Can Twitch ‘Change the Economics’ for Artists?

When Spotify announced last month that it was finally giving fans a way to directly “tip” artists, it was largely met with approval from the artist community. Spotify’s move represented one of the first launches of “tipping” on a major global audio-streaming service — and it came at a good time, as the ongoing crisis has decimated live touring.

Yet the early evidence suggests Spotify hasn’t exactly moved the dial: Vice recently interviewed 13 indie artists to discover what difference Spotify’s “Fundraising Pick” feature had made to their lives, and the consensus was “not a whole lot.” Domenic Palermo from the band Nothing summed up the general view: “Yes, I’m struggling, and yes, the button is there to donate. But no, it hasn’t helped, and again, I don’t feel comfortable promoting it when there are others who need [the money] more.”

This raises an important question for the music industry. The model of fans directly funding their favorite acts online, and making a material difference to their bank balance while doing so, remains a tantalizing one. Yet if the world’s biggest audio-streaming brand can’t make it a mainstream reality, can anyone?

Amazon-owned Twitch argues yes — and that it’s the platform to make it happen.

The explosion of music live-streaming during lockdown means most of the music business is now au fait with Twitch, but just for the newcomers: Twitch is an online platform that allows “creators” to host live video channels on its service. Fans can subscribe to these channels for three distinct price points: $4.99 a month, $9.99 a month, or $24.99 per month. Viewers of a channel can also tip (“Cheer”) creators using the platform’s fake money (Bits) that, obviously, actually costs real money ($1.40 for 100 Bits).

Revenue paid for those subscriptions is split 50/50 (minus tax and processing fees) between Twitch and the creator, while the money fans Cheer is split approximately 70/30 in favor of the creator. A less-than-well-known fact: If you’re an Amazon Prime member, you can opt-in to Twitch Prime, which then supplies you with a cost-free subscription to any Twitch channel of your choosing. Or to put it another way: If an artist you love has a channel on Twitch, opting in to Twitch Prime allows you to pay them $2.50 per month, out of your existing Amazon Prime membership.

Not that the artist you love is actually too likely to have a channel at the moment. Twitch, which was acquired by Amazon for $970 million in 2014, has built its immense user-base mainly via the popularity of video games. The best known Twitcher of all time — now no longer a Twitcher, but that’s a different story — is Tyler “Ninja” Blevins, who made his name live-streaming gameplay from Fortnite (a title which, of course, has become quite the buzzword in the music industry of late). The world’s biggest Twitcher right now is video game streamer NICKMERCS, whose channel is estimated to be generating over $148,000 a month from paid Twitch subscriptions (not including Twitch Prime or gifted subs).

Quarantine, though, has brought more musicians flocking to Twitch than ever before, including the likes of Charlie Puth, Diplo and John Legend — who all appeared on Twitch’s Stream Aid in March to raise money for the COVID-19 Solidarity Response Fund.

Behind the scenes, Twitch has been busy building its own bank of music biz expertise. In early 2018, senior Spotify exec Pat Shah left to join Twitch as Head of Music Strategy & Licensing and, this year alone, two other Spotify deserters have joined him. The Green Machine’s former Global Marketing Lead, Matt Webster, became Director of Marketing, EMEA at Twitch in January. And in April we learned that Tracy Chan, who built the much-praised Spotify For Artists platform, was joining Twitch as Head of Product and Engineering for Music, a role he took because “there is a massive opportunity to help artists connect with their fans through virtual performances and live streaming.”

Twitch has also leaned on another leader in digital music, Pandora, for executive talent. Sara Clemens, who was formerly COO of Pandora before leaving in late 2016, is now COO at Twitch. And Mike Olson, who established Pandora’s Artist Marketing Platform, came to Twitch in 2018 and was last year promoted to SVP, Head of Music.

Olson tells me Twitch is unabashedly trying to “take a gaming monetization model and bring it to music.”

“If you look at the addressable opportunity in terms of overall market size for gaming and music globally, they’re very close. The long-pursued holy grail is how you connect artists with fans, and Twitch unlocks that upside.” —Mike Olson, Twitch’s SVP, Head of Music

Says Olson: “If you look at the addressable opportunity in terms of overall market size for gaming and music globally, they’re very close. The long-pursued holy grail is how you connect artists with fans, and Twitch unlocks that upside.

