There’s a lot going on in this map, and I’ll break down each section in detail in the following paragraphs.
Some preliminary notes about the legend:
- I divided the map into two umbrella groups: micropayments that monetize hard content and assets (labeled “A” on top), versus those that monetize soft relationships and sentiments (labeled “B”).
- Companies marked with an asterisk enable micropayments primarily through passive payouts on the backend, rather than active transactions issued by the end user.
- The slash symbol indicates startups that don’t actually engage in monetary micropayments yet—but have a strong possibility of doing so because their core product already asks fans to contribute small amounts of data, rather than money, in exchange for rewards.
- The “PP” symbol refers to prepaid models for micropayments—whereby fans purchase a bulk number of virtual “currencies” or “gifts” within a given app for a fixed upfront price, then send these items individually to artists who can cash them out later for fiat currency.
You can also imagine this map as an ongoing cycle—i.e. once you get to the stage of monetizing loyalty, you can feed that back into demand on the left side and then go through the map again for any new product or campaign.
WTF is a micropayment anyway?
One downside of micropayments’ early, experimental nature is that there’s no standardization around what that word actually means.
a micropayment as anything under $10 in value, in part because the company sets a dedicated “micropayment fee rate” —i.e. 5% + 5¢ per transaction, versus the usual 2.9% + 30¢—for merchants who process a high volume of <$10 transactions.
For this newsletter, I will aim a bit lower and define a micropayment as any online transaction ≤ $1.
In other words, the purchase of a $0.99 single on iTunes is a micropayment, but that of a longer album or EP is not (unless the whole EP costs $0.99). A $1 donation to an artist during a livestream is a micropayment; a $30 purchase of a Chance 3 cap
through the rapper’s online store is not.
In addition, with respect to the actual flow of money, the majority of examples I include on my map involve micropayments from fans -> artists, rather than from artists -> fans or from fans -> other fans. The one exception is the Curation category, as I discuss in detail further below.
A note about blockchain…
Considering that “micropayment” is already a teeming buzzword in and of itself, you may be amused to find that it’s virtually impossible to Google-search “micropayment” without also finding the words “blockchain,” “Bitcoin” and/or “cryptocurrency” on the first page of results.
One of the biggest reasons why companies aren’t investing more heavily in micropayments yet boils down to two words: processing fees. As Business Insider
found in a 2017 report
, many merchants cannot afford micropayments because the fees for credit-card transactions “are often high enough that they pare down or eliminate almost all potential for seller profit.”
Blockchain companies are gaining significant ground in the financial-services sector because of their potential to reduce these fees significantly, and subsequently disintermediate incumbent institutions—saving a projected $15 billion to $20 billion annually by 2022, according to Santander
Hence, it’s not totally unfounded to claim that blockchain will become an integral component of future music-micropayment platforms. Some experts even claim that a scalable micropayment platform for music can be funded by all the world’s active listeners contributing just 10¢ a month
To avoid scope creep, I won’t be discussing any more technical details of blockchain in this newsletter—but it’s an important, foundational trend to keep in mind.
Now, let’s dive into each category on the map:
1. Micropayments for demand
As visualized on the map, this category of micropayments normally takes place before a given piece of content is created.
Fans transact in this category to voice their demand for a certain type of content that does not yet exist, leveraging a built-in voting and ranking system to maximize the chances of that demand becoming a reality.
Interestingly, the majority of music-related examples in this category come from the live sector, but fall short in that they ask fans for data rather than actual money.
Platforms like WeDemand
enable fans to request that an artist or band stop in their city on tour. Set The Set
(now under the digital-marketing company Harmony
) enables artists to crowdsource setlist ideas from their fans. Spark DJ
brings a Set The Set-type interface into bars and venues, enabling patrons to vote on which song should come up next over the loudspeakers; voting regularly on the most popular songs over time allows patrons to rack up points that can then be redeemed for food, drinks and other perks at participating venues.
As with many other categories on the map, the gaming industry seems to be more proactive than music in experimenting with monetary micropayments tied to demand.
For instance, YC-backed startup Camelot
allows viewers to place monetary “bounties
” on their favorite gamers, paying for what they want to see in a given livestream—for instance, winning a game without any extra armor or weapons, or adding a heartbeat monitor to the screen display.
The mechanics are like a self-organized Kickstarter, in that fans crowdfund for the outcomes that they themselves want; to protect streamers’ privacy and autonomy, fans pay for bounties upfront and are refunded if the streamer declines their request.
As more and more artists embrace Twitch
as a fan-engagement platform, they could also potentially benefit from tools like Camelot to generate incremental revenue from real-time demand.
A potential case study: DJ-producers Anna Lunoe and TOKiMONSTA recently partnered up
on an episode of Red Bull’s Twitch show Remix Lab, which invites producers to remix songs in real time while incorporating live feedback and ideas from viewers.
Throughout the stream, fans were using the chat forum to request specific types of samples, instruments and chord changes with which they wanted TOKiMONSTA to experiment. The Red Bull Twitch account had to field those requests in a manual, somewhat unstructured way—less “crowdsourcing,” and more flowing through a continuous influx of uncoordinated comments. Future sessions of Remix Lab could use a tool like Camelot to give a more formal, streamlined structure to this process of co-creation and collaboration with fans, while opening up an additional revenue source for all stakeholders involved.
