Digital and Mobile

What Place Will Virtual Tipping Have in the Post-Pandemic Music Industry?

phone money
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In China, virtual tipping provides a widespread, legitimate revenue stream for artists. Some think the pandemic will help (finally) normalize the practice Stateside.

Andy Bothwell, a Brooklyn-based artist who performs under the moniker Astronautalis, has an online hub that lists links to his music, social media accounts and merch site. But after the coronavirus pandemic cut off the touring income he relies on to pay his bills, he added two new links to the top of the list: His Cash App and Venmo accounts, allowing fans to send him money directly. “I’m curious to see if I keep it there,” he says.

His decision is more than a curiosity. As the pandemic has shut down economies across the globe, many artists are asking fans directly for cash -- and music companies like SoundCloud and Spotify have added features to help them do so. While the “virtual tipping” common in China has long provided a way for users to support their favorite creators on music streaming platforms and social-networking apps like WeChat, those methods have yet to take off in Western markets. But the coronavirus crisis could help forge a path that would make virtual tipping -- and other methods of virtual monetization -- normalized in the U.S.

Chinese music and tech giant Tencent Music Entertainment, which owns three streaming services as well as karaoke app WeSing, makes around 70% of its revenue from “social entertainment services,” which includes tipping and other forms of “virtual gifts.” According to Tencent’s most recent earnings report, 12.8 million of its total 42.7 million paying users -- 30% -- ponied up money for those services in the first three months of 2020.

Yet a similar virtual tipping market hasn’t taken off in the West. Some have argued that Eastern collectivism lends itself better to tipping than the West’s individualistic consumer culture, but it goes deeper than that. Western streaming platforms have also lacked the social media-like functions that encourage tipping on Tencent’s music apps; it wasn’t until 2017 that Apple updated its global App Store guidelines to even allow in-app monetary tipping.

But in response to the coronavirus crisis, attitudes seem to be changing. Spotify says 50,000 artists are using a new “Artist Fundraising Pick” feature it unveiled last month, which allows artists to highlight their personal Venmo, Cash App or PayPal links on their profiles (or, alternatively, link out to a charity). A few weeks before Spotify, SoundCloud introduced a similar feature that it’s calling a “Direct Support Link.” Unlike Tencent, neither streaming service here takes a cut of the donations.

Still, just because new virtual tipping options exist stateside doesn’t mean they will be embraced.

London-based singer-songwriter Emmavie, who released her new EP Epoch in April, was initially turned off by the idea of signing up for Spotify’s Artist Fundraising Pick because it felt like asking for a handout. “You might as well make a GoFundMe page and ask people to pay your bills,” she says. Plus, she worries that asking for donations could taint the relationship with her fans that she has spent years carefully building. “As artists, we have spent so much time creating a narrative between the artist and the consumer that’s about being desirable, and creating some kind of mystique,” she says. “That’s completely blown out of the water when you’re like, ‘Hey, so all my gigs have been canceled. Can you help me out?’” In the end, she signed up for the Spotify tool anyway, but the payoff hasn’t been high: Between April 22 and May 10, she had made £110, or about $133.

However, Bothwell thinks it’s a good thing for fans to understand the sometimes-harsh realities of making a living as an artist -- and that once they do, tipping might become commonplace. “People are starting to realize, especially right now, that their favorite artist who tours all over the world isn’t rich,” he says. “Ultimately, I make a lower- to middle-class living. But I think people want to help and I think people are starting to understand what life is like for most independent musicians.” He’s content to have pulled in “a couple thousand dollars” from a combination of Spotify’s Artist Fundraising Pick and fan donations during livestream performances.

A representative for Spotify declined to comment on whether Artist Fundraising Pick will live on post-pandemic, though it could seem in poor taste for the platform to cut the option in the future. As for SoundCloud, “We haven't put a time limit on how long the support button will be available,” a spokesperson said over email, “but are committed to providing fans with more opportunities for supporting the creators they love."

