What is BitClout and Why Should Indie Artists Care?
Written by Pavel Czernek
At Artist Bridge Consulting, we work with a lot of independent artists. We help them with branding, marketing, publishing, sync, mixing, content, legal, and more, to help them get to where they want to be. The music industry is a tough sea to navigate, so we start each and every conversation like this:
An independent artist is, effectively, a business. Therefore, just as in business, it’s important for independent artists to always look out for threats as well as opportunities. I have never been so excited about a new opportunity for independent artists as I am for what I’ll be covering in this article. No, really. I mean it.
You, the artist, have a product (your music) that you want to monetize. You need to raise funds to write, record, and market this product, as well as a strategy to exploit the music once finished. Lucky for you, the number of ways to do this seems to be increasing at an exponential rate. Not coincidentally, the traditional option (signing with a label, getting an advance to record an album, and walking away with a small cut of the profit your music produces) is looking less and less attractive as more innovative and empowering technologies are developed.
This article is about a new platform built with blockchain technology that you can leverage for this purpose: BitClout. But first, I’ll give some background on a few of the pain points artists and fans face today that make the music industry ripe for disruption.
Pain point #1: bragging rights have zero value
Most of us indie music lovers have at least one artist we discovered prior to their breakout. For me, it’s Father John Misty. “Man, I’ve been blasting Father John since Fear Fun came out in 2012,” I brag to my friends who kindly pretend to give a damn.
I calculate that I’ve spent a little over $100 on FJM: two CDs ($20), two concerts ($80), and an unknown negligible amount of my Spotify membership license. How much of my $100 actually ended up in FJM’s pocket?
Assuming the accepted rule of thumb — that only 12% of music revenue goes to the artists — we land at a measly $12. From my $100, FJM got 12 bucks, the label got a big chunk, and some other players like the management and promotion got a smaller chunk. And me? I got… bragging rights.
“Bragging rights” are literally all that I have to show for being an “early adopter” of Father John Misty. 60,000 tracks are uploaded to Spotify every day. The work that I put into sifting through the noise to discover new talent amounts to nothing except for the right to brag about it. What if that weren’t the case? What if the investments I made in the careers of artists were treated just so — as investments, where I would share in their growth?
Photo by Spencer Imbrock on Unsplash
Pain point #2: fundraising is tough
Remember when the crowdfunding craze began? Everyone and their mother was on GoFundMe raising capital to record an album, go on tour, or what have you. It’s been a massive success. This technology has enabled community fundraising at scale, and numerous projects have been funded with the resultant proceeds.
One of the problems with this concept is that, well, “crowdfunding fatigue” starts to emerge. People get tired of being inundated with new projects to support, being guilt-tripped, all the while gaining little to nothing for supporting. What’s in it for them?
Sure, it feels nice to support a good cause, especially one connected to our friends and family, and we may get a nice t-shirt or water bottle out of the exchange, but let’s be honest: our pockets are not that deep. We all have bills to pay. How much disposable income can people afford to drop on new artists?
Plus, not every artist has the network, marketing know-how, or desire to crowdfund effectively. This is one of the main reasons people still turn to record labels to fund their careers, despite an archaic and unfair model where artists exchange the majority of their revenue as well as ownership of their songs for the cash needed to live and record new music.
Back to my first point — artists are businesses, so maybe it would do us well to try and learn from them. How do businesses raise funds anyway? Don’t they have startup costs too?
Great books for aspiring entrepreneurs — photo by Daria Nepriakhina on Unsplash
Removing entrepreneurs who start out with lots of capital on hand and/or rich family members, they generally seek loans, or better yet, outside investment. Investors provide the money a company needs to jump-start its engines in exchange for a piece of that company, without the need to pay back a loan with interest. Also unlike a loan, the company gains advisors who now have “skin in the game”. Someone who exchanges their hard-earned cash for a piece of a company wants to see that company grow so they can, in turn, see a return on their investment. It’s a win-win relationship, so long as both parties do their part. What if there were an easy way for artists to obtain direct investment from their fans?
Pain point #3: monetizing music is even tougher
So, you’ve somehow raised the capital to record some songs, maybe a music video, some graphics, whatever. You are ready to convert your music into cash. How to do this?
“It’s simple right? I just need to upload it to YouTube and Spotify and start posting on social media right?” Established indie artists react to the previous sentence with a combination of humor and PTSD. It is not that simple.
