March 2, 2022: Bandcamp puts out a press release about their “joining” Epic Games. This follows in a line of eerily similar acquisitions of companies catering to indies, namely Sketchfab and ArtStation.
There are lots of interesting topics intersecting here:
- Venture capital and the associated perverse incentives
- Antitrust and general issues with corporate consolidations
- The takeover of existing institutions, especially technical infrastructure
- The false narrative of corporations as indie and non-corporate
- Epic vs Apple and problems of platform monopoly
- Bandcamp’s correct but rare approach to piracy, which is endangered
I’ll talk more about those some day, don’t worry. For now, though, have some tweets.
Wed Mar 02 18:04:16 +0000 2022the problem with making a good website is that sooner or later someone will offer you an un-refusable amount of money to ruin it twitter.com/Bandcamp/statu…
@mcclure111 on acquisitions in the tech industry and how/why being purchased by a large company often destroys the small acquisition:
Wed Mar 02 23:40:04 +0000 2022A basic fact of life in the tech industry is often a company will all of a sudden wind up with a bunch of cash, because they made money quicker than they expected— thinking here Epic Games, Apple, Facebook— and will start acquiring companies *just to do something with the money*.
Wed Mar 02 23:40:04 +0000 2022A basic fact of life in the tech industry is often a company will all of a sudden wind up with a bunch of cash, because they made money quicker than they expected— thinking here Epic Games, Apple, Facebook— and will start acquiring companies *just to do something with the money*.
Replying to mcclure111:Wed Mar 02 23:40:05 +0000 2022Generally you don't want to have cash reserves. Money stored in cash is "unproductive"; investing or buying a productive business can bring money in year over year, so leaving it in a bank account is an opportunity cost. Plus surplus cash means investors clamoring for dividends.
Replying to mcclure111:Wed Mar 02 23:40:05 +0000 2022Moreover what I *assume* to be the case (tho corp-scale taxes are complicated so I'm nervous I'm about to say something wrong) is random acquisitions are a tax deferral ploy. Excess revenue gets taxed; but spend it on buying something big, & you don't get taxed until you sell it.
Replying to mcclure111:Wed Mar 02 23:44:48 +0000 2022Anyway if $BIGCORP buys $SMALLCORP_YOU_LIKE, and you're nervous because you can't imagine why they would do that, maybe it's *literally* as a cash disposal method.
Now get nervous again. Since if $BIGCORP sincerely doesn't care about SMALLCORP, there might be a death timer going
Replying to mcclure111:Wed Mar 02 23:44:48 +0000 2022Consider the specific case of Epic Games buying Bandcamp. Bandcamp is productive; Epic isn't going to dismantle it.
However chances are good Epic will sell it off one day, esp if it starts having financial trouble— probably to an investment bank that breaks or disassembles it.
Replying to mcclure111:Wed Mar 02 23:50:22 +0000 2022G/O media is a good model to look at here. Sometime around 2016, Univision made a ploy to break into English-language online publishing. It didn't work out. They wound up bundling the Onion and all the Gizmodo sites together into a new entity & selling them to an investment bank.
Replying to mcclure111:Wed Mar 02 23:50:23 +0000 2022The new owners proceeded to try to wreck the place. They're hollowing out the Onion+AV Club, & are trying to break the Gizmodo union (which is at this second on strike). AFAIK, Univision doing all these acquisitions was benign; but *when Univision lost interest*, then it got bad.
My Emu Is Emo on venture capital and private equity:
Wed Mar 02 20:32:41 +0000 2022This, my dear indie musician friends, is a private equity firm's exit strategy on its investment in Bandcamp, so (a) you're not wrong in feeling mangled by greed and (b) I'm going to tell you, in broad terms, what's behind the curtain. #bandcamp 1/?
Replying to myemuisemo:Wed Mar 02 20:34:07 +0000 2022Bandcamp has (had) one known investor, a venture capital firm called True Ventures. The size of their stake is not available to me: their materials say they usually aim for about 25% of the company, but it varies.
What matters is what VC does and why. 2/?
