Welcome to Issue #9 of Appetite for Distraction, a newsletter exploring how technology is bridging the gap between art and commerce. My goal is to make this a resource that cuts through the noise; helping creators and creative industry professionals make informed decisions. 

Big Announcement: Appetite for Distraction is now available in Spanish! Lamberto and I believe that music tech insight in the Spanish speaking world is grossly underrepresented. We’re trying to change that! So if you know someone who would prefer reading this newsletter in Spanish, direct them towards Apetito por la Distracción!

As always, thanks so much for subscribing, and please tell a few friends if you’d like! 

— Yash

At their Stream On event, Spotify announced a slate of features across music and podcasting for their 340 million MAUs and 150 million paid subscribers. In this essay, I wanted to analyse what these new feature rollouts tell us about building an effective creator-oriented product strategy.

Broadly speaking, there are two ways to formulate a creator-facing strategy, or build a creator-facing product. Creators can be incentivised using: 

1. Social Capital (Status, exposure, virality, fame, etc.)

2. Financial Capital (upfront advances, share of advertising revenue, monetization features, etc.)

Now, let’s look at how this framework aligns with the new announcements:

They are launching Spotify Audience Network: a marketplace consolidating ad inventories across Spotify exclusives, Megaphone, and Anchor. 

• This was long overdue. There have been several reports stating that the main advertiser using Anchor’s advertising tool for podcasters was.. well, Anchor. Anchor incentivized creators to use their platform by pitching their sponsorship tool which matched them with potential advertisers. But since advertisers don’t prefer promoting through smaller podcasts, this feature had to be kept afloat by Anchor itself. Spotify’s Audience Network enables broader reach across all Spotify exclusives, Anchor, and Megaphone. This may potentially incentivize advertisers, helping smaller podcasters hosted by Anchor in the process. 

Spotify will let creators launch paid podcast subscriptions through Anchor starting this spring. 

• Spotify has been bolstering its podcast publishing business to attract more creators and capitalise on the ongoing podcasting boom. Paid subscriptions make Anchor a compelling tool for podcasters, even though it’s take-rate (not revealed yet) will have to be in line with competitors like Stitcher Premium or Acast’s integration with Patreon. 

• Both the features described above underscore that Spotify is formulating a creator-facing strategy aligned with financial capital as opposed to social capital.

They’re partnering with Wordpress to help creators convert text to podcasts. 

• Spotify’s integration with Wordpress uses third party text-to-speech technology to convert text into podcasts. Reducing friction to podcast content creation, the feature aims to attract individuals to create more content through Anchor. (I am actually really tempted to do a podcast version of this newsletter, let me know if I should!)

Spotify wants to make podcasts interactive by introducing features like polls and Q&As. 

• Although these features work for Clubhouse, interactive features for podcasts, which are a fundamentally linear form of entertainment, is overkill. This seems to be more of a defensive tester move to assess how users are interacting with audio content. 

They’re beta-testing Discovery Mode, an audience development tool allowing artists to select music they want the recommendation algorithm to prioritize for discovery. 

• Discovery Mode = Google Ads, but for music. The poor man’s Marquee. Another deep push into Spotify’s two-sided marketplace. With streaming and the ubiquitous access to music becoming a precondition and Spotify becoming its de facto search engine, releasing Discovery Mode was the obvious next step.

• Compared to its podcasting business, Spotify’s creator-facing initiatives on the music side concentrate on providing exposure (Social Capital) instead of increasing payouts (Financial Capital.) 

They’re launching Spotify HiFi, a hi-fidelity audio streaming tier. 

• A luxury feature aimed at increasing ARPU in saturated markets (Scandinavia, for example) by encouraging subscribers to play status games. I see this as Spotify’s way of offsetting the potential costs of launching in 85 new countries—where they will be compelled to sacrifice ARPU for user acquisition. The HiFi tier offering may also potentially solve some of the growth hurdles Spotify is facing in physical-sales dominated markets such as Germany and Japan.  

ICYMI

SoundCloud revolutionizes streaming music payouts, launching new royalties system  | Tim Ingham, Music Business Worldwide 

• Soundcloud recently introduced fan-powered royalties which means we now have the opportunity to see how the user-centric payout experiment practically works.

• Best paired with: The Creator Economy Needs a Middle Class | Li Jin, HBR 

Square Acquires Tidal in $297 Million Deal  | Katherine Rosman, NYT 

Yash @YashBagal

This is big!! Really appreciate the vision to try out new payout models but can we really have them while rights management remains the complicated soup it currently is? If not impossible, definitely not feasible

jack @jack

Square is acquiring a majority ownership stake in TIDAL through a new joint venture, with the original artists becoming the second largest group of shareholders, and JAY-Z joining the Square board. Why would a music streaming company and a financial services company join forces?!

2:40 PM ∙ Mar 4, 2021

The Era of Audio Creators Has Arrived  | Taylor Lorenz, NYT 

• The audio-UGC gold rush is just getting started. But it’s not about music. Taylor Lorenz documents the rise of creator communities on Clubhouse. 

NFTs and a Thousand True Fans | Chris Dixon, a16z

Social networks are finally competitive again  | Casey Newton, The Verge 

What I’m Reading 

American Idle  | Eugene Wei  

Eugene Wei with another Neil Postman-esque dissection of the network effects of creativity enabled by the FYP on TikTok. The editorial angle of this newsletter borrows a lot from his approach, connecting traditional philosophical and psychological theories with things that are relevant today. 

What I’m Listening To 

BADBADNOTGOOD, a name straight out of “Spotify SEO” and Liz Pelly’s worst fears. But I was pleasantly surprised.

Podcast: Kapil Gupta: Conquering the Mind

Naval interviews Kapil Gupta, who talks about why so-called prescriptions to success are so popular, but ultimately futile. 

I'd love to get some feedback on your experience reading the newsletter. It'll really help me focus on what you'd like to see more of, and what would be best left out.

Reader Feedback

If You’ve Made It This Far.. 

You can make it all the way. 

What I’m Brewing — Honduras Las Flores Honey from Gigi World Coffee

• Bottomless, a subscription service for specialty coffee recently raised a $4.5 million Series A funding round. The company gives subscribers a smart coffee scale which automatically detects when you’re about to run out of coffee and places a new order; so that you’re never in a situation where you run out of the sweet elixir of life. 

Thank you so much for reading! If you want to get in touch, you can respond directly to this email or reach out on Twitter or LinkedIn. Always excited to meet like-minded humans! 

Until next week,

— Yash