Business

Will Avatars Kill The Radio Stars? Inside Today's Virtual Artist Record Labels

Illustration by Ryan Inzana

"Why should Scooter Braun be the only person who’s allowed to manufacture artists?"

Two years ago, Anthony Martini's teenage daughter showed him an Instagram profile for a green-haired rapper with tattooed arms, hypebeast style and glitched-out trap tracks getting hundreds of thousands of plays on SoundCloud. Martini — a former artist manager who helped develop artists like Lil Dicky and MadeinTYO, and in March became CEO of Royalty Exchange — signed the rapper, who now goes by FN Meka, to his record label, Factory New. Since then, FN Meka has released three official singles and acquired 9.8 million TikTok followers. It’s a typical story about online artist development, but with a twist: FN Meka isn’t real, and Factory New isn’t for human artists.

FN Meka is a virtual avatar, designed by Martini’s business partner Brandon Le, which performs music created with artificial intelligence algorithms. Martini and Le run Factory New to develop virtual acts and "sign" ones created by other developers.

"We’re taking cues from a company like Marvel as opposed to a record label," says Martini. "There’s a way to enable a much longer career if you build a franchise, and we’re going to start creating a universe of music characters." Like Marvel’s heroes, these artists won’t age — or even ask for a raise.

Factory New
Factory New’s FN Meka

Virtual artists aren’t new: Animated band Gorillaz, created by musician Damon Albarn and visual artist Jamie Hewlett, have sold the equivalent of over 24 million albums worldwide (according to its label, Parlophone) and won a Grammy Award for hit "Feel Good Inc."; Hatsune Miku, a Japanese pop star character who sells out arenas in her home country, was slated to perform as a hologram at last year’s Coachella. Now the music business is emerging from a pandemic that shut down touring, at a time when virtual reality and AI technology are making significant strides, and investment is flowing into companies like Spirit Bomb, a Warner Music Group-backed virtual artist record label from production studio Strangeloop Studios, and Authentic Artists, a startup launched in April with funding from Linkin Park co-founder Mike Shinoda.

One star to watch is Lil Miquela, a perpetually 19-year-old Brazilian-American model/pop star with 250,000 monthly listeners on Spotify and endorsement deals with Calvin Klein and Prada. She was created by the studio Brud, which specializes in virtual social media personalities and has raised $6.1 million, according to Crunchbase. (Lil Miquela brings in over $10 million a year, according to the U.K. online marketplace OnBuy.) When co-founder Trevor McFedries launched Lil Miquela’s Instagram profile in 2016, where she now has 3 million followers (with the same number on TikTok), he says his peers "couldn’t wrap their heads around" the idea of a virtual celebrity. But he figured that today’s teenagers consume so much pop culture online that it no longer matters much whether the people they follow even exist offline.

"It became really apparent that young people didn’t differentiate between Miquela and other celebrities they followed," says McFedries, who has toured as a DJ with Katy Perry and produced music for Azealia Banks under the name Yung Skeeter. “If you’re 11 or 12, some of your first friends are probably Roblox or Minecraft players" from virtual interactions. "And the relationship between Miquela and a fan [versus] between Rihanna and a fan — interfacing via these mobile devices — feels pretty similar."

Brud
Brud’s Lil Miquela

Just like human artists, virtual ones need a narrative for fans to follow, whether that’s relatable or futuristic. Lil Miquela’s Instagram posts are a mix of Generation Z "It" girl aesthetics (think Telfar bags and bucket hats) and political advocacy (like a post about defunding the police); FN Meka is basically a cyborg video-game character who goes bowling and uses inhuman speed to whip up meals in TikTok videos; the futuristic, alien-like artists on Spirit Bomb’s roster have been sent back in time to save the world.

"What allows people to connect is seeing their story and persona and wanting to follow the next step on their journey," says Ian Simon, co-founder of Spirit Bomb and Los Angeles-based Strangeloop, which has created tour visuals for artists including Kendrick Lamar and SZA, and started to work more seriously on virtual artists when the pandemic halted touring.