Newcomers often underestimate the amount of work that goes into building a following and overestimate the payout these streaming platforms provide. Did you know artists earn little more than $0.004 per stream on Spotify? Yeah. Less than half of one cent.
That means 1,000,000 streams, a massive number that makes any new artist red with desire, earns them a grand total of $3,000 — a little less than 2 months of rent in a crummy Brooklyn studio apartment.
True, there are platforms that pay a little more… some a little less. But you get my point; streaming alone does not generate a living for artists. Touring helps… but, COVID. Also touring is expensive, time-consuming (tough for artists with day jobs), and tiring. It works, though.
Pain point #4: the 3rd wheel of the creator-fan relationship
The bond between artists and their fans is closer than it’s ever been. Social Media has given artists a forum for self-expression and the forming of close bonds with their fans. It gives fans an intimate window into the lives of their idols. It’s been revolutionary for producing unprecedented fan loyalty. However, there is an awkward third-wheel in this relationship: big tech.
Spotify, YouTube, Instagram, Facebook, Twitter — these platforms write all the rules and make all the decisions — artists must comply. They rake in massive profits off the backs of artists and don’t like to share. They are more concerned with pleasing the whales of Wall Street than they are with pleasing the people who actually drive users to their platforms, attract advertisers, and keep these communities afloat. They implement and then manipulate opaque algorithms that make it incredibly difficult for creators to optimize their usage of them. They hoard valuable user data for themselves and give creators the scraps.
Why?
Because they can. They know artists have nowhere else to go (or do they?). That artists need to use these platforms to build a following. That artists who choose not to participate are falling on their own sword. The end result? Artists slave away to establish and maintain a gleaming social media presence, in exchange for minimal return on their investment.
Enter: BitClout
Alright, enough diddle-daddling. Let’s get to the point of this article.
By now, you have heard about Bitcoin, the global currency of the future, yada yada yada. You also must have heard about NFT’s. Digital artist Beeple recently sold a piece of his art as an NFT for $69 million. Did that get your attention?
We’ll get to NFT’s in a bit. First, allow me to introduce you to an exciting new project in crypto — BitClout. Funded by huge venture capital firms like Social Capital, Sequoia, and more, BitClout is a DAO (Decentralized Autonomous Organization) social media clone of Twitter, that generates a Social Token for each profile that signs up. Before I go on, allow me to first define a couple of terms:
Decentralized Autonomous Organization — an organization that is created by developers and operates according to computer code. Unlike most organizations, there is no centralized leadership, meaning all the decisions made for that organization are made by its members in a democratic fashion. BitClout has no rules for the type of content that can be posted, no banning, no curation, no ads, nothing. Just code and community. This is important because it gives artists more flexibility and control over how they manage their community without corporate rules or oversight.
Social Tokens — a type of cryptocurrency that is tied to an identity or a community. These are best explained with an example. Famous producer RAC recently went independent and launched his own cryptocurrency: $RAC. People with $RAC tokens in their digital wallets can interact with the artist on his exclusive Discord channel, get early access to new merch drops, and eventually will be able to get access to discounts, exclusive NFT artwork, and much more. $RAC cannot be bought, only earned — by supporting him on Patreon or for buying $TAPE, an NFT that can be redeemed for a limited-edition cassette tape of his album, Boy.
Screenshot from BitClout of the top 10 most valuable token
With BitClout, each new profile created is granted a social token. You may post, like, comment, direct message, and engage in pretty much every method you can on Twitter. Your token goes up and down in value depending on how many buyers and sellers your token has. My token, known as $pavy, is worth $188 at the time of this writing. Here is a screenshot of the holders of my token:
Holders of $pavy coin
The idea is this: as your “clout” increases, so will the demand for your token, and therefore the price. The driver behind demand is speculation. The more people believe in your future success, and therefore the potential for your token to appreciate in value, the more they will be willing to invest.
When an emerging artist joins BitClout, they ideally will have an established following, a catalog of songs, album artwork, music videos, and more, all of which are “collateral” that will theoretically attract investors. Investors will (hopefully) see this artist as a talented creator with lots of “skin in the game”, cohesive branding, and a bright future. As such, they will be motivated to buy the token to participate in the financial gains to be had.
Social tokens bring about a plethora of game-changing possibilities for artists, many of which I’ll cover in the following sections.
