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strength in algorithms

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Hey! Congrats to Flo Rida, who was just awarded $82.6 million in a lawsuit with Celsius energy drinks due to a breach of contract for compensation.

Flo Rida became a brand ambassador for Celsius when it was struggling in 2014. He elevated its exposure, which led to the company’s transition to the Nasdaq in 2017 and a period of rapid growth. Since January 2020, its stock price has jumped from $5 to just under $100 today. While several investors became billionaires, Flo wasn’t compensated fairly for his work.

Despite the lawsuit, this is one of the more successful hip-hop business partnerships of the past decade. I had no idea he was out here like that. Now I’m sitting here like the Shaq meme. “I owe you an apology. I wasn’t really familiar with your game.”

Today’s memo is about the power of the streaming algorithms. On this week’s Trapital podcast episode I talked to Ari Herstand, an independent artist, course instructor, and author. We talked about how power had shifted from editorial playlists to algorithms, how indie artists are winning, and more. Let’s dive in.

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gaming the algorithm

The music discovery pendulum is swinging further and further away from humans. We went from radio DJs and MTV VJs, to the blog era curators and streaming playlist editors. Now, Spotify editorial playlists like RapCaviar don’t have as much power as they once did to break new artists. Look at this 2018 article I wrote on RapCaviar that I got completely wrong. A lot has changed since then!

Now, those curators have seized ground to algorithms controlled by TikTok, Spotify, and all their competitors.

Every digital streaming provider has a treasure trove of data on their deep catalogs and how their users interact with each song. This same data, along with their relentless A/B testing, has upped the effectiveness of personalized algorithms to keep users on the platform.

Ari Herstand, founder of Ari’s Take, said the same thing in our podcast episode.

Many artists are less concerned with playlist placement and more concerned with gaming the algorithm. The waterfall release strategy is an example of that. This tactic strings together album singles (sometimes over many months) until the whole album is released — without losing any stream counts. SZA did something similar with SOS, which led to the biggest streaming week ever for an R&B album.

Ari believes that algorithmic shift works in favor of independent artists who may not have the ear of the top playlist editors, but have a better chance to show up in one of your Spotify Mixes. There are a limited number of human-curated playlists, but an endless number of personalized algorithmic mixes that can match an artist’s needs. It’s a numbers game, and numbers games benefit indies who are less reliant on gatekeepers.

the Twitter Spaces growth hack

When I think about the pandemic bull run, I often think about the EtherRock NFT that sold for $1.7 million. That’s when we should have known that shit was about to hit the fan.

But there were less discussed signals too, like Latin country artist Sammy Arriaga, who made $250,000 by selling NFTs to complete strangers.

When Sammy was dropped by Sony, he leaned so heavily into NFTs that he made a song called “MetaGirls.” To promote the song, Sammy joined web3-focused Twitter Spaces to find users who were already bullish on NFTs. He raised his hands in each Space, told listeners that he is an artist who uses NFTs right now, then he played them the song in the Twitter Spaces, pinned his tweet to the top of the chat, and directed listeners to buy the NFTs. He sold the song to the web3 diehards on Twitter, most of whom weren’t true fans, didn’t know him before, but wanted to collect NFTs at the height of the frenzy.

Props to Sammy. It’s an impressive hustle that made perfect sense in a world with zero interest rates and crazy spending.

Those days are gone, but both Ari and I are still optimistic about the future for artists.

the pyramid of investment

The “pyramid of investment” is Ari’s method for artists to think about fanbase segmentation:

Source: Ari’s Take

It’s similar to an inverted version of Trapital’s artist sales funnel.

The bottom tier of the pyramid has the largest number of fans. These fans don’t proactively spend direct money on the artist, but they stream their music or follow them on social media. The higher a fan is on the pyramid, the more invested that fan is in the artist’s success. The middle of the pyramid is for fans who bought tickets or merch, but the top is for the VIPs.

We talked about Kevin Kelly’s 1,000 True Fans theory, and how this adds context. What’s more realistic is a handful of VIP and fan club members, hundreds of crowd funders and buyers, thousands of concertgoers and tippers, and tens of thousands of streamers. The larger the artist is, the larger all those numbers get, but they all stay in proportion.

But the dollar amount spent at particular moments doesn’t always line up with each tier. A fan who supports a Kickstarter campaign could easily spend $1000 one time, but still be in the middle tier of investment. But a fan who subscribes to an artist’s Patreon, even if it’s just $10 or $20 per month, will sit higher up the pyramid given the nature of the purchase and the overall expected lifetime value of the fan.

Ari and I covered a bunch of topics that are in the new third edition of his book, How To Make It In The New Music Business. We talked about how artists structure their teams, how Ari runs his businesses and more.

Listen to the full episode here.

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coming soon from Trapital

Podcast: How Cash Money Records Pulled Off Hip-Hop’s Louisiana Purchase. This is a special “case study” style episode where Zack O’Malley Greenburg and I dive deep into 30+ year run of hip-hop’s storied record label. Drops next week!

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