What better way of starting my witterings about all things music biz, rights ownership, Web3 and the Metaverse than the announcement by Spotify that they are buddying up with popular gaming platform ROBLOX to create ‘Spotify Island’. It’s a hugely significant play for Spotify and heralds the first dip of their big Swedish toe into the uncharted pond-water that I like to call digital reality. Exciting times, but what does it actually all mean? 

Spotify’s metaversal partnership with ROBLOX is a strategic move allowing cohesive integration of artist and fan experiences in essentially a fun Spotify ‘VERCH Park’ where they can gather to play interactive quests, unlock exclusive content and purchase merchandise. Basically - hang out, shout into headsets, spend money; if this really is an island then it’s surrounded by an ocean of parental cash.

The slightly autologically named Spotify Island, if nothing else, will end speculation regarding the DSP opening a satellite office in Dublin (and yes, I have been planning that hilarious gag for DAYS). The virtual space manifests as a central area surrounded by a series of themed islands and allows users to move between the various sectors. I must say, it does look like a heap of fun, bouncing about with a crew of mates backdropped by a massive music event, having a right laugh online and spending vast sums of your parent’s cash (in case I haven’t yet mentioned that vast sums of adult owned cash gets spent by kids at these things).

Importantly, and I believe this is the most interesting aspect of what Spotify says - and also hints at a potentially seismic shift towards a game based music industry - it’s vision is to turn ROBLOX players into creators themselves, initially by having players create sounds at its virtual beat-maker stations powered by Spotify audio creation tool Soundtrap, and by moving around a stage where they can interact with ROBLOX items. Over time, the company said it plans to expand on this ‘creator hub’ experience. Soundtrap’s raison d’être is to “democratise and empower high-quality collaborative music-making”. The Soundtrap Studio was launched in 2013 as the first web-based, cross-platform, collaborative music recording studio. There’s a free version, a £6.49 per month and £9.99 per month music maker version, a podcast version at £9.99 p/m and an ‘all in’ £10.99 p/m complete version. 

So, in short, (spelling it out) Spotify wants to empower gamers to become creators. One has to assume this is because they see a big opportunity to upsell Soundtrap subscriptions, filtrate music and content directly into the Spotify ecosystem without any of those annoying rights owners getting in the way, and monetise the musical output created within this interactive environment. Here is our glimpse into the future of an entirely gamified Web3 music industry, folks….. clearly this virtual stuff just got real.

Is there further music industry context here?

Yes. The business reality is this represents a blip of exciting news in an otherwise temporarily declining sector. ROBLOX share price has been taking an absolute battering recently yet rallied +6% as a result of the announcement. So the City noticed and cared, which is nice.

The wider context for big music companies AKA recorded music rights owners, and its artists, is far more interesting, in my opinion. 

As everyone knows, the major labels (plus the indie Merlin) negotiated a slice of Spotify in order to let the music even play in the first place.

Post Spotify’s IPO, a decision was taken by Warner Music Group (WMG) (and also the same decision was made by Merlin) to sell their shares and cash out early; by doing so they played good business darts and got out at a market cap $7bn higher than it is currently (accepted that in early 2021 Spotify peaked at over $60bn, but now it's $19bn and anyhow, that's showbusiness for you).

Sony partially cashed out, Universal didn’t cash out. They, quite rightly, claimed that by piggy banking their shares they maintained their excellent working relationship with Spotify and it was good for them, good for artists, good for investors. Essentially, they still had a bit of skin in the game by way of shares whereas WMG did not to the same extent. However, clever old WMG took their cash and bought a minority stake in ROBLOX in early 2021 for a reported “eight figure sum”. This buy in, one presumes, allows for them to have greater opportunity to promote their artists in cahoots with ROBLOX and now, guess what, they can do this on Spotify Island as the licensing process for WMG activating the platform is surely a no brainer. 

So Warner are sat back at the table, only it’s a virtual table in a more progressive sector than boring old fashioned music streaming and, as WMG Chief Digital Officer Oana Ruxandra said herself in her recent Music Week piece, “Gamification is a big part of keeping interactivity, engagement and excitement going…. you’ll see us spending a lot of time in the gaming area, there will be so many opportunities for cross-pollination.” The extremely well known David Guetta has already done an avatar DJ set within ROBLOX, plus TwentyOnePilots and BBC Sound of 2022 topper PinkPanthress have also had a go in there.

But, and I will be bleating on about this like a trapped sheep, labels can only seriously monetise virtual merchandise - VERCH - if they own the rights to do so. No merch rights, no name and likeness rights, no dice. 

Let’s refresh what I said Spotify said earlier. Spotify’s partnership with ROBLOX is a strategic move allowing cohesive integration of artist and fan experiences where they can gather to play interactive quests, unlock exclusive content and purchase merchandise. Whilst there will no doubt be some excellent promo opportunities here, labels need to be operationally capable of creating VERCH the fans want (once they’ve nailed down the artists who are willing to interact as an avatar with their fans online in the first place). If they don’t own the merch rights then all they can hope for is a cut that would likely need to be individually negotiated by their business affairs team and the artist’s lawyer or manager. Plus they would need to agree how that money is paid through and apportioned. 

This raises three questions. 

How generous are increasingly powerful managers going to be towards the labels if the labels do not own any rights to exploit their artists in this space? 

How much operational capacity - both marketing toolkit and legal bandwidth - does any rights owner really have at the moment to make this commercially viable? 

In a rapid fire signings environment, where the notion of ‘the album artist’ looks like your Nan on a skateboard, how many artists are having meaningful label negotiations about including merchandising, name and likeness rights into their relatively short term recorded music agreements? 

I think it’s going to be so interesting to see how quickly these Metaverse based digital reality concepts really get traction, and if existing rights owners are even able to keep up. 

If this article raises any questions for you or your business and you need some input surrounding Web3 and Metaverse related rights acquisition and ownership, please do get in touch to discuss further.