Restoration Software, retrodollars, CPOs, Everyday Art, Splice-won, and Supers
February 26, 2021 Edition (#44)
Congratulations to all of us on (nearly) successful completion of another February. For the record, it is roughly 70 degrees in the Bay Area and I am thus disastrously sun-burned.
“Unsubscribe us or face annihilation.”
Restoration Software (🥁)
That was a retailer joke. Much to my delight, some enterprising souls decided to fully restore the original soundtrack for 1983’s timeless classic: Super Mario Bros. Per Input, the audio that we all experienced in 8-bit glory was a result of the hardcore file compression necessitated by SNES storage limits. Now, thanks to the internet and good old human ingenuity, we can listen to the uncompressed audio in its full aural majesty.
Essentially, the tracks were rebuilt from the ground-up using the original audio stems, thanks to leaked source code from Super Mario Advance. Quite an entertaining listen—depending on your age—if you’re looking for a trip back to simpler times.
Retrodollars
Last week, in my “Dispo-sable Capital” snippet, I wrote about YouTuber David Dobrik’s venture: Dispo. You may recall that I was characteristically skeptical about its retro concept: waiting until 9am the next day for your digital photos to develop, as if it were 1995. [Ed.: the app’s tagline is “Live in the moment,” which I find mildly confusing given that the company is still based on the premise that you should be taking lots of photos of things…but then I suppose you’re free to live in the moment until the next morning when your photos are ready for your obsessive gaze. “Live temporarily in the moment thanks to an artificial digital delay” doesn’t have quite the same ring to it, so I understand how we got here.]
You may also recall that I simultaneously expressed my unshakeable belief in the venture’s fundraising prospects. “Pencil me in,” I wrote with more conviction than I feel about many things, “for a $150M Series A valuation sometime in the next 3-5 weeks and a cool $1bn Series B sometime between December 2021 and this time next year.” Well, the first part of that brilliant prognostication has already come true, except more spectacularly than I expected. Dispo, per Axios, has just announced a raise at a $200M valuation. Spark Capital is the lead. When the company raises its next round—probably next week—I will consider trying its product.
I continue to find this story interesting for what it suggests about the creator landscape, and particularly the trend towards creators seeing themselves as holding companies for multiple sub-products. Colin & Samir—two creators who create creative things about other creators—referred to this trend as “becoming ‘Houses of Brands,’” which I think is an apt characterization of what’s going on. Indeed, the two recently reviewed a range of “Merch 2.0” products from established digital personalities.
For me, more than any particular insight about a specific product, I was compelled by the breadth of custom, branded physical goods that creators are starting to sell to their fans: from burgers and pizza to perfumes, whiskey glasses, icons and smartphone gear, journals, “curiosity boxes,” and much more. And, this is purely limited to the physical items that creators are offering, as an evolution of the old-school t-shirts and hoodies merch era. Extending this creator commercial expansion to consumer apps—an evolution of the Jessica Alba/Honest Company mode—and digital goods makes plenty of sense, in this context.
Creator Public Offerings
Sometime in the next 6-8 months, someone will propose that a SPAC take PewDiePie public, and I will cry myself to sleep. Along similar lines, Rex Woodbury wrote an interesting post about “Creator IPOs.” In it, he talks about the K-pop mega-brand that is BTS, even citing research that the group adds $3.6bn annually to the South Korean economy. Woodbury’s basic premise is that stratospherically popular artists account for the majority of the market capitalizations of the media companies to which they are attached; ergo, the creators could conceivably chart their own course through a lucrative equity offering to fans.
I agree with the idea that the old-school economic model in many creative industries—music, film, and publishing, to name a few—is outmoded given the monetization models of the digital era. I don’t necessarily think it’s a great idea to, as some have suggested, create a “YC for creators” or to enable equity investing in individuals. I get the appeal, on some level. It just generally gives me hives, and strikes me as messy to evaluate an investment in a person…forever? By contrast, I like the idea of building programming to empower creators to make their own decisions about how to commercialize their work; and, similarly, I like the notion of innovating around how projects might be funded.