The music matters, too, of course. While songs for acts like FN Meka are created with AI, other virtual artists rely on human collaborators. Lil Miquela's vocals blend real singers' voices with computer-generated sounds, and McFedries calls on talents like producer Jasper Harris, songwriter Sarah Aarons and singer Teyana Taylor to create her music. Simon tapped songwriter-producer Mr. Carmack, dance musician Sweater Beats and others to create Spirit Bomb’s first compilation EP in May, Spirit Bomb 001, offering an outlet for musicians to test out new sounds or release music without the mental toll of fame. "Part of the genesis was having [artists] be like, 'I’m sitting on multiple hard drives of music that are never going to come out under my main project, and I would love to get it out into the world,'" he says. League of Legends game publisher Riot Games’ virtual K-pop girl group, K/DA — which has 2.8 million monthly listeners on Spotify — relies on an in-house music team of 20, as well as vocals from artists like Kim Petras, Becky G and real-life K-pop girl group (G)-IDLE. "There's no shortcut, because it's very easy for it to feel like a stunt," says Riot Music Group head Toa Dunn.

Working for an avatar can have its advantages. Simon says that without an actual artist earning a royalty on recorded music, Spirit Bomb can offer music producers "considerably more favorable deals." And virtual artists are ideally positioned to take advantage of new digital revenue streams like non-fungible tokens (NFTs) and digital goods for video-game players. In March, FN Meka sold an NFT animation of a "super toilet" for $6,400, and Spirit Bomb’s first "character card" NFT, featuring the virtual artist XEN, sold for $4,000 in April. For a few dollars each, League of Legends sells "skins" that let players appear in the game like members of K/DA. That money could add up: Gamers spent about $50 billion worldwide on such in-game items in 2020, according to MIDiA Research — more than the entire music business took in.

There is a growing market for avatar accessories even outside of video games, as avatars are a prerequisite for the "metaverse," the futuristic concept of a shared virtual space. Industry leaders predict that it will eventually become common for people to use avatars as a form of self-expression similar to social media profiles.

"It's a necessity to be able to present myself virtually," says Warner Music Group chief digital officer and executive vp, business development Oana Ruxandra, who has led the company's investments in Spirit Bomb and avatar technology companies Wave and Genies. "This has been a space where people have just had a picture or an email address or a handle, and [avatars are] just another way for people to express themselves."

Spirit Bomb
Spirit Bomb’s XEN

Next steps include interactive experiences that could let fans influence virtual artists’ music and stories. Authentic Artists, a seed-stage startup launched in April by Chris McGarry, a former music strategist at Facebook’s Oculus, lets fans influence how such artists perform during virtual shows on Twitch — which already have average watch times of over 30 minutes. And Brud’s McFedries will soon let fans essentially vote on what actions virtual characters like Lil Miquela take. "You can imagine a world where [virtual] artists going to the Grammys or not is a vote that fans can take," he says, referring to The Weeknd’s decision not to attend this year. "If the fans are like, 'No, we’re going to stand in solidarity with The Weeknd,' then the artist doesn’t go."

Ultimately, the virtual realm will give fans a far bigger say in artist development — even if that means scrapping a concept and starting fresh. "If the audience doesn't ultimately end up caring about a particular virtual artist, we can birth a new artist and run that out into the world," McGarry says. "We're here in service to the audience."

Authentic Artists
Authentic Artists’ DJ Dragoon

What does this mean for real-world artists? There’s a fear that the virtual could replace the actual, as well as skepticism that music created by AI can ever live up to the real thing, like when an algorithm "trained" on Nirvana’s music created a song in the band's style. Then again, how different is the idea of executives creating a virtual star from the advice and creative direction given by the managers, label heads, A&R executives and various consultants who help real-life artists?

"I was talking to someone and they were saying, 'You’re making virtual artists. What does that do to human artists?'" recalls McGarry. "My response was, "Why should Scooter Braun be the only person who’s allowed to manufacture artists?'"

A version of this story originally appeared in the June 26, 2021 issue of Billboard.