Investment from fans: fundraising on crack
Imagine your earliest fans — your parents, best friends, and hometown community could share in your growth. Let’s say you need funds to buy some home recording equipment. Instead of begging those in your inner circle for money, you can ask them to invest in you by buying your token. As your career develops, more people buy your token, the token price goes up, meaning your early investors see a return on their investment (ROI). This is easier to ask for than a donation, as inherent within the request is the potential for the requestee to realize financial gain: incentive.
As an artist, you know how painful it is to ask people to like, share, comment, and spread the word about your new music or content. People agree to do this, a tad begrudgingly, because they care about you. That’s all fine and well, but what if there were also a financial incentive for people to help you gain exposure? BitClout provides this for you. Early investors are incentivized to get as many people to board your ship as possible, and will actively champion your growth just as your family does.
Labels invest in emerging artists too, but there are several key differences:
You must have traction already to get a label’s attention: a social media following, branding, songs, etc. Many artists face the chicken-and-the-egg conundrum: “I need money to record, create content, and build a following, but I need recordings, good content and a following to get money.”
Their investment comes in the form of an advance, which is more like a loan than an actual investment: you must repay this loan with the royalties your songs generate.
In exchange for this money, you give up ownership of your music: the label gets control of the exploitation efforts, and you expose yourself to the serious risk of getting poor, low effort, or toxic representation. Emerging artists are especially at risk.
If you are successful, the label profits, not your fans: …enough said.
Who wouldn’t want their fans to share in their success instead of a major label? Also, for the first time ever, the masses have a powerful incentive to find and support emerging artists: money. That’s right, and while I know full well that that last sentence might make some of you sick to the stomach, I implore you to seriously consider the implications of those words.
Because of the BitClout price curve, people are now financially motivated to find your profile as early as possible and to help you grow to be as big as you can be, given that you show potential. How cool is that? That has NEVER been the case before. Ordinary people are looking for you — that is one hell of an opportunity.
Monetization opportunities abound
The most obvious monetization strategy is to buy a large chunk of your own token at the beginning, when the price is at its lowest, and to sell bits of it as the value increases. However, as you sell your token, the price will fall, and your investors will not be happy. Artists will need to be really careful and transparent about how they handle sales of their own token so as to not trigger “sell-offs”. My advice is to come up with a strategy, clearly communicate it early on, and stick to it.
An example would be to guarantee your investors that you will not sell any of your tokens until they pass a certain price threshold and that you will only sell a certain amount at a time. A cool aspect of crypto is that these commitments can be codified into smart-contracts, removing the need for trust. If you have a smart contract that doesn’t allow you to sell before you reach a certain price threshold, it literally will not be possible until said threshold is reached. These types of policies lure investors in, as they can feel somewhat confident that the value of your coin will appreciate, or at least not tank because you decided to sell all your tokens.
Artists will also need to be creative about how to incentivize investors to hold onto their coin long-term, just as companies must incentivize investors to hold onto their stock. Fortunately, the number of ways in which artists will be able to do this is unlimited. For the sake of brevity, let’s take a look at a few ways companies are doing this today.
Dividends: commit to sharing some profits with your holders by directly sending them more of your coin.
Buybacks: commit to allocating a certain percentage of revenue to buying more of your token, thereby increasing the value of it.
Having a strong roadmap: investors invest because they believe the entity they invest in will grow in the near to long term. Create an excellent growth strategy that clearly details how you plan to grow. Allow anyone to access, read, and provide feedback on it.
Hiring a strong team: surround yourself with people who have solid reputations — this will give investors confidence in you.
BitClout social tokens are extremely flexible. The code for the platform is open source: no black-box algorithms, no secrets. Taken directly from the whitepaper: “anybody can build apps on top of the BitClout data without the risk of being de-platformed”. That means that your token is not constrained to BitClout and that it can be used for any purpose you want. This also means it’s only a matter of time before we see decentralized versions of Instagram, YouTube, Facebook, and TikTok that utilize BitClout’s tokens.
Indeed, we will see a plethora of applications on which BitClout tokens can be used and traded, many of which will help creators monetize as well as interact with their fans in novel ways.
Before we examine some monetization and incentivization strategies that are only available in the crypto world, it’s important that we cover NFT’s. If you don’t understand NFT’s, this graphic will help:
Credit: Rhett/Mankind (the link has a great video explanation!)