Replying to myemuisemo:Wed Mar 02 20:35:49 +0000 2022VC firms like True Ventures provide capital for start-ups to... well... start up. This can be a very early stage to bootstrap the company into existence, or it can be a slightly less early stage to expand. I don't have info on which it was with Bandcamp, but it doesn't matter. 3/
Replying to myemuisemo:Wed Mar 02 20:37:24 +0000 2022Typically, people starting a company do a first, informal round of funding by hitting up their friends & family. After that, they start looking for investors, either among VC firms or among rich people looking for private investments. 4/?
Replying to myemuisemo:Wed Mar 02 20:38:59 +0000 2022A company may do several rounds of VC or they may get a big investor & only do one. What's important here is two things:
1) This kind of investing is very high risk. Most start-ups fail.
2) Investors are focused on an exit strategy. 5/?
Replying to myemuisemo:Wed Mar 02 20:40:22 +0000 2022An exit strategy is how early investors get their money back. There are two conventional exit strategies:
1) Go public (IPO).
2) Get acquired.
Once Bandcamp got in bed with a VC firm, one of these outcomes was going to happen if the company didn't outright fail. 6/?
Replying to myemuisemo:Wed Mar 02 20:41:30 +0000 2022So why doesn't Bandcamp go public? We don't know, because as things stand, they don't have to disclose any financials. There's nothing really comparable in the music space & the last few major labels are mostly subsidiaries of larger companies. 7/?
Replying to myemuisemo:Wed Mar 02 20:43:36 +0000 2022Going public is expensive af, it opens the company to long-term financial compliance expenses, & it requires either being profitable or having a super-exciting growth story. So there are lots of reasons why Bandcamp could be a perfectly nice company that doesn't want to IPO. 8/?
Replying to myemuisemo:Wed Mar 02 20:45:10 +0000 2022Being acquired, on the other hand, just calls for having something that another company wants. It can be the actual business, but it can also be talent, patents, customers, clients... 9/?
Replying to myemuisemo:Wed Mar 02 20:46:53 +0000 2022All you indie musicians using Bandcamp qualify as an asset that could be interesting to a buyer, regardless of how profitable Bandcamp's business model is (which we don't know either way). So yeah, in a sense, you've been sold to Epic, as has the user base of music buyers. 10/?
Replying to myemuisemo:Wed Mar 02 20:49:29 +0000 2022What Epic Games intends to do with indie music and indie music buyers is another kettle of fish; I haven't looked at them beyond noting that Tencent owns a bit under half the company, which doesn't exactly put the yee in my haw. 11/11
Future of Music Coalition on the important role Bandcamp has, and the qualities it will need to preserve in order to still be decent and non-exploitive:
Wed Mar 02 18:56:08 +0000 2022You can bet we have a lot of complicated thoughts about this! 🧵 twitter.com/Bandcamp/statu…
Replying to future_of_music:Wed Mar 02 18:56:08 +0000 2022Too few companies have too much power in every part of the music business. It's easy to understand why mergers and acquistions are viewed with serious skepticism. And some in the music community have real frustrations with how Epic has dealt with music licensing in the past.
Replying to future_of_music:Wed Mar 02 19:01:06 +0000 2022It would be really easy for Bandcamp's new owner to squander the goodwill that the service has banked over the years with artists, indie labels, and music listeners. But the service is profitable NOW--it doesn't need to change course from the principles that made it successful.
Replying to future_of_music:Wed Mar 02 19:03:58 +0000 2022In evaluating this merger, that's perhaps the key question: does Epic fundamentally understand what those principles are? And is Epic comfortable with committing to them moving forward?