2. Micropayments for process
Over the last year, I’ve written a handful of articles arguing that artists and rights holders will increasingly differentiate themselves not just by their own, singular content or brand image, but rather by their “creative ecology
"—namely the extent to which their unique ecosystem of creative "ingredients” is available to third parties to share and manipulate autonomously.
In part because the average per-stream rates on recorded music are so low, a growing number of artists are now packaging and selling their creative process as a product
in its own right, in an attempt to strengthen their moat against competitors.
Accordingly, fans in the Process micropayment category transact for access to an artist’s process and “secret sauce”—often for the purpose of coopting that process in their own creative endeavors.
From the artist’s perspective, this could mean selling stems, loops and samples
instead of finished, fleshed-out recordings (Splice, Sounds.com, LANDR, Tracklib, etc.), or offering online tutorials
for an instrument, DAW or other musical tool or skill of your choice. Remix clearance and monetization platform Dubset enables these transactions more passively, as it runs on a Content ID-type model rather than an active transactional model on the part of the remixer.
To date, however, few of the companies on the map under this category operate as true micropayment platforms, because their products are priced at greater than $1 and/or do not enable users to pay artists directly (e.g. Tracklib licenses start at $50; Splice Sounds and Sounds.com are both structured as monthly subscriptions that pay out content owners on a rev-share basis). Closing this gap will likely require streamlining both the technology and policy behind creative attribution at large, a difficult but surmountable feat that blockchain companies like Po.et
are actively working on today.
3. Micropayments for access
While somewhat similar to the Demand category, the Access category comes after fans already have knowledge of the content they are going to see, rather than before.
Fans transact in this category to gain access to a single, smaller unit of content, often as a cheaper alternative to purchasing larger bundles of said units.
Outside of music, the most widely-publicized examples of access-driven micropayments come from journalism and sports.
In journalism, startups such as Blendle
aggregate individual, “premium” articles from multiple news sources, then make each of them available for readers to purchase for a price determined by the original publisher (averaging around $0.30 to $0.50 apiece). As indicated on the micropayment map, Agate adopts a prepaid model in that customers can deposit bulk sums into a branded “wallet” for use on a longer string of articles over time.
Access-driven media micropayments are not just limited to aggregators; a select number of individual publications have implemented the model as well. For instance, since 2015
, the Winnipeg Free Press has been testing a system that charges readers 27¢ to access each story, as an alternative to paying the standard ~US$13.50/month price for a subscription.
While the newspaper reportedly did not hit its early revenue projections
for micropayments, execs still view the tier as a valuable sales funnel, with 15% of “micro-payers” converting to full digital subscribers—a significant improvement over the standard single-digit conversion rate for the wider news industry.
There aren’t that many parallel examples of this dynamic in music, aside from digital downloads of individual singles (which declined by 28.5%
in the U.S. last year, and by 21.2%
globally). DJ Sam Feldt’s startup Fangage
does allow artists to offer exclusive content and merch to fans in exchange for email addresses, phone numbers and other contact info—but as depicted on the map, this relies primarily on transacting with data, rather than with actual money.
In sports, most access-driven micropayments are connected to some form of real-time engagement with a game or tournament.
For instance, Twitter—already a notable livestreaming partner to major franchises such as the NFL, MLB, MLS and even esports organization OWL—was considering
integrating micropayments into its app as early as December 2017, for use cases such as paying a small fee to watch games in five- to ten-minute increments.
Similarly, the NBA now has quarter-by-quarter
pay-per-view pricing on its League Pass
TV service—allowing fans to purchase out-of-market games (i.e. those not broadcasted in their local market) for $1.99 to watch the fourth quarter onward, $2.99 for the third quarter onward and $4.99 for the second quarter onward. There remains an opportunity here to experiment with dynamic pricing based on the state of a given matchup.
It’s difficult to translate the NBA’s dynamics to the music industry, whose growth doesn’t rely as much on competitions or events that unfold in real time. But as more and more music experiences become “gamified” (see: Marshmello’s Fortnite concert
, Wiz Khalifa’s Weed Farm
, Netflix’s choose-your-own-soundtrack paradigm
), it may become more natural to bring in micropayments for access to different kinds of characters, levels, skills, customizations and other features during this real-time “play.”
4. Micropayments for curation
Money flows differently in the Curation category from nearly all the others on the map, in that curators, not artists, become the primary recipients of a given micropayment. (Of course, artists can take on the role of curators themselves and benefit from this category as well.)
Fans transact in this category to reward what they think is the “best” content, and beneficiaries are paid for curating the best content for the best audience, as determined by crowdsourced activity and deliberation.
The small handful of music- and media-related examples in this category all rely on blockchain.
Last summer, blockchain-based music-streaming platform Choon launched “Monetized Playlists
”—an affiliate-commission model that gives users monetary rewards for featuring artists on their own playlists, based on an opt-in revenue-share rate of 0% to 100% determined by each individual artist. For instance, the track below has its rev-share rate for playlist adds set at 50%: