The Anatomy of an Online Music Venue

November 2020

The spaces we spend time in are not all physical places anymore. Increasingly, they are online - experienced through our screens. Online music venues (OMVs) are one of these spaces.

Imagine opening Netflix to watch a movie, but all that's available to watch are recordings of theatrical stage plays shot from a balcony. It sounds ridiculous, but this is the quality of content that we settle for much of the time with live music online.

But it doesn't have to be this way. Live music performances can be produced specifically to be experienced online - and OMVs do just that.

Read on to find out how you can tell if the content you're watching came from an online music venue, or if it's just a recording of live music that was put online. I will also dive into a breakdown of the OMV business model, comparing them to traditional music venues and explaining how the online ecosystem has shaped the content they produce and the ways they monetize it.

What is an Online Music Venue?

An online music venue is a place you go online to see live music. They reside on platforms like YouTube. They are made up of video recordings of bands playing live music. My favorite examples are Colors Studios and NPR Tiny Desk. (See here for my rough case study of Colors Studios).

Online music venues are persistent and consistent. This is what makes them a place, not just a piece of content. Shows happen regularly, and have a distinct style that you can recognize.

Imagine walking into your local music venue on a random night. You might not know exactly what band is playing, but you have a good idea of what to expect. You could guess how many people would be there, what types of people, and how long the show will last. There's a consistency to it.

It's the same with OMVs. When you click the thumbnail on YouTube and enter through the front door, you already have a good idea of the experience you're about to have. You know what the sound quality will be like, how long the set will be, what the stage looks like, and even what the comments section might look like. It's consistent, like going back to the same venue you've attended for years.

The other defining characteristic of OMVs is that the performances they showcase are produced and recorded specifically to be experienced online. They are online first.

The other type of live music content you will find online is recordings of concerts at traditional venues. These productions prioritize the live concert first. The online content is a secondary product.

This generic style of content is not consistent. Video quality is generally lower, and the crowd gets in the way of certain shots. The band addresses the crowd (not you) between songs. Visual effects are used based on what looks good to people at the show, not the viewers on their screens. These small details add up and break the immersion. They are the difference between being at an OMV and watching generic footage of live music.

Different Environments

The comparison between traditional music venues and OMVs is useful, but the experience you have at each is quite different. The format of the shows each evolved in their own way because of the unique environments they reside in.

Shows at traditional music venues operate in an environment of scarcity. A band can only be on one stage at a time, and can only travel to a certain city once or twice a year. A ballroom can only physically fit 2000 people. It is costly for the people involved - the band, crew, staff, and fans - to move through space to arrive at the venue.

These shows are one-off events; they are consumed once, in real time. They are relatively costly to produce, so they must last long enough to collect a suitable amount of revenue from fans. Luckily the fans spent time and money getting to the show, so they want a long experience too. The result is that there isn't much room for flexibility. Traditional venues are locked into providing an experience that is 1-3 hours long and brings in $25-$100 per person between ticket and drink sales.

Well what about OMVs, why are they so different? They operate in an environment of abundance. Restrictions from time and physical space don't apply.

A Tiny Desk concert on YouTube can be watched by millions of people spread all across the world on the same day. It costs NPR the same amount of money to produce and distribute the show whether it is attended by a hundred people, or a hundred thousand. It is relatively free for fans - in time and money - to access a show. It just takes a few clicks on the device of your choice and you're at the venue.

As a result, the business model of OMVs and the format of their shows is very different from that of traditional music venues.

The Online Music Venue Experience

Shows at OMVs are not one-off events. They are recordings that can be played over and over, by an unlimited amount of people, forever. This is the main difference between traditional shows and those produced by OMVs. Traditional shows are consumed by fans in real time, together. OMV shows are consumed by fans at different times, alone. One is synchronous, the other asynchronous.

The reason OMV shows are asynchronous can be summarized as follows: the experience of watching a livestream is not much better than watching prerecorded content, but prerecorded content monetizes much better than livestreams and allows for better production values.