Replying to future_of_music:Wed Mar 02 19:06:07 +0000 2022Those principles include:
(1) clear, fair, and transparent terms
(2) neutral and nondiscriminatory treatment of all the artists and labels they work with (no sweetheart deals or equity stakes for big rightsholders)
(3) absolutely no payola of any kind in any part of the platform
Replying to future_of_music:Wed Mar 02 19:12:10 +0000 2022(4) centering the needs of artists, especially those whose work is not aiming for mass scale in platform design and new feature development
(5) investment in original high quality journalism that centers diverse communities and musical traditions not covered elsewhere
Replying to future_of_music:Wed Mar 02 19:14:12 +0000 2022(6) treating music listeners respectfully, rejecting the kinds of surveillance technologies and user monetization schemes running rampant on some of the major music platforms
Replying to future_of_music:Wed Mar 02 19:19:03 +0000 2022(7) valuing music itself by allowing artists to set pricing--rejecting the notion of music as loss leader
(8) never joining in efforts by large firms to drive down the value of music in ratesetting processes or working to limit musicians' rights over where/how their work appears.
Replying to future_of_music:Wed Mar 02 19:29:14 +0000 2022These are some of the guardrails that Epic will need to be mindful of if they want Bandcamp to remain a partner that musicians value and trust. That path is clearly available to them.
Replying to future_of_music:Wed Mar 02 19:35:51 +0000 2022One of the factors that drive mergers and acquistions is the belief that additional resources can encourage growth. In the past, Bandcamp's growth strategy has been simple, slow & steady--to provide a solid value proposition for artists and indie labels and fans.
Replying to future_of_music:Wed Mar 02 19:42:34 +0000 2022Many artists would certainly prefer an environment where a larger percentage of overall music consumption is happening through Bandcamp, rather than the mainstream full-catalog on demand streaming services that currently undervalue their work.
Replying to future_of_music:Wed Mar 02 19:48:19 +0000 2022But one of the pitfalls of mergers and acquisitions is the potential for new gatekeeping or exclusionary behaviors to emerge. So: musicians are going to watch close, and try and keep 'em accountable.
Replying to future_of_music:Wed Mar 02 19:52:32 +0000 2022Epic has made a compelling case in antitrust suits and in legislative debates that certain app store policies amount to anticompetitive practices by Apple and Google. Notably, those policies have also been a problem for Bandcamp, and are likely a factor inhibiting its growth.
Replying to future_of_music:Wed Mar 02 20:28:49 +0000 2022This points to some important context: we have to understand the market dysfunction that has led to Bandcamp's artist friendly policies and payment structure being such an outlier. That's the result of decades of failure by US antitrust regulators and enforcers.
Replying to future_of_music:Wed Mar 02 21:27:34 +0000 2022Tencent’s role as 40% owner of Epic adds another set of potential concerns, over what antitrust nerds call “horizontal shareholding” and “vertical shareholding,” given that Tencent has investments in major music companies and in streaming services.
Replying to future_of_music:Wed Mar 02 21:33:10 +0000 2022Still, the details really matter. Vertical/horizontal shareholding can alter business imperatives, but it doesn’t necessarily equate to voting power or operational control.
Replying to future_of_music:Wed Mar 02 23:05:45 +0000 2022So:
1)we watch closely.
2)we hold ‘em accountable.
3)we work to address the systemic problems that lead to market dysfunction in recorded music.
4)we push for reinvigorated antitrust enforcement and regulation.
5)we address musicians’ lack of collective and individual leverage.
Ron Knox on Epic in particular, and the streaming market:
Wed Mar 02 18:05:28 +0000 20221. I'm still trying to wrap my mind around this, but, as someone who is deeply cynical of consolidation, here are some quick reactions to Epic Games buying Bandcamp. twitter.com/Bandcamp/statu…
Replying to ronmknox:Wed Mar 02 18:06:58 +0000 20222. As always, my primary concern here is with the independence and finances of artists and their labels. Bandcamp isn't perfect, but so far it has been a noble and sometimes successful attempt at recreating the brick and mortar record store online. It's too important to lose.
Replying to ronmknox:Wed Mar 02 18:10:19 +0000 20223. There are a few ways Epic could improve Bandcamp, and I suspect it might.
It should fight for fans to be able to buy music from their phones within the Bandcamp app. Doing so would help artists and fans. Epic deeply understands Apple's payment monopoly - and how to fight it.
Replying to ronmknox:Wed Mar 02 18:12:56 +0000 20224. At the moment, Apple doesn't allow third-parties to accept payments for anything - whether it's Fortnite skins or albums on Bandcamp. That has forever been a barrier for the platform - and one Epic is obviously willing to go to war for.
