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While not all entrepreneurs are artists, all artists are entrepreneurs. More specifically, an emerging artist’s career is like a startup: they must focus on having a great product to sell, connect with their audience, grow their reach, and invest into marketing and other key areas to strategically grow. Independent artists today can do this with very little money and now have the ability to seek investment to help take their business to the next level. But what key performance indicators (KPIs), or metrics, should artists focus on to assess if they’re ready to connect with investors?
A major area for artists in the digital age to focus on is streaming. While there are over 150 streaming services globally, artists should primarily focus on Spotify, Apple Music, and Amazon Music, as these three retain roughly 65% of the global music subscriber market share today. While people in the industry reference artists’ Spotify Monthly Listener metrics to gauge relative reach, artists should also be aware of their Followers, Fan Conversion Ratio, and Playlist Reach-Followers Ratio for a clearer picture of their current standing.
The Fan Conversion Ratio is a simple calculation of Followers divided by Monthly Listeners; this helps artists understand how effective they are in capturing their audience. Not all engagements are created equal, and artists with a higher Fan Conversion Ratio have a higher percentage of listeners that are fans.▼ Article continues below ▼
Generally, for an investment model to work, our team at AmplifyX looks for artists with a Monthly Listener reach of at least 50,000 and a Fan Conversion Ratio over 2%. Artists can calculate this from their Spotify for Artists account or dive deeper using music data tools like Chartmetric.
At the end of the day, you don’t just want listeners, you want fans. Fans have a higher probability of streaming your new song 10 times in a month, buying your $50 merchandise, engaging with your social media, paying to see your next concert, and investing in your future.
Another metric we analyze is the Playlist Reach-Followers Ratio, which indicates how leveraged the artist is through Spotify playlists. This is total reach from all the Spotify playlists the artist is currently on, divided by the current follower count of the artist. Artists with a very high ratio, say over 200x, are considered to be highly “leveraged” because their current reach is coming from playlists and not from a fanbase.
Playlists are the new radio and they’re the backbone of how content is consumed today. Roughly 2/3 of the total time spent on Spotify is spent listening to playlists, according to Spotify. Playlists are a powerful medium to gain reach, and artists who’ve shown they can capture a following with that reach are more likely to be ready for investment capital.
Social media can be a powerful tool to connect with and grow a fanbase. In a study from MusicWatch, 9 out of 10 regular social media users take part in music-related or artist-related activity on their most-used platforms. Additionally, 63% of users say they’re discovering new artists on social media and almost 60% of social media users are streaming music after they see an update, tweet, or post from an artist.
Social media and music have a unique harmony together, and we believe artists showing growth and engagement through both mediums have a higher probability of a successful career and are more likely to be ready for investment. As we focus on independent artists ready for an investment, our team generally looks at artists with at least 10k followers on Instagram and Twitter with an engagement rate of at least 2%.
The COVID-19 pandemic has created an entirely new live streaming world for artists and fans. Platforms like Twitch, Fortnite, Minecraft, Wave, Facebook/Instagram Live, and YouTube Live have attracted the attention of music fans across the world and connected them with their favorite artists. This is a gold rush moment in the world of content. Successful artists, as with their adoption of social media as a tool, should explore these platforms as a tool to connect with and grow their fanbase. The demand for content and connection has never been greater; artists that simply hop on a 30-minute Instagram Live session every week and engage with their fans have a clear advantage.
As artists think about their career trajectory and whether or not they’re ready for an investment, it’s important to make the distinction between crowdfunding and an investment model. Traditional crowdfunding gives artists a platform to ask for contributions and handouts in exchange for perks (t-shirts, unreleased content, concert tickets, etc.).
The investment model carries a different mentality: artists think of themselves as startup businesses – where artists have the power to raise investment capital from their fans and a network of investors. In turn, fans have the opportunity to invest into the success and revenues of artists they love and support, while investors can support the artists that they believe have high growth potential. While investors will own a fractional piece of the artists’ future streaming royalties, artists will keep up to 90% of their monthly royalties, retain ownership of their intellectual property, and remain in full creative control over their future content. This is the essence of the AmplifyX model, and the dawn of what we foresee as a new age of engagement and empowerment between artists and their loyal fans.
Bobby Kamaris is the Head of Community Relations at AmplifyX, the only FINRA and SEC compliant platform allowing investors to build a portfolio by directly funding musicians. For more info, visit https://www.amplifyx.com