A Tale Of Two Ecosystems: On Bandcamp, Spotify And The Wide-Open Future
Spotify and Bandcamp could not be more opposite. Where Spotify highlights playlists, most often of its own creation, Bandcamp sticks to the album (or any other format, as determined by the artist). Where Spotify pays royalties according to little-understood formulas that can only be analyzed by reverse calculation, Bandcamp lets artists and labels choose their own prices. Where Spotify requires working through a limited number of distributors to access their services, Bandcamp is open to anyone. Where Spotify has revenue streams dependent on ads and data, Bandcamp operates on a simple revenue share with artists and collects no information on its users.
Spotify is now worth an estimated $54 billion on the stock market, despite having never shown an annual profit. Bandcamp is privately owned, has been in the black since 2012, and continues to grow... slowly. You might be tempted to say that one is a 21st-century business, and the other belongs to an earlier age. But neither could exist at any other time.
Which poses the question: does our 21st-century business world really have to be so much like Spotify, and so little like Bandcamp? I spoke with Bandcamp CEO and co-founder Ethan Diamond to try and understand better how and why his company does business the way they do.
Given how differently Bandcamp has behaved from a typical startup, I asked Diamond a fundamental question: Is Bandcamp a digital business?
There was a long pause. "Yeah, I'm not sure," said Diamond. "I think of Bandcamp as a music company first, because I think of who we serve as first and foremost the artist. And the way to best serve artists happens to be through technology, a particular model of technology that our business is based on. But we're definitely – no question – we're different than a lot of digital businesses. I mean, the mission of the company is, I think, fairly unique. ... There's this great story – there was a New Yorker article about it – about how Prince was working on his autobiography just before he died. And he had picked a co-writer and in one of their initial meetings together he said, 'Music is healing. Write that down first.' He said that he wanted it to be the guiding principle they used in the book. And if you start with this idea that music is healing, that is obviously a power that should be in the hands of everybody who has the talent to wield it. ... And so that's what Bandcamp is. That's what I feel like we're here to build – that system. And the way you do that is by ensuring that artists are compensated fairly and transparently for their work. And that is through the direct support of their fans."
Try going into an investor earnings call with that! Actually, what does a proper earnings call in the digital music business sound like? Daniel Ek, CEO and co-founder of Spotify, peppered his on April 29 with the phrase, "audio-first strategy." He uses "audio" rather than "music" because podcasting has become an important element of Spotify's strategy. But strategy toward what, exactly? Here are more of Ek's own words, from his Q1 2020 earnings call:
"When I look ahead both short- and long-term, I'm always thinking about what's Spotify's role within the larger ecosystem. And while most focus is on competition between streaming services, we continue to be focused on the billions of users that are listening to linear radio. The 20-year trend is that everything linear dies and on-demand wins. This is a trend that we suspect will be accelerated by the COVID pandemic. ... So in my mind, our competition is actually those learned and long-held user behaviors. For us, it will always be about capturing the share of time listeners spend elsewhere and prove out [sic] that their time is far better spent with us."
Spotify is focused on "capturing the share of time listeners spend elsewhere." This is why Ek talks about "audio" generically, because it doesn't matter specifically what those listeners are doing elsewhere, Ek just wants them doing it at Spotify instead. Spotify is not a "music company first," as Diamond describes Bandcamp, because music plays a role only insofar as people spend some of their time listening to it, and Spotify wants all their time. What truly comes first for Spotify is competition – the company is focused on eliminating other places for time spent listening to... whatever. If it's to conspiracist shock jock Joe Rogan – now signed to Spotify for exclusivity of his podcast, reportedly for upwards of $100 million – then it's Joe Rogan. And Joe Rogan is anything but healing. Indeed, health clearly has nothing to do with this. As Ek makes clear, even the COVID pandemic can be put to use by Spotify's strategy, as can the death of an existing medium for music, "linear radio" (more commonly known as "radio").