NFT’s are digital assets, that can contain any digital file, from videos to artwork, music, and more. It stands for Non-Fungible Token. What does non-fungible mean? The Mona Lisa is a non-fungible work of art. Millions of replicas have been made to look like the painting, but there will only ever be one painted by Leonardo himself — the one sitting in the Louvre in Paris. In the art world, we trust the consensus of authorities (art historians) to establish which pieces of art are originals and which are not.
Establishing authenticity in the crypto realm is much simpler, thanks to blockchain technology. NFT’s are assigned a unique “cryptographic signature” (you don’t need to know what that means, just accept that they are unique) when created that remains attached to the NFT no matter where it goes. The cryptographic signature is recorded on the blockchain, which operates on an automated, distributed consensus mechanism, replacing the need for art historians.
An NFT has value in the same ways the Mona Lisa has value — scarcity, and authenticity. The fact that The Mona Lisa can be replicated does not diminish the value of the original, just as with an NFT. However, the NFT has additional inherent value in that it can be used in any NFT-supporting application across the Ethereum ecosystem (Ethereum being the cryptocurrency that has its own programming language with which developers can build applications). If it’s digital art, it can be hung on a wall in your digital art gallery on Decentraland, a virtual reality crypto world. If it’s digital shoes, those shoes can be worn by characters on Ethereum-based video games. In short, NFT’s are way more versatile than real-world non-fungible assets like fine art.
In March 2021, The Kings of Leon released the first-ever album sold as an NFT. The NFT album came with numerous perks attached, such as front-row concert tickets, exclusive digital art, etc. What’s more, these NFT’s have a lifetime royalty attached to them. Any time they are resold in the future, The Kings of Leon receive a percentage of the sale (donated to charity in this case). NFT’s give power to artists in that they can choose where to make them available, how many copies to mint, what price to charge for their work, and attach their own royalty rate if they so choose.
Some further ideas for monetization and incentivizing the purchase of your token:
NFT lotteries for token-holders: put your digital assets up for lottery as NFT’s — album art, B-sides, outtakes… literally anything. Think of NFT’s as collectibles — how much would people be willing to pay for a unique master of an unreleased Beatles track? That is part of what drives interest to these.
Concert ticket giveaways: concert tickets can also be NFT’s. Offer free concert tickets to the top 10 holders of your coin, or to 10 new buyers of your coin.
Post your music on Audius: a crypto streaming platform where you can choose how much users must pay to listen to stream your music
Conclusion
In 1994, in the early days of internet adoption, do you think anyone could have predicted the rise of music streaming and its ensuing complete and total disruption of the music industry?
Of course not. Spotify, Apple Music, SoundCloud — these are natural evolutions of the digital age, which, although easily explainable in hindsight, were nearly unpredictable 25 years ago.
Ten years ago, in 2011, Bitcoin was worth $1. How many of those early adopters do you think knew it would be worth more than $57,000 today? Very few, I’d wager.
Bitcoin’s price history — today (March 28th, 2021), it stands at just over $57,000
Today, the cryptocurrency scene is booming. Everyone seems to be jumping on the bandwagon — from Elon Musk to investment banks, celebrities, athletes, and more.
When I first found out about BitClout, I could hardly sleep. I was so excited. From the moment I understood the concept, I was certain that it would become huge. Adoption will take time, but definitely not the 10 years it took Bitcoin. A couple of key points make me believe that it will catch on quickly:
BitClout has launched at a time where crypto is becoming mainstream
Decentralization: Twitter, in particular, has received a lot of pushback of late in their silencing of Donald Trump and other controversial profiles — people will be drawn to a place of truly free speech
Social Media’s gamification (being rewarded with likes and follows for quality content) makes it incredibly addicting — the financial incentive adds fuel to the flames
The music industry is broken, which has never been displayed so clearly as it has with COVID stripping artists of their touring revenue — artists are desperately seeking new monetization methods
As mentioned before, this is a young platform built on fairly young technology. Best practices will eventually come forward, and we will be able to provide more coherent advice as to how exactly you should approach your social token.
That being said, one thing is for certain: artists who take the time to understand crypto, and furthermore to start experimenting with it, will be way ahead of the game. This is going to be the biggest disruption to the music industry since Napster, and those who familiarize themselves with the tools at their disposal early will be rewarded greatly.
For questions, feedback, or inquiries, email me at pavel@artistbridgeconsulting.com.
“Our guide provides readers with information on NFTs, how to buy them, and the risks to keep in mind.”
Read more on investing: NFTs, explained: What are these hot digital collectibles bringing in million