We are in the early days of being able to participate and interact in online spaces. But consumption works quite well with video content. You can see the artists clearly and hear the music beautifully - but the social concertgoing experience is not as rewarding online.

There is no journey to and from the venue with friends, and its accompanying conversations. Live chatrooms are a poor substitute for the energy and atmosphere of a concert floor. And no matter if the video you are watching is livestreamed or prerecorded, the artist is still far away, trapped on your screen. This means that the economic and production value benefits of prerecorded content win out.

Real time consumption locks you into heavily monetizing a big chunk of time. The prerecorded content model allows for more freedom. The amount of revenue made scales (roughly) with the length of content. You can produce single song shows at 4 minutes long, a short set of 16 minutes, or a full blown concert an hour long. This allows the content to reach a wider audience. Listeners can consume more live music because it fits into the random time slots throughout their day better.

Now let's take a closer look at how the OMV business model works.

Business Model and Monetization

I call these businesses online music venues because that's what they look like from the perspective of a listener. However, when you consider the methods through which they monetize, they look more like record labels or advertisers.

The shows that OMVs produce are pieces of content. They have the same attributes as the recorded songs that populate your Spotify library or CD collection, they just have an added video element. So they monetize in the same way. They produce revenue for a lifetime, as long as people continue to consume them, one stream at a time.

The content OMVs produce is multiplatform. Maybe the main piece of content you create is a YouTube video, but you can cut out a 15s clip for an Instagram story, or isolate the audio track to upload to Spotify.

To give you an idea of the amount of revenue this content can bring in, YouTube views monetize at about $3-$5/1000 views. Spotify pays out about $3.5/1000. There are other streaming services with their own unique pricing, but these two big players give a good picture of the landscape. For an example, using an average rate of $4/1000 it takes 250m streams for an OMV to make $1m revenue.

Consider an OMV that produces two recordings a week. After six weeks, they have a collection of twelve songs that they own part of the royalties on. The revenue they make from those twelve songs will be similar to that of a record label that has a signed artist releasing an album.

Like record labels, OMVs slowly build up catalogs of content that monetize for a lifetime. But they don't sign artists to long, all-encompassing deals. These types of deals work well for artists. It's hard to accurately predict the value your music will have over the course of years. Small short term deals give artists the flexibility they need to make intelligent choices.

OMVs don't own just the content, but the distribution as well. They have control over the YouTube page, the Instagram account, and the Spotify playlist that holds their songs. This marks another economic flip from traditional to online music venues.

Traditional venues sell fans access to artists via tickets. But shows at OMVs are basically free. Instead, they sell artists access to fans that follow their channels. This is the advertising angle. However, the economic benefit doesn't show up as advertising revenue, but as decreased talent costs. Bands will be willing to play shows for relatively low pay if it gives them exposure to a large number of new fans that will pay them in the future.

The other main asset an OMV has is its brand. Music fans don't just consume, they want to signal and socialize around the brand and their shows as well. Part of going to a show is being a member of that community. Seeing and being seen. Now while you can't exactly be seen at an online show, you can signal your allegiance in other ways. An Instagram story post, a Tweet, or directly linking a show to a friend. OMVs capitalize on this by selling merch - again Colors Studios is a great example. If you can't be seen at the show, being seen in the shirt is the next best thing.

Wrapping Up

I'm excited to see what further innovations are still to come from OMVs. These businesses are vertically integrated, handling their own production, marketing, and distribution. But it's possible that they can use their reach and close relationships with artists to add even more revenue streams. They could work out longer term deals with artists and become neo record labels like Amuse has done with their music distribution app, or use their brand awareness to launch traditional live concerts or a festival.

Live music is a timeless form of art, and it makes sense that fans want to see it presented in a way that maximizes its value for the medium through which we experience it - screens. Online music venues are not new, but I believe they have a long way to grow. They will be mature once every touring band marks off at least one or two as they plot their travel plans across the globe.

If you have thoughts on this essay, please leave them here.