The direct-to-fan tech stack for artists

As I’ve written recently, one of the biggest pivots in the music industry amidst the COVID-19 pandemic has been a shift in focus from third-party aggregation models (e.g. streaming services like Spotify) to direct-to-consumer (DTC) or “direct-to-fan” revenue models — whereby fans can offer financial support to artists more directly and more immediately, with fewer middlemen in between.

This parallels a wider shift in the global economy, whereby many retail businesses have pivoted to DTC sales in the wake of their wholesale and B2B relationships with bars, restaurants, event venues and other brick-and-mortar locations drying up.

In fact, the recent resurgence of direct-to-fan channels in music is a powerful lens through which to study the concept of the “artist as a startup.”

While there are many ways for artists to act entrepreneurial in their own careers today, one common pattern is that many indie artists seek to own their relationships with their customers (i.e. their fans), across both communication and finances/sales. Traditional deals with record labels — and the economics of the dominant streaming model in itself — do not allow for this direct relationship in a truly holistic manner. (For instance, as part of a label deal, artists might control their social-media accounts as part of a label deal, but don’t control how the money flows from their music streams.)

Usually, when people talk about “direct-to-fan” initiatives in the music industry, they’re thinking primarily about merchandise, or about fan club-type structures where artists can interface directly with loyal fans in a more closed environment, like through newsletters or paid memberships. Indeed, ecommerce platforms like Bandcamp and Shopify and membership platforms like Patreon have grown into some of the most popular outlets for the recent direct-to-fan shift.

But those are far from the only options for building out a direct-to-fan business model around an artist and their creative work today — especially if the artist’s income extends beyond recordings into touring, livestreaming, merchandise, influencer marketing and other avenues.

In the tech startup world, it’s common for developers to talk about a “tech stack” — i.e. the many layers of tech infrastructure that underlie a given software application. For instance, it takes dozens of different tools for business analytics, cloud computing, developer/IT operations and much more to keep Spotify running behind the scenes.

To understand the potential scope of an artist’s direct-to-fan business in 2020, we can take a similar approach and look at the “tech stack” of apps that allow artists and fans to communicate and transact directly today.

Here is my preliminary framework:

There are few artists in the world who actively invest in all four of these kinds of direct-to-fan channels simultaneously (they’re already busy enough with making and performing music). Rather, it’s more common for artists to pick and choose the kinds of platforms that work best for them, depending on where they are in their careers, what kind of music they make, how often they release new material and how their fans behave.

There’s also a rough spectrum in the above diagram from the least investment from the fan on the left, to the most investment from the fan on the right.

On the left side, one-time ecommerce purchases and donations typically require minimal upfront commitment from the fan in terms of keeping up or engaging with the artist beyond a single interaction. The fan can just contribute whatever they want, and then move on to the next thing. In contrast, if a fan signs up for an artist’s private “club” or membership, or engages regularly with said artist on a premium experiential storefront like Cameo or Jemi, that’s a strong signal that the fan is more loyal and eager to keep up to tabs with the artist over time. In this way, fan clubs, paid memberships and premium experiential storefronts cater more to the “1,000 true fans” (or even now “100 true fans”) of which Kevin Kelly and many other marketers speak.

Let’s go through each of these sections one-by-one:

Ecommerce and one-off donations

Platforms in this section enable fans to make a one-time purchase for an artist’s already-existing product, and/or make a one-time donation to the artist with no product received in exchange.

There are countless examples of artists who have benefitted from this model, especially on Bandcamp (which has paid out $16.2 million to artists in the last 30 days as of publication) and Shopify (which powers many major and indie artists’ merch stores, and thanks to some plugins can now host native livestreams).

One-time donations to artists are slightly less common, but have become somewhat normalized in the context of the COVID-19 pandemic — whether through Spotify launching a donation section on artist profiles, or through livestreaming platforms like Twitch and YouNow enabling fans to tip artists or send them virtual gifts in real time during streams.

Limited-term crowdfunding campaigns

Platforms in this section allow fans to contribute to artists’ limited-term crowdfunding campaigns for products or experiences that do not yet exist.

As I’ve discussed in the past, music plays an important role in the history of crowdfunding; one of the world’s first crowdfunding platforms (ArtistShare) was tailored for artists, and many of Kickstarter’s first successful projects came from musicians and record labels. There is a newer generation of platforms focused on equity crowdfunding for music — i.e. that allow artists to give fans a share of future revenue from a given product in exchange for their campaign contributions, such as Corite and Vezt.