And if virtual tipping does begin to have a meaningful impact on artists’ careers, a battle over how to split the profits will likely follow. “I think there'll be a squabble over who [revenue] belongs to -- whether it belongs to the label or the artist,” says veteran music lawyer and author Don Passman. “All of that needs to get worked out if this thing becomes more of a norm.”

Streaming services aside, many artists are now collecting direct donations from fans during livestream events, which could further help normalize the practice post-pandemic.

For example, Jimi Davies of the Maryland rock band Jimmie's Chicken Shack has been hosting weekly livestream performances on Facebook, YouTube and Twitch, and listing his Venmo, PayPal and Cash App accounts at the bottom of the screen. The tips he has received are paying his bills. “The first time I did it was kind of a special thing, but now I see this as something that I'll continue to do even after we can start gigging again,” he says. “I make more doing a live feed than I do if I have a physical gig.”

On gaming platform Twitch, streamers who are part of the platform’s Affiliate or Partner programs can collect direct donations from viewers in the form of “Bits.” And Bothwell is particularly intrigued by YouTube Live, where the “Super Chat” feature allows users to pay to pin a comment or sticker to the livestream chat, with the dollar amount the user paid displayed beside it. The idea is that many fans will pay simply for the thrill of seeing their name displayed onscreen -- and that others, watching, will follow suit.

“It’s hard to talk about this and not talk about it like a strip club, because I think it functions using a lot of the same psychology,” Bothwell says -- and he’s not joking. “When you see a lot of people throwing money, you throw money.”

And as fans get more used to seeing virtual tip jars, Bothwell is convinced that virtual tipping in the post-coronavirus world will be commonplace. “I think this changes everything,” he says.

MIDiA Research co-founder and music industry analyst Mark Mulligan has been predicting that kind of shift for years. But he goes a step further. Mulligan argues that the next inevitable shift for the music business will be not just virtual tipping, but fan monetization -- meaning monetizing not the music itself, but the opportunities for expressing fandom that exist around the music. That includes physical items like collectible box sets but also virtual ones, such as stickers and skins that could be shared on social media or on streaming platforms themselves, if streamers add the option.

“It has absolutely been accelerated by COVID-19,” Mulligan says. “All the signs are bubbling up that audiences want this. Artists’ fanbases want to support their favorite artists. So now is the time for the industry to double down and find out how to build genuine ways to do this at scale.”

Mulligan adds that fan monetization is a far stronger business model than virtual tipping, since only the former option offers the fan something in return for their payment. While virtual tipping favors small, independent artists -- “If Beyoncé was saying, ‘Please tip me,’ you would say, ‘Come on,’” he quips -- a value exchange turns the business model into something that’s scalable and can work for artists of all sizes. This would also solve Emmavie’s “GoFundMe” predicament, since “Tipping is charity,” says Mulligan, “whereas virtual gifts are merchandise.”

But if fan monetization is so lucrative, why haven’t more music industry players seized on the opportunity? Mulligan offers two explanations. First, as streaming revenue has continued to grow, labels haven’t been forced to find new revenue streams in a dramatic way (until, of course, the pandemic). Second, virtual collectibles like skins and avatars would presumably be tied up in the rights to an artist’s image, which often do not belong to the label (and would not, as follows, generate the label revenue).

Even so, Travis Scott is one top-tier artist who is pioneering this approach. The rapper debuted his new single with Kid Cudi, “The Scotts,” during an in-game Fortnite concert in April for more than 12.3 million concurrent players, helping propel the single to a No. 1 debut on the Hot 100. But he also no doubt profited from in-game merch surrounding the event. Players could purchase an official Scott skin for 1,500 “V-Bucks” (or about $15), with a range of other emotes, outfits and other items available from 300 to 2,000 V-Bucks.

As for virtual tipping, the more artists engage with it, the more of a potential for the practice to stick -- and the pandemic just might do it.

“This removes the veil, and makes it clear that [fans and artists] are, indeed, in a transactional relationship,” says Bothwell. “And that’s okay.”

Chris Eggertsen contributed reporting.

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