Woodbury talks about existing public companies that incubate influencers (a surprisingly big business) and, I think rightly, states that it’s ridiculous for massive artists to hold such a small percentage of their own equity. He then models investing in Taylor Swift, estimating that a 1% stake purchased in 2006 would be worth “$4,000,000 today.” I won’t debate whether this is objectively a Good Thing or Bad Thing, nor the Taylor Swift IRR, but I’m sympathetic to the concept that fans could crowd-source the funding for creative projects and, in so doing, share in the economic upside generated by the creator.
I’m not entirely sure at what point platforms enabling fans to invest in creator “equities”—like Rally with their “creator coins”—might run afoul of securities regulations, but I hope that this is an area where we’ll see regulatory innovation over the next few years.
The Revolution Will Be [Decentralized]
Somehow, in just a few weeks, my unfortunate obsession with non-fungible tokens has gone from “something most people I know haven’t heard about and definitely don’t care about” to “something that people I barely know mention constantly.” I still don’t know how to feel about this.
One salutary benefit, however, has been the profusion of interesting pieces about NFTs, the evolving economy for digitally-scarce goods, and other things that are highly likely to put Reader BV to sleep. To wit: Tyler Cowen wrote a good piece for Bloomberg, in which he talked about the potential for a move from the centralized big tech companies of today to a future of decentralized services without any single controlling body. I am admittedly still not much of a believer in this vision. I generally think that most people are fine with centralized products & services so long as they are rewarded with better reliability and quality.
That doesn’t stop me from believing that our future will still see NFTs as a mainstream phenomenon. Certain applications, like digital collectibles or fan-funded creativity, do clearly benefit from this model. And, other similarly appropriate use-cases will no doubt emerge over time. For now, it seems that the world of digital art collecting—and collectibles like NBA Top Shot more broadly—will be the gateway drug that introduces many consumers to NFTs and the world of smart contracts. [Ed.: this is anecdotal, but no fewer than 7 people from different walks of my life have texted me about NBA Top Shot in the past week.]
Indeed, recent days saw a large Esquire feature on digital artist, Beeple (an “overnight celebrity” after 13+ years of producing an artwork every day), and his recent NFT auctions; the first grossed $3.5M in one weekend. The overall crypto art market is reportedly around $20M—a still-tiny amount—with much of the growth in the last few months. Digital collectibles like CryptoKitties and NBA Top Shots constitute a related and larger asset class that has seemingly captured the attention of a very engaged community of digital natives, many of whom have crypto wealth to deploy in the pursuit of these artifacts.
As noted in weeks past, communities of passionate collectors are not new: see stamps, baseball cards, coins, cars, Beanie Babies, phobias, etc. For a good article on the psychology underlying collecting, check out Ben Carlson’s recent piece in which he identifies scarcity, narrative, novelty, market FOMO, entertainment, and community as core elements.
Beeple has now officially moved into the spotlight, despite having previously amassed 1.8M followers on Instagram. Starting yesterday, the entirety of his “EVERYDAYS”—13.5 years worth!—were packaged into a single lot sale at Christie’s (the blue-chip auction house). This is genuinely newsworthy, as Christie’s has become the first “major auction house” to offer “a purely digital work with a unique NFT (non-fungible token)…and to accept cryptocurrency.” Check out the entire digital collage, which consists of every single “EVERYDAY” organized in roughly chronological order. Bidding opened at $100 but, at the time of this writing, had already climbed to $2.4M. It will be fascinating to see how frothy things get before all is said and done in mid-March. Even the New York Times has tuned in to this story!
Splice-Won & music monetization
[Ed.: I couldn’t resist a California hip hop homage.]
Bloomberg’s Lucas Shaw wrote an interesting profile of Splice—the sound, sample, and plug-in marketplace—and its impact on what Scott Brinker calls “Citizen Creation.” Splice, like many technology companies enabling digital creativity, has experienced a surge in popularity during the pandemic. The company’s core offering is a library of royalty-free sounds and music production tools, accessible for a monthly fee.