“That 1% of 100 million [fans] willing to contribute a certain amount can massively increase and change the economics for the artist. That is, fundamentally, the business of gaming. Going back to even the early days of Zynga, with Farmville and the premium model, [it’s about] a smaller percentage of users who are disproportionately generating revenue.”

Twitch avoids the problematic “begging bowl” undertone that can plague artists on other direct subscription services like Patreon by offering fans something in return — an exclusive, interactive live video experience — that Olson believes has an immediate premium value in the mind of the audience.

Noting that Twitch has seen non-gaming content on its platform quadruple in the last three years, Olson comments: “Ultimately the future of entertainment is live, interactive and community driven. It’s where anyone can play a role in creating a moment, and where the audience likes to participate and actually engage in the entertainment.” Olson says Twitch is particularly enthused about the idea of Gifted Subs, which enable someone to buy another fan of a Creator a subscription to their channel.

He adds: “If you want to demonstrate your fandom and support an artist, right now there’s only so much you can pay for that Spotify subscription, only so much you can pay for a meet-and-greet, only so much you can pay for merchandise. We take the top off; you could contribute as many gift subscriptions as you want for that artist, you can Cheer as many Bits as you want for that artist.”

Olson is aware that Twitch is far from the only player in music live-streaming. Facebook Live and YouTube have presented their fair share of popular artist-to-camera performances of late, while Instagram has hosted arguably music’s most memorable recent live-stream series, the Verzuz battles (including RZA vs. DJ Premier, Swizz Beats vs. Timbaland, Babyface vs. Teddy Riley, and Erykah Badu vs. Jill Scott).

Facebook last month announced that it will soon introduce the ability for live-streamers to charge fans for access to “events,” but made no mention of matching Twitch’s direct subscription offering. Olson argues that Twitch’s monetization options, which also include ad revenue sharing tools, set it apart from rival platforms.

Even when physical venues are back to full strength, Olson believes that Twitch will establish itself as a significant way for artists to generate money outside of their recorded music catalog, their publishing catalog and their ticketed live appearances.

“We know artists make the vast majority of their take home revenue from live events, and we believe Twitch can be additive to that,” he says. “Where it gets interesting is when you start to think about things you can do in a digital world that you couldn’t do in the [live] space. You couldn’t allow millions of fans into an intimate setting during a creative session, or [hold] an Ask Me Anything kind of Q&A roundtable. That feeling of VIP access is something we’re seeing a lot of artists leverage.”

Olson cites DJ/producer Illenium and rapper T-Pain, who have both recently invited their Twitch fanbase to contribute to writing sessions, via the service’s in-built chat mechanic.

It is certainly early days for Twitch as a significant player in music. According to one recent report, Twitch welcomed 17 million hours of watch-time on “Music & Performing Arts” channels in April, up 385% year-on-year; but that 17 million figure made up just 1% of total viewing hours on Twitch in the month, dwarfed by the hundreds of hours of watch-time on video games-related channels.

Another big challenge: Prominent songwriter and music publisher advocates have voiced concern over elements of Twitch’s licensing. David Israelite, CEO of the National Music Publishers Association, the D.C-based body that is currently threatening to sue TikTok for an alleged lack of licensing, says: “While some portions of Twitch’s platform are licensed properly, there are other large segments that contain massive infringement of musical works and it is disappointing Twitch does not do more to license its content properly. All social media sites and digital streaming services need to realize that music has value.”

Olson says Twitch “respects music rights-holders and we respect copyright,” adding that Twitch’s in-built karaoke service for its Creators, Twitch Sings, has been licensed by over 180 music publishers worldwide. He adds: “We have been working very directly with rights-holders as music evolves on Twitch.”

However many artists Twitch attracts to its platform in future — and however many music licensing deals it signs — the company is clearly making an effort to establish its name in music circles during the current COVID-hit period. Twitch recently built a music directory that Olson says was “a real investment for us as a company”, and also launched a dedicated on-boarding area for artists.

Says Olson: “I fundamentally believe we need to broaden the distribution of economics and create the category of artistry as a career. That’s what I love about Twitch: you don’t need scale. You don’t need to be on a popular playlist; you don’t need to be on the top of a [streaming service’s] directory to survive and thrive as a music creator.” He adds that Twitch’s economics “distribute all the way down to the smallest of artists with strong, committed communities who want to support creators, who see the value in art, and who want artists to be able to sustain a career.”

Tim Ingham is the founder and publisher of Music Business Worldwide, which has serviced the global industry with news, analysis, and jobs since 2015. He writes a weekly column for Rolling Stone.

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