Meet the architects of music's new avatar economy

By: Cherie Hu

Published: 2020-05-12

CGI musician and influencer Lil Miquela signing with CAA. Travis Scott performing in Fortnite for over 27 million unique viewers. Japanese V-Tuber (“virtual YouTuber”) Kizuna AI performing in Porter Robinson’s Secret Sky Festival. Grimes launching her new digital persona WarNymph to separate her online and offline selves — in part because she just had a baby.

All these developments, which took place just in the past few months, point to a groundbreaking development in the music industry right now: The emergence of a new music-avatar economy.

By “avatar,” I mean a digitally-rendered body that serves as the primary conduit of interaction, instead of real-life bodies and faces.

The music-avatar economy is a two-way street: Celebrities are becoming avatars, and avatars are becoming celebrities. In the former scenario, artists like Travis Scott and Grimes are working with software developers to build their digital doubles, often with gaming contexts in mind. In the latter, companies are building new characters from scratch, such as Lil Miquela and Kizuna AI, with their own personalities, followings and businesses. Both paradigms are possible thanks to technological advancements in 3D modeling, motion capture, facial recognition and virtual/augmented/mixed reality.

The concept of an avatar becoming a celebrity might sound too futuristic or impractical, especially amidst a pandemic. But now is actually a more realistic time than ever, not less, to give avatars serious weight.

The COVID-19 pandemic in particular has spurred a systemic shift in media consumption habits. While audio-based streaming consumption on services like Spotify has declined, consumption of films, video games and other longform visual content has risen across the board — both on premium streaming subscriptions and on free, social video. Games like Fortnite, Roblox and Minecraft in particular now serve as social gathering spaces, concert venues and creative canvases for professional artists and everyday fans alike. It makes sense that, when stuck at home, we seek a deeper level of escapism in our entertainment.

Against this backdrop, demand for more visual music experiences has surged. But social distancing makes it difficult to shoot traditional music videos. As a result, artists and labels are hiring more animators and game designers to create visual assets and worlds around new single and album releases that can keep fans entertained. In the process, an artist usually becomes represented as an animated avatar — and has much more creative liberty as a result.

There’s also a less glamorous, more dystopian motivation behind avatars’ rise in the music business. As the digital-media landscape gets noisier, artists feel even more pressure to be present in as many online spaces as possible. There’s only so much a single artist can do in a single day with respect to exposure. What an artist and a digital clone can do, though, is a whole other question.

In other words, artists are creating avatars of themselves by both creative and promotional necessity. But pressure makes diamonds, and the swift rise of avatars is also reinventing fan engagement, fame and artistry in ways we haven’t seen before.

Celebrities becoming avatars

As I mentioned above, the two major paradigms in the music avatar economy today travel in opposite directions: Celebrities becoming avatars, and avatars becoming celebrities.

Most musical avatars you see in the world today are in the first category. In other words, they’re extensions of existing, real-world artists and celebs. Key examples include:

Artists are already using their digital avatars to promote new songs and videos. For instance, J-pop star Namie Amuro used her Genie to promote her catalog being available on Spotify and Apple Music for the first time. All of J Balvin’s lyric videos from his latest album Colores feature his Genie avatar in place of his actual self. Hana released her Jadu avatar and her music video for “Anxious Alien” on the same day (March 20, 2020).

The common thread among these examples is that avatars helped artists achieve some level of creative, marketing and commercial efficiency that wasn’t otherwise possible.

This is especially the case with brand endorsements, which drive much of Genies’ business. “Offset wants to be in the studio. Kyrie [Irving] wants to play basketball. Celebrities have to reject brand partnerships and activations constantly because they don’t have the time,” Akash Nigam, co-founder/CEO of Genies, tells me. “With their Genies, their second, virtual self is able to complete the brand endorsement for them, so they’re able to do twice as much.”

It’s also relatively more affordable for brands to do deals with celebrity avatars versus with their real-world counterparts. “Typical brand partnerships might involve six to 12 months and millions of dollars worth of negotiations,” says Nigam. “We can do it for pennies on the dollar and hours of advance notice in comparison.”

Not that these celebrity-to-avatar transformations aren’t still expensive. Sources tell me that Travis Scott’s Fortnite show cost as much as a standard Coachella set — i.e. six to seven figures — to produce. The main difference is that most of those costs come from software engineering, rather than from physical stage design. Genies is exemplary of this mix as well: Out of roughly 40 staff members, the vast majority are engineers, with only one official in-house “agent” handling brand deals.

To make a “hologram” avatar for Jadu, an artist has to visit the company’s studio in Los Angeles and capture volumetric video using over 100 specialized cameras. The process is “time-consuming and costly,” Jadu CEO Asad Malik admits to me, but “the cost is justified because of the economies of scale. What we’re making is not the end result, but the tools that are then used to generate a lot more content.” For now, Jadu fronts all production costs for its artist partners.

Business models for these musical avatars resemble, and often incorporate, gaming. Sources say that Marshmello and Travis Scott each made millions of dollars in revenue from sales of their own skins in Fortnite. (In general, Fortnite makes over a billion dollars in revenue per year from cosmetics alone.)

For now, Jadu is monetizing only one hologram on its app (from TikTok influencer Josh Richards) for 99 cents per sale, but plans to open up that model in the future. “We want to grow our platform to be a place where fans can collect and store these holograms,” says Malik. “We also see a lot of fans coming in to try a few different holograms from artists they don’t know, so there’s a lot of potential with discoverability.”

While B2B deals drive Genies’ reach today, the company is currently working on a consumer play that will launch this summer. “It looks more like an avatar social network,” says Nigam. “We think people, especially in Gen-Z, are going to care about their digital identities more than their real identities. They’re going to spend more money on digital assets that give them social status and validity in a digital world — like having their avatar adorned in Gucci from top to bottom. You’ll see this digital economy in V1 of our consumer product.”

Avatars becoming celebrities

The second paradigm in the music-avatar economy involves building virtual avatars into celebrities from scratch, rather than drawing inspiration from existing personalities.

This approach has been popular in Asia for years. In Japan, virtual YouTubers, or “V-Tubers,” account for over 9,000 channels and over a billion views on YouTube. Japan’s Hatsune Miku and China’s Luo Tianyi are two of the world’s biggest “virtual idols.” They collectively bring in tens of millions of dollars in annual revenue, and play sold-out shows globally — even though they’re just animated characters representing voicebank options on Yamaha’s Vocaloid software.

Only in recent years has avatar-celebrity taken off in other countries. One of the most notorious examples is Lil Miquela, the brainchild of Los Angeles-based “transmedia studio” Brud. Miquela has an online footprint many aspiring artists envy — over 2.2 million followers on Instagram, 600,000 fans on TikTok and 400,000 monthly listeners on Spotify — with multiple fashion endorsements and appearances in the likes of Vogue and Highsnobiety under her wing.

Another emerging company in this second music-avatar paradigm is the “virtual artist label” Spirit Bomb, which soft-launched its first artist Xen on Instagram in early April. The company behind the label, Strangeloop Studios, was a member of the latest Techstars Music accelerator. Previously, they worked on live music visuals for artists including Flying Lotus, Erykah Badu, Kendrick Lamar and SZA — an outlet closed off for the time being due to the pandemic.

Then there are projects like Grimes’ WarNymph — one of the few examples that blurs the line between a celebrity becoming an avatar and an avatar becoming a celebrity. Grimes and her team do oversee the development of WarNymph, under an umbrella company literally called “Media Empire.” But WarNymph’s branding and social presence, including a dedicated Instagram account and a Spotify playlist dubbed WarNymph Radio, is separate from that of its creator.

“Creating an avatar just for marketing purposes isn’t compelling enough of a narrative for people to follow that avatar,” Kosta Elchev, Chief Marketing Architect at Media Empire and former Head of Brand Development & Partnerships at Brud, tells me. “These avatars need their own identities and will be their own businesses. WarNymph will be developed like how an artist is developed, but will be a separate business from the Grimes business.”

The motivations for turning avatars into celebrities are a bit different from the other way around. Yes, it can make marketing a given artist’s brand more efficient, especially amidst physical limitations. “Grimes doesn’t want to tour as much anymore, so she wanted to create an entity that could take her place in certain situations,” says Elchev.

But most founders in the avatar-celebrity paradigm are more driven by storytelling as opposed to marketing. Interestingly, when you hear these founders speak about their work, they sound more like film producers and game developers than like music executives.

“The way you should think about Brud is like a more modernized version of Disney or Marvel,” says Elchev. “Brud is developing intellectual property and avatars in a similar way to what Marvel has done with comic books, to tell non-linear stories on non-linear platforms. The end result of Brud is more longform content, or even a theme park like Disneyland.”

Similarly, Ian Simon, co-founder and president of Strangeloop, sees Spirit Bomb as highlighting deeper narratives rather than just music. “We find that we’re talking in film jargon with the musicians we collaborate with,” Simon tells me. “With Xen’s soft launch, we treated it almost as a graphic novel, with chunks of really high-quality stills.”

Building celebrities out of avatars from scratch also allows founders to rethink the mechanics of artist-fan engagement from the ground up. The traditional music industry measures consumption in surface-level metrics like streams or views. But the growing popularity of music partnerships with games like Fortnite has raised the bar on new metrics and forms of community-building that emphasize immersion, interaction and more diversified behavior beyond just “listening” or “watching.”

“You’re already seeing this in real life with artists like Travis Scott and Kanye West,” says Elchev. “They’re not just musicians; they’re designing stages and clothing lines. The next evolution of that is creating worlds in a virtual space. In the future, artists might not even release a physical album. They’ll release a virtual world, and that’s how you will engage with them as a fan.”

For example, the music video for Grimes’ song “Delete Forever” was built using the 3D creation tool Blender. “What we can do is take that music video and turn it into a video game,” says Elchev. “People could go ‘into’ the Grimes music video and actually play it, via a community-based gaming platform like Stadia or Steam.”

One could also take gamified fandom even further by allowing public input into certain aspects of an avatar’s appearance. “What would be really aggressive, reconstructive surgery for a human being can be put to a vote on social media,” says Simon.

For now, the business of building avatar celebrities is even more expensive than the other way around. “You need all these partners across hardware and software — especially CGI artists, who are expensive because they’re so in-demand,” says Elchev. Grimes and her team used a character kit from Daz 3D to save on some costs in building out WarNymph.

But if anything, the business opportunities in the avatar-celebrity paradigm are more proven, not less. As discussed above, the virtual idol industry in Asia generates tens of millions of dollars in sales every year. Sources say that Lil Miquela has also done a few seven-figure deals with brands in fashion and other industries.

This raises the common debate of whether avatars will end up stealing valuable jobs from real-life artists. But founders claim that this combative view is an inaccurate representation of what’s actually going on.

“Many of the avatars get marketed as ‘A.I.’ or ‘intelligent’ characters, which I find quite problematic,” says Malik. “They’re almost never ‘A.I.’ — instead, they’re interactive, branching narratives or scripts that are pre-written by humans. Lil Miquela isn’t interactive; she’s a movie character developed by a studio whose script unfolds through social media. People’s perception of A.I. is already skewed in a way that is fearful and unhelpful, so having these characters being marketed as A.I. is problematic because people who don’t know better then assume that the characters are coming up with their own thoughts.”

Moreover, on the music side, virtual avatars are actually bringing many real-world, working musicians along for the ride. Lil Miquela’s music career, for instance, takes a village. One of her recent singles, “Machine” (feat. Teyana Taylor), credits a total of four other songwriters and producers apart from Miquela and Taylor — namely Jasper Harris (credits with Roddy Ricch, Dababy), Rodaidh McDonald (David Byrne, The xx, Sampha), Sam Dew (Wale, Rihanna, Taylor Swift) and Ville Haimala (of Amnesia Scanner). Sources say that Brud is experimenting with payment models that give songwriters and producers a higher cut of streaming revenue compared to the standard split with a traditional recording artist.

Spirit Bomb is working with artists including Nosaj Thing and The Glitch Mob’s Justin Boreta to help write some of the first music for the virtual artists on the label. “This isn’t about celebrity, because no one person can claim credit,” says Simon. “It’s a more collaborative process between musicians and visual designers, and a form of franchise IP that a lot of people can contribute too.” One as-yet unanswered question is how exactly to frame these collaborations. As Simon puts it: “Should it be Human Artist ft. Virtual Artist, or Virtual Artist ft. Human Artist, or an even split between the two? We’re still figuring that out.”

What’s the point — imagination, or efficiency?

As for where these technologies and business models go next, the possibilities seem limitless. Spotify’s partnership with mixed-reality hardware startup Magic Leap, first announced in November 2019, points to the opportunities in incorporating three-dimensional, spatial thinking even to lean-back audio streaming. Games like Fortnite are paving the way for artists to experiment more with virtual merch and other digitally-scarce goods.

Epic Games acquired computer-vision startup Cubic Motion in 2020 — likely to help improve real-time facial rendering of their in-game avatars, including but not limited to musicians. In fact, we’re getting eerily close to a music-industry version of Kevin Kelly’s Mirrorworld, where “everything will have a digital twin.”

Of course, there are several other urgent issues to attend to in the “real” music business. Music freelancers aren’t getting the federal aid they need. Indie venues continue to fight for their lives. Concerts in general will likely be the last kinds of gatherings to reopen.

But the world’s changing media consumption habits show that entertainment companies are offering a different kind of essential business right now: Imagination. Amidst a pandemic, avatars, and the worlds they come with, could be powerful tools for musicians to introduce audiences to fantastical, larger-than-life worlds, and to remain present for fans who want inspiration from that escape.

It remains to be seen whether the music industry in the long term will actually use avatars for this imaginative purpose, or simply to clone itself — problems and all — for the sake of maximum efficiency and scale.