To be fair, Ek says he does have another mission in mind for Spotify. It's one he spelled out a couple of years ago, before podcasting entered the picture but right before the company went public on the stock exchange: he said he wanted Spotify to help "one million artists to be able to live off their art." This sounds good, especially if you're one of a million artists, rather than one in a million. But what can it mean, when Spotify's royalty rates are so low that to earn a living wage of $15 an hour, a musician needs 657,895 streams per month*? (And if you aren't a solo artist, multiply that by the number of people in your band.)
*Some streaming napkin math: A $15-an-hour minimum wage is $2,500 in revenue per month (pre-tax). Calculating Spotify streaming payout as $0.0038 per stream, then $2,500 equals out to 657,895 streams. It's important to note that this is necessarily an estimate, because each artist makes a slightly different amount per stream — but many use this average figure to estimate Spotify earnings.
It's this discrepancy, between stated goals and reality, that has led many musicians to become more vocal about their dissatisfaction with Spotify. So many that Ek himself recently complained, in an interview with MusicAlly, that: "In the entire existence [of Spotify] I don't think I've ever seen a single artist saying 'I'm happy with all the money I'm getting from streaming.' " Tellingly, Ek didn't follow this with an acknowledgement of why artists are unhappy with the money they get from streaming. Instead, he drew a rather Trump-like conclusion: they are happy, they just don't say it in public. "In private they have done that many times, but in public they have no incentive to do it. But unequivocally, from the data, there are more and more artists that are able to live off streaming income in itself."
Ek continued to swallow his foot in that same interview. "Obviously, some artists that used to do well in the past may not do well in this future landscape, where you can't record music once every three to four years and think that's going to be enough," he said. The reaction from musicians on social media to this particular statement was swift and loud. Musicians do not see themselves as audio machines, able to increase output to make up for the falling unit value of their product. To anyone who knows what goes into recording an album, and how few albums one is likely to make over a career in music, this may well have been the proverbial final straw.
Which brings us back to the anti-Spotify. It's becoming more common, especially among younger bands, to eschew Spotify altogether and post their digital music files on Bandcamp exclusively. [Ed. note: We've been noticing, anecdotally but with increasing frequency, that many new releases we'd like to include on our playlists don't make the jump from being posted on Bandcamp to appearing on platforms like Spotify.] But does it function as a replacement? When I talk about Bandcamp to music fans, especially younger ones, they often say, "but it doesn't stream." You can stream from it, I always point out – just album by album rather than playlist. But I can see their attention has already wandered.
So I put this other very basic question to Ethan Diamond: Is Bandcamp a streaming service?
His answer surprised me. "No," he said. "I don't think of this as a streaming service. I consider us a record store and a music community. The primary difference being that we're a way to directly support the artists that you enjoy listening to. You know, half of the sales on Bandcamp at this point are for physical goods. ... Digital has also seen really strong growth. And when you buy digital on Bandcamp, what you're buying is access. So you can grab a download – you know, there are people who want to grab the high-quality file – but you can also stream through our app, unlimited once you've purchased the music. But yeah, I don't think of us as a streaming service. Definitely."
Bandcamp does stream music – I'm still going to give the same argument to those who tell me it doesn't – but it's so far from the mission of the service, it doesn't even play into Diamond's view of it. Simply put: streaming doesn't support artists. So even though Bandcamp does stream (see, I'm making that argument again!), that's not how it supports artists. Which is what it really is about as a service.
Another striking aspect to Diamond's answer is Bandcamp's connection to physical goods. It is a digital-only business: it has no warehouses or delivery service, like Amazon. But Bandcamp allows artists to take orders for physical goods that they can fulfill however they choose – from their homes, from record labels or distributors, or from third-party merch services. Bandcamp simply takes a 10% revenue share of these sales. For bands, it's a bit like setting up a merch table at a virtual venue. (Venues, especially big ones, typically collect a percentage of merch sold on their premises.)
But if half of Bandcamp's revenue is from physical product, is it a digital platform?
