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Download PDF Version Twitch’s Rockonomics Introduction 3 Part 1: Twitch Distinctions 8 Part 2: Twitch True Fans 18 Part 3: Twitch In Action 27 Closing Remarks 43 About The Author 46 Partners 47 Acknowledgements 48 #twitchrockonomics Live streaming won’t go away when live music returns. This inquiry into Twitch helps us understand how they may co-exist. ‘If you keep the full $100 of each true fan, then you need only 1,000 of them to earn $100,000 per year.’ Kevin Kelly, The Technium, 2008 Kevin Kelly’s 2008 1000 True Fans essay is making something of a comeback, as many artists today are feeling short-changed from their paltry music streaming royalties. In a recent Harvard Business Review article that’s rich in media theory, Li Jin argues that ‘The Creator Economy Needs a Middle Class’. Jin encourages us to rethink media, and Kelly’s essay suggests a remedy, which Twitch is strongly positioned to provide. Twitch offers a unique way for artists to reach fans and earn money. The growing criticism from music industry trade bodies about Twitch’s licensing strategy appears to be based on a misunderstanding of what Twitch is and isn’t That takes us to the threefold objective of this – which is understandable, given that live inquiry. Getting exclusive access to data (and streaming on Twitch is a new paradigm. Key to data scientists) from Twitch, MRC Data and this seachange are Twitch’s roots in the culture ChartMetric has allowed me to: of gaming. You can bring a horse to water, or you (i) establish what makes Twitch distinct; can bring water to the horse. Twitch is bringing (ii) enable the music industry to compare Twitch music to gaming. with on-demand streaming models to better understand the different ways creators can make money; and (iii) illustrate how Twitch works, using six unique artist case studies. This work is timely, as live music – the breadwinner for most artists – has been silenced during the pandemic. We don’t know what a new normal will look like, but we do know that live streaming won’t go away when live music returns. Understanding Twitch will help to understand how they may co-exist. Part 1 Twitch Distinctions— It’s almost 20 years since the 2002 launch of Rhapsody, among the first music streaming services, at the same monthly price of $9.99 that we see today, and fans remain largely disconnected from their favourite bands. None of the on-demand streaming services that have since sprung up enable immediate engagement, nor do they offer fans a way to directly compensate creators. This is a relic of the music industry of old. Popular Subscription Streaming Service Combinations in the U.S. also subscribe to… FREE SERVICES 65% 51% 50% 13% 3% 23% 15% 86% 63% 61% 17% 4% 31% 20% 86% 80% 67% 20% 5% 34% 17% So is the remarkable similarity across all the major music streaming services. Not only do 88% 82% 70% 20% 5% 36% 19% they charge the same monthly fee, but they offer the same 60 million songs. This makes ‘cross-usage’ – where a subscriber to one 93% 91% 84% 81% 19% 55% 24% streaming service would also subscribe to another – irrational. MusicWatch, a consultancy, 91% 93% 87% 84% 76% 67% 36% reckons only a quarter of those who pay for one music service also pay for another, and 91% 91% 79% 80% 31% 9% 20% it’s probably lower as some of them will be in the process of churning or switching. This is Users who subscribe to… in stark contrast to video streaming, where exclusive content fosters cross-usage: a consumer paying for Hulu, Disney+ or HBO Max is more likely to pay for Netflix. ReelGood data puts this cross-usage figure as high as 90% – making Netflix a universal service. Not only are these services additives, but each has been raising its price gradually in recent years. Change has been a long time coming. Many What Makes Music on Twitch Distinct companies like TopSpin and MySpace tried to remove this price ceiling and enable direct Descriptors Distinctions Twitch YouTube TikTok On-Demand Streaming artist-to-fan relationships, but found themselves User Primary Venue Laptop Mobile Mobile Mobile left by the internet’s wayside – or being fondly Experience remembered as ‘My Empty Space’. Twitch brings Interactivity Predominantly Predominantly Predominantly On-Demand Live Video On-Demand On-Demand Audio a long-overdue change. Artists are now able to Video build atop the old service models, adding a new Duration Long Form Short Form Sub-Song Short Form lane that goes ‘over the top’ of the traditional (> 1 hour) (> 3 mins) (<1 mins) (> 3 mins) streaming model and monetises their own Music Primary Source First Party Third Party Third Party Third Party channels instead. The best way to understand Licensing of Content (User Created) (Aggregator- (Aggregator- (Aggregator- Delivery delivered) delivered) delivered) this change is to focus on what makes Twitch Licence Hybrid: Hybrid: User/ Hybrid: User/ Rightsholder distinct. The table below summarises Twitch’s Provider Creator/ Rightsholder Rightsholder Licensed unique position among digital music platforms PRO Licensed Licensed Licensed by focusing on four characteristics: (i) the user Money In Primary Duration and Track Track (or Track Revenue Interaction snippets) experience; (ii) the licensing framework; (iii) Generator money in; and (iv) money out. Revenue Subscription, Ad-Supported Ad-Supported Freemium Source Ads, Donations with Premium (Ads and/or & Gifts offering Subscription) Money Out Distribution User Centric Qualified Pro Lump Sum Pro Rata (To Artist) and Licensor Rata Catalogue Centric Accounting 30 days after > 6-8 Months > 6-8 Months > 6-8 Months month end (Point to Point) (Point to Point) (Point to Point) User Experience Twitch usage is primarily via laptop/desktop, rather than the mobile app-based use that dominates nearly all other online experiences. Unlike most other services, Twitch is A reliance on the desktop may feel like a predominantly used for live streamed content. disadvantage in a ‘mobile first’ world of And despite conventional wisdom holding smartphones, but the opportunity for the that the sweet spot for consumption is under desktop-first strategy is that it competes 30 minutes, typical Twitch usage is very for attention in a space where many other media companies have taken their eye off long-form. the ball. The war for attention taking place on our smartphones resembles a tragedy of the commons: seemingly innumerable competing apps are over-exploiting our scarce attention, with little regard for the actions of others. The desktop is arguably less susceptible to this insatiable competition for our attention, as people using a desktop are typically in a more focused zone than when they’re on their phone. Win this form of attention and you win subscribers, not just ad dollars. MIDIA, a consultancy, recently studied the average weekly hours spent at each of these four ‘venues’ per user. YouTube, TikTok and Spotify may have more users than Twitch, but Weekly Hours per Weekly Average User Twitch users reportedly spend almost three times as much time (16 hours) as on Spotify 20 and YouTube. This should not be surprising given Twitch’s roots in gaming, which typically involves long durations of dedicated attention. For example, when the game Animal Crossing 15 15.8 launched during lockdown, the average duration of playtime was over nine hours! 10 6.4 5 5.7 1.9 0 Twitch YouTube TikTok Spotify Music has won its battle against piracy thanks to the convenience of streaming, but it risks losing the war for attention if its lean-back nature is marginalised by more lean-forward forms of activity. As David Bowie famously put it almost two decades ago, ‘music itself is going to become like running water’, i.e. always there, always in the background. By bringing music to gaming, and especially by bringing the lean-in experience of livestreaming to the less contestable desktop venue as Twitch does, music may well find a new way to capture attention that it would otherwise lose. Music Licensing Framework Most online on-demand Twitch is distinct here in that the creator is broadcast/transmit) effectively any song ever services use a rightsholder both the source of content and the licence written. It is therefore necessary to obtain a licensing system, wherein provider. Many musicians livestreaming or blanket licence for ‘Performing Rights’ in each the service obtains uploading content control the sound-recording country where it is available. Even though this sound-recording rights rights (simply because they create that sound doesn’t apply where an artist is not a member during that livestream) and may also control of a CMO and performs only self-penned songs from record labels and the publishing rights in their underlying (or is a member of a US-based CMO and is able publishing rights from compositions. The one notable exception is to grant a ‘direct licence’), the blanket licences publishers and Collective ‘Performing Rights’, which need to be granted in are still necessary for performances of all other Management Organisations case a Twitch artist performs a cover version of a songs in each country. Unfortunately for Twitch (CMOs). Twitch, conversely, CMO-controlled song. (and other video services), there is no blanket system for ‘sync’ licences (which must be orients itself directly toward The traditional solution that enables artists to obtained on a song-by-song basis whenever a musicians or performers. perform cover songs is ‘blanket licensing’. In this song is used within a video recording). system, national CMOs permit performances of any song in their catalogue to every physical Lastly, (for the avoidance of doubt) there is venue, outdoor festival, radio/TV station and no copyright problem involving record labels online service in their territory.
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