In general, few successful music crowdfunding campaigns start from scratch. Rather, they leverage existing social-media followings and buzz in a highly strategic way, and offer an outlet for existing, more loyal fans to signal their interest in an artist’s long-term work.

Fan clubs and paid memberships

In this category, fans sign up for an artist’s online “fan club” or membership experience in exchange for an exclusive, recurring set of product- and/or experience-driven perks. Usually, fans have to pay a monthly, quarterly or annual fee as the price of admission. There is also often a built-in community element that allows fan-members to meet and hear from each other, through an online forum, Discord server or other similar hub.

The concept of a fan club is decades old; perhaps the best-known example of a membership platform for music fans is Patreon, which saw a 200% increase in the number of musician accounts between mid-March and late May 2020. Examples of musicians who have benefited from this model include Amanda Palmer, Zola Jesus and Noname; Cardi B recently joined the bandwagon with her OnlyFans page. (Read more on paid membership models for music here.)

Premium experiential storefronts

This is one of the newest kinds of channels in the direct-to-fan tech stack for artists, as most of the tools under this category are under five years old.

In this category, fans can pay a one-time, premium fee to access a more intimate online experience with an artist — whether asynchronous (e.g. personalized video messages or social-media shout-outs) or live (e.g. one-on-one video chats or private shows for five to ten superfans).

As I recently explained for Water & Music, meet-and-greets and other superfan-oriented experiences were typically cyclical, tied to an artist’s touring schedule as part of a premium “VIP” package. With touring off the table, not only have these meet-and-greets gone digital, but they have also become year-round rather than just seasonal, and part of a wider sweet of direct-to-fan engagement online.

In addition, artists who would otherwise be overlooked or left behind by mainstream channels — e.g. emerging artists who are “too early,” legacy artists who are “too late” — can now offer and benefit from these VIP-esque business models, vastly expanding the addressable market for platforms in this category.

Initial takeaways

1. Direct-to-fan is a mindset, not just a business model

I already established above that you can map these four types of direct-to-fan channels on a rough spectrum from least commitment/loyalty (left) to most commitment/loyalty (right). You can also map a second spectrum: How much the fan contribution is tied to the product versus to the relationship with the artist.

Ecommerce and crowdfunding campaigns tend to be tied to shipping physical products to market. “I have an album or new piece of merch coming out,” the artist would say to fans, “and here’s where you can buy it or contribute to its future production if you’re interested.”

In contrast, the reasons fans would want to sign up for a given artist’s exclusive club, membership or premium experiential storefronts are more about access and relationship-building, rather than merely about getting a physical product in exchange.

As critic William Deresciewicz wrote in his new book The Death of the Artist: ““’Fans’ are something more than listeners or readers in the older sense. They don’t just want to savor the work. They want to feel connected on a personal level. They want to feel like they know you, and they want to feel like they’re part of the adventure of creation.” In other words, the adventure and the process now comprise the “product” as much as the end product itself.

The implications of this mindset look slightly different depending on what kind of channel you’re focusing on. For instance, in the context of paid memberships — and occasionally of crowdfunding campaigns — artists need to think of fans not just as “customers” or “followers,” but rather as partners in the growth of a given project or career. In addition, many successful memberships make an effort to cultivate community and relationships among fans, not just with them (I elaborated on this concept in my recent post on Patreon’s blog).

In the context of premium digital experiences, the fan is paying for more access to the artist, not to a given product. Hence the question artists need to think about in this situation becomes not “how much do fans value my music?,” but rather “how much do fans value me?”

2. Streaming services are not direct-to-fan

This may already be obvious to many people in the music industry, but bears repeating: Music streaming services as we know them today are not direct-to-fan tools.

We can have a debate about whether streaming services have been positive or negative for the music industry and for artists’ careers. But the fact of the matter is that  streaming services ultimately control both pricing and user relationships for their respective products. Musicians have minimal visibility into their own fans’ behaviors on these services, and also have no say over royalty rates (with the exception of years’ worth of lobbying on Capitol Hill).

Mass-market social-media services like Facebook and Twitter are also not direct-to-fan in a truly accessible and equitable manner — just ask any advertiser. The late Nipsey Hussle said it best: “When you say ‘follow me on Twitter’, and you get 10 million people to follow you — you just leveraged your influence to add value to an app that you have no ownership in.”