"It definitely started as a digital platform," says Diamond. "In 2007, when we started the company, streaming didn't exist in the United States and our competition essentially was piracy. And the idea in 2007 primarily was that nobody was going to pay for music anymore. And it just seemed very obvious to me that if you like some music from one of your favorite artists, you should be able to support them directly. And so we built the platform to do that. My reference point for this was blogging services. In 2007, you had Blogger, Typepad, Movable Type, services that were essentially like white label services for writers – you could set up a site within minutes and tap this direct relationship with your readers. And it seemed crazy to me that if your artistic output happened to be music instead of words, you were just out of luck."
"And the most promising thing that happened in the early days," Diamond continues, "was we immediately saw people start to actually buy music, which was very exciting. I wasn't sure that was going to happen! And then, one of the fun things that happened was we started to look at the search terms people were using that brought them to a Bandcamp artist's site that led to a purchase. And several times per hour, we were seeing search terms like the name of an album or name of a track plus the word 'torrent,' or plus the word 'Limewire' or 'Kazaa.' You know, this was somebody whose intent initially was just to get the music – I don't know if they were thinking 'I'm pirating the music' – but they were trying to get it for free. But when they saw that they could make a direct purchase to the artist, they wanted to do that. And that just warmed my heart. So that's really what we were trying to do from the beginning, was just make it clear that this was a way to show your direct support for an artist."
Whether that direct support entails a digital exchange seems immaterial to Diamond. And the platform – unlike any others that come to mind – seems equally indifferent to whether you stay on it. Diamond says this, too, was deliberate from the start.
"That's a lot of the reason why, for a long time, there were not community features on the site. The MySpace community example that I had to go on was just all these people saying 'thanks for the add,' and posting their fliers for their own shows on sites, and basically, you know, polluting somebody else's space. So I said, 'Nah, let's just have no community at all.' And then what happened slowly evolved, because a lot of people started asking us 'Hey, you know, what are the other, like, math-rock artists on Bandcamp?' And my first reaction was, 'Why do you care?' Like, we're not – just go use Google or whatever. Type 'math rock' into Google. But then I started to understand that what was really going on here was a community of like-minded people forming around this idea of direct support of artists. And so then we introduced fan accounts, and collection pages, and discovery tools. And now that drives a significant percentage of the sales on the site. And again, that's just super encouraging."
Ethan Diamond's indifference to the time and money spent by users off his platform would be anathema to Daniel Ek. I am sure any Spotify employee who suggested that their users just type "math rock" into Google would have their desks cleaned out by the end of day. The differences are so extreme, Bandcamp may not just be the anti-Spotify; it may be operating in an entirely different world. I asked Diamond what digital businesses he feels a kinship with now, the way he did with blogging services when he started the company. He didn't name a music platform.
"I would say Etsy. You know, Etsy is similar in that it's a marketplace, right. They connect buyers and sellers, but they're not trying to create competing goods. And they're not fulfilling the goods or anything like that. So it's a community, and they're creating those tools to help connect those artists or sellers and buyers directly. And I think they offer everybody on that platform a fair deal. They've grown into a big company doing that, and I think like every company they have had their fair share of criticisms. But I feel like that's probably the closest."
Music as a craft, as a cottage industry? This may well be the future for many of us in the profession. In my own career, which started in the late 1980s, the type of music I play has gone from subculture to the "alternative" wing of the mainstream and now back, it seems, to subculture. Spotify is built for an economy of scale: it needs and wants to occupy all of everyone's listening time. My music and the milieu it is part of was never intended for that environment – I would worry about anyone who listened to nothing else! Are we, as Brian Wilson sang, just not made for these times?
Bandcamp's counterexample suggests that the problem I and many musicians in my situation face isn't about the digital age per se. It is possible to build a different kind of environment for music online, one that subcultures can recognize as their own and maybe even use to thrive. Or heal, at least, while we dream up new ways to connect with one another in the 21st century.
Damon Krukowski is a musician (Damon & Naomi, Galaxie 500) and writer (Ways of Hearing, The New Analog). He contributes frequently to journals including Art in America, Artforum, Pitchfork, and the New Yorker.