. ok W&M fam, help me out. What is it with the mass migration of 2000s-era music piracy sites into web3? First Limewire and now this — https://twitter.com/hivemindcap/status/1524027670941556739?s=21&t=d0QizPuw_AwKruBRoLXKXw”
– @cheriehu42

ICYMI, Napster, perhaps the most notorious of the Y2K music piracy services, has been acquired by two Web3-related companies: Blockchain protocol Algorand and crypto investment fund Hivemind.

Napster is no stranger to acquisitions. In April 2021, publicly-traded company MelodyVR acquired the company as part of its plans to launch a hybrid music streaming/video/VR service. It appears that MeoldyVR has since pivoted and abandoned those plans.

And as previously mentioned, this isn’t the first Web3- reboot of a brand previously associated with piracy: LimeWire also recently relaunched as an NFT marketplace, in a $10M token sale. Interestingly, Hivemind also invested in LimeWire’s relaunch.

On #web3, we discussed whether this trend exemplifies Web3 challengers seeking out legitimacy by attaching themselves to established brand names, or if there’s something more to it. As Charlotte notes, there’s undoubtedly a prominent branding element driving these acquisitions — although the perception in some corners of Web3 platforms as scammy arguably won’t be helped by an association with music piracy:

“I just think its an exercise in leveraging 00s nostalgia and brand familiarity. They don’t actually have anything to do with the original team. Purely PR”
– @Charlotte – csquared

Hivemind has suggested as much in a LinkedIn post announcing their Limewire investment. The company characterized the deal as combining “the nostalgic value of Web1 and 2 brands with the technological potential of Web3.”

However, we wondered whether there aren’t some cultural affinities between the legacy of services like Napster, and the energy coalescing around Web3 technologies. As @sydmusic notes:

“I don’t think it’s just a brand grab. For me, it relates to the core insight of web3 that I’ve had – that this moment feels like it did in the late 90s and early 2000s – I’ve referenced Napster and mp3.com as two of the forces for good in my career that helped me align my artistic aspirations with my desire for community and the thrill of new technology. I think there is a place where one of these legacy brands does come back and do something fundamentally interesting in this space.”
– @sydmusic

You may recall @basgras’s guest post for W&M on the shape of Web3 music communities, which drew several comparisons between Web3 music communities and early 2000s internet communities. Both have vibrant, radical energy, with a distinct tendency towards community-driven operating models. If the Napster relaunch can harness some of the status quo-breaking power of the original Napster project, it could reap exciting results.

Even if Napster doesn’t repeat the early 2000s run, signs suggest this could still be a project to watch. Notably, former WMG exec Emmy Lovell was announced as CEO, meaning there’s serious traditional music-industry pedigree behind this attempt at a “nostalgia-driven” relaunch.

Further reading: From Napster to now: The legacy of Y2K music piracy

Is TikTok (already) a record company?

First shared by @seaninsound in #music-streaming

On #music-streaming, we discussed a recent piece from Murray Stassen for Music Business Worldwide, making the case that TikTok is slowly transforming into a music label. Stassen cites the launch of SoundOn (TikTok’s in-house distribution service) and recent recruitment drives for A&R roles to indicate that TikTok may have ambitions beyond being a music discovery platform.

While the MBW piece suggests that speculation surrounding TikTok’s label ambitions are often “scoffed at” in industry circles, we observed that TikTok might actually already be there.

As @yung spielburg notes, it isn’t such a fantastical idea. TikTok is arguably the number one channel for discovering new artists right now. Strategically, it makes strategic sense for TikTok to want to own as much of the artist lifecycle as possible, rather than allowing labels to reap the rewards of TikTok-incubated talent.

Besides, artist incubators are already standard DSP features, with everyone from Spotify to Apple Music investing in artist development programs. While these programs are styled invariably as philanthropic endeavors, they also allow DSPs to acquire a stake in an artist’s career at an early stage:

“1) There is no better shot an unknown artist has of discovery than through tik tok right now.
2) Sounds to me like they already are a label. I didn’t know about soundon. I think you’d have to say that if a company discovers, markets, and distributes music, they are a label?
One could argue they are doing this huge service for labels and not necessarily getting all the downstream benefit so makes sense from their perspective.”
– @yung spielburg

@BernieCho offered some much-needed context around TikTok’s practices, arguing that they are commonplace in Asian markets and mirror broader trends around streaming platforms acting as both content producers and distributions. Netflix’s studio arm, he offers, is a prime example:

“In Korea (#7 WW streaming music market), all of the local DSPs (who control more than 80% market share) are Premium DSPs — they are Premium Diverse Services Providers who are not only Content Platforms but also Content Producers and Content Providers who annually invest $16M to $26M USD a year in original content productions and periodically invest anywhere between $180K to $18M into local music management companies and/or indie labels. Through such strategic investments into music content and music companies, Korean Premium DSPs can generate $21M to $75M (or 1/8 to 1/3 of their Total DSP revenues) in additional premium revenues via Content Production and Content Provider business operations.

In China (#3 WW streaming music market), the top 2 DSPs — Tencent Music Entertainment and NetEase Cloud Music — who combined capture over 80% market share also exercise Premium DSP business models.

In India (#16 WW streaming music market), the top 2 DSPs — Gaana and JioSaavn — who control over 50% of the Indian streaming music market also exert Premium DSP business models.

Simply put, the Netflixation of music where the Content Platform heavily invests in local/original Content Production and engages in Content Provider distribution is very much a reality in Asia.”
– @Bernie Cho

As we’ve discussed in previous digests, despite the recent trend of platforms offering artists elements of label services, there’s little visibility around the quality of these offerings or whether they genuinely present artists with more equitable deals than traditional labels. Either way, it’ll be interesting to observe what kind of careers artists incubated by tech platforms ultimately have, and whether their partnerships with big tech turn out to be long-term.

Further reading: The biggest misconceptions about TikTok music marketing