The sounds and plug-ins can come from a range of sources, including packs created by established artists like Boi-1da (who has done a lot of work for Drake). The most common customer model is based on “monthly sample credits” and ranges from $7.99/month to $29.99/month; there’s also a “Rent to Own” model where monthly payments allow customers to eventually own a license for a given sound or pack.
Recently, Splice raised another $55M from investors including Goldman Sachs and Music (a creatively titled investment vehicle that focuses on…music). As Shaw writes, the company has now raised upwards of $150M and has a ~$500M valuation, thus making it roughly a half-Clubhouse. Impressively, the company has 4M users today, and monthly sample consumption in the 400M range.
These numbers speak to the passion of amateur creators who, thanks to Splice, have access to the same type of high-quality sound inputs that professional producers might use. As someone who has used Splice and other products like it, I can testify to the product’s utility, particularly when paired with the vast archive of digital “how-to” content that is enabling this current generation of musicians (and those to come). There used to be a pseudo-indie genre known as “bedroom pop.” Now, this genre has become a reality, only most people wouldn’t be able to tell the difference between a digital-age bedroom pop song and a proper recording studio production.
The ease of high quality musical output through technology is unequivocally a good thing for music creation over the coming years. The challenge, though, is if you want to monetize this music. As we’ve discussed repeatedly, it’s hard for most artists to make money from music streaming. There’s innovation happening around the edges—Bandcamp’s “pay what you want” model and Soundcloud’s tipping experiment—but it’s a hard, structural problem to solve. In related news, Spotify CEO Daniel Ek talked extensively about creator monetization during an interview with The Verge.
If you’re interested in this theme, I’d encourage you to read through the full piece. At a summary level: Spotify has 7,500 creators making over $100,000 on the platform. It wants to grow that number; Ek believes the way to do that is by “allowing a multitude of different monetization models.” He talks broadly about ad-supported, subscription, and a la carte offerings.
This is a familiar Trillium idea: that most content platforms are converging on the same set of monetization options, and that creators must think about how to build their fan funnel from high-reach but low-value platforms where they have minimal audience control all the way down to low-reach but high-value destinations where they own their audience. Spotify’s world is even more complex given the company’s introduction of podcasting content and platform exclusives. It’ll be fascinating to watch how the platform evolves its creator offerings over time, particularly given that many Spotify creators are also active on other platforms that are attempting to innovate in their own domains.
You ask me if I’m Super?
It is a rite of passage in 2021 to use “Super” indiscriminately when naming things. YouTube has Super Chat. Facebook has Super. The United States has Super Spreaders. And now, Twitter has Super Follow. (Verge) As we always say: another promotion for the creative geniuses in Marketing!
Breathtaking branding aside, this feature is intriguing because it represents a major move for Twitter in the vein of “direct-to-consumer” monetization between fan & creator. In essence, creators can now charge their Twitter followers for access to exclusive & additional content. Think of it like a native Patreon entirely within the Twitter ecosystem. Importantly, this feature may also encourage Twitter’s creators to stay on-platform, as opposed to leveraging 3rd party products—Patreon, Substack…OnlyFans?—to monetize their intellectual brilliance. Given Twitter’s recent acquisition of paid newsletter platform Revue, and desire to broaden its business model beyond advertising, this move makes a lot of sense.
For your ears only
Last week, I shared music from Pino Palladino & Blake Mills and mentioned that the former had played in legendary jazz pianist Robert Glasper’s rhythm section. To continue the Glasper throughline, this week I’m sharing a song from the incredible Dinner Party EP: a collective project consisting of Glasper, LA jazz royalty like Kamasi Washington, and producers 9th Wonder and Terrace Martin. I’ve been listening to the full project non-stop for months, largely because it makes me feel like I’m living in Southern California again. Here’s “LUV U” in two versions: the original and the “Dessert” session remix featuring Snoop & Alex Isley.
See you all next week.
N