I’ve read some posts online where people claim that “pre-save” campaigns — which encourage fans to proactively pre-save an album to their streaming library in exchange for their email address or other contact info — are examples of “direct-to-fan” marketing. But I would argue that these kinds of campaigns only get halfway there, because the end result is pushing fans to a platform where, again, the artist owns neither the customer relationship nor the context in which their work is presented.

The argument that streaming cannot adequately support a direct-to-fan music model comes out in an intriguing way in an NPR Music interview that Damon Krukowski recently conducted with Bandcamp’s CEO Ethan Diamond.

According to Diamond, even though you get access to unlimited streams of digital music purchases, Bandcamp is not a streaming service. Instead, it focuses (and makes all of its money from) physical and digital music and merch sales. “Bandcamp does stream music … but it’s so far from the mission of the service, it doesn’t even play into Diamond’s view of it,” writes Krukowski. “Simply put: streaming doesn’t support artists. So even though Bandcamp does stream … that’s not how it supports artists. Which is what it really is about as a service.”

There’s a new generation of services like Audius, Matter and Emanate that are trying to improve the economics of streaming consumption and pay artists more equitably and quickly, but we have yet to see a long-term success story from this approach.

3. Livestreaming checks off almost all the boxes

Livestreaming has become largely normalized as an engagement outlet for artists and their fans. One underrated way to interpret the enduring power of livestreaming in this moment is that it can fit into any of the above four categories of direct-to-fan engagement.

It can be a noncommittal way for fans to tune in to an artist’s one-time performance on Instagram Live, Facebook, YouTube or Twitter without paying a dime. Or, it can be an outlet for fans to check in regularly with artists as part of a monthly membership, as many artists already do on Twitch or Patreon. (Twitch’s VP, Head of Music Tracy Chan recently quipped on Twitter: “Musicians who stream on Twitch know their superfans BY NAME. Do you?”) Or, it can be an even more intimate live meet-and-greet with an even more exclusive group of fans, for a higher price tag (like apps such as Cameo and Looped now facilitate).

This variety drives home the important fact that no two livestreams are created equal, even if the interfaces for virtual concerts and music events may look increasingly similar across platforms. Artists need to be clear from the outset about the purpose and target audience of a given livestream, so that they can choose the best channel accordingly to stage their experience.

MIDiA Research’s Mark Mulligan outlined the importance of segmenting the livestreaming market in a blog post from May 2020 that is more relevant than ever today, especially in this specific discussion about the possibilities around direct-to-fan engagement and monetization. “We must think of the live opportunity as something that goes beyond live streams,” wrote Mulligan. “Live streams are just one part of the mix. The true opportunity is virtual experiences, that can range from 100 attendee super-premium intimate sessions, through mass scale ad-supported YouTube streams, to avatars performing in games. If we start this journey thinking narrowly, the scale of opportunity will be constrained” (emphasis added).

4. Opportunity to reduce fragmentation

Above, I’ve laid out the case for artists segmenting their fans and pinpointing the best channels for marketing to those different groups of fans effectively. But segmentation cam start to take away from the fan experience, if it leads to more fragmentation and confusion about which platforms fans should turn to for engaging with artists on a more regular basis. The whole point of “direct-to-fan” is to facilitate this engagement with as little friction as possible.

There’s an opening for tools that help streamline the way this fan journey works across multiple different platforms. In a recent newsletter, investor Li Jin — who focuses on tech opportunities in the “passion economy” — suggested that there was an opportunity to create a “single sign-on” experience for superfans, whereby they could pay for a single subscription in a centralized place to access all of a given creator’s content. “For instance, paying for a creator on Patreon could grant access to their private Substack group, private Zoom events, paid podcast,” wrote Jin.

What’s notable about this conception is that instead of the traditional, rinse-and-repeat route of releasing a record into the streaming ether and then taking the album on tour, it paints a picture where an artist has to manage a multifaceted, segmented, 24/7 media brand and community online to make ends meet.

This parallels the immediate reality of the COVID-19 pandemic — where, in the absence of touring and of a solid economic foundation around streaming, artists have to claw for other opportunities beyond just “making music” to survive. They start to act more like influencers or “content creators,” taking more brand sponsorship deals and going live more often on Instagram and Twitch.

But it’s also perhaps the inevitable end point of the direct-to-fan shift over a longer period of time. In Deresciewicz’s words: “When artists are able to appeal directly to audiences, our ideas of both artists and audiences change.”