Replying to ronmknox:Wed Mar 02 18:13:29 +0000 20225. Epic could also help create a thing fans have been asking for for years, and that is now occupied by third-party software: Playlists.
Bandcamp playlists would be massively popular. But the worry, for me, is that it would lead to something else entirely.
Replying to ronmknox:Wed Mar 02 18:15:29 +0000 20226. My concern is that Epic looks at Bandcamp as sees the potential to create its own, very profitable streaming platform.
Maybe it would be better than Spotify and the others, maybe it pays out more royalties. But the core business model of streaming remains bad for artists.
Replying to ronmknox:Wed Mar 02 18:17:19 +0000 20227. At the moment, streaming on Bandcamp on mobile does what all streaming companies claim to do - offer a preview of music, so fans can then decide whether they want to pay for an album. On Bandcamp, it's a necessity. You can't keep streaming without buying. That's the model.
Replying to ronmknox:Wed Mar 02 18:19:24 +0000 20228. Were Epic to undo this model - if it unlinked streaming from buying a song or album - it would crater the core purpose of the platform entirely.
I'm worried that - given Epic's love for subscription models in games - that's exactly what it wants to do.
Replying to ronmknox:Wed Mar 02 18:22:09 +0000 20229. The other concern of course is that Epic starts pinching from artists' current cut of sales on Bandcamp. There's an argument that, hey, even, say, a 70% cut is far better than the penny fractions bands make from Spotify and YouTube.
But that's not really the point.
Replying to ronmknox:Wed Mar 02 18:24:55 +0000 202210. I have other worries - some less likely than others. Would Epic have right to first refusal for licensing? Would bands have to check if Epic wants to turn a song into an emote before licensing it some other way?
Probably not, but it's a thought. Stranger things, you know.
Replying to ronmknox:Wed Mar 02 18:26:47 +0000 202211. Would Epic allow fans to stream more music, more times, without paying out royalties, because Bandcamp remains primarily a shopping site? At some point, Epic would be blatantly picking artists pockets.
Replying to ronmknox:Wed Mar 02 18:28:22 +0000 202212. Anyway, those are some initial thoughts. I want to be optimistic about this. I love Bandcamp, I've written words for their editorial products before. I want it to remain intact, for artists and for fans.
But time will tell. /end
Megan Fox on venture capital:
Wed Mar 02 21:36:43 +0000 2022Anyone wondering why Bandcamp would sell?
They were VC funded. This is what happens when you take VC money. You're not able to structure in a way that would block their exit, and they will insist eventually if they can find or get given an offer. crunchbase.com/organization/b…
Replying to glassbottommeg:Wed Mar 02 21:38:39 +0000 2022VC do not give money out of the goodness of their heart. They just want to make more money. If your profits don't suit their desires, then they look for other exits, like a sale event. It's really that simple. And it sucks. Eyyy, capitalism.
Replying to glassbottommeg:Wed Mar 02 21:40:25 +0000 2022Is it the VC's fault? Not precisely? It's just kinda baked into the relationship. In a better world, you wouldn't have to take VC money to build and scale your business. We'd have public funds for that, to encourage stable, long-term business. It's fucking abysmal that we don't.
Replying to glassbottommeg:Wed Mar 02 21:42:27 +0000 2022@glassbottommeg Still countin' down the days to when this exact same disaster strikes Patreon (which has done multiple rounds of VC funding over almost 10 years, so I feel like it's just a matter of time).
Replying to glassbottommeg:Wed Mar 02 21:44:03 +0000 2022Yuuuuup.
Or Discord. Or Twitter. Or literally any other tool indies have built their whole ass business around that is great for bringing people together but hasn't managed profit yet. twitter.com/Campster/statu…
Wed Mar 02 19:09:27 +0000 2022tbh I think the thing bumming everyone out about Bandcamp is that we're being reminded that there's no room in the current way of the world for a modest, sustainable success that generally benefits everyone opting into it. the sane option just never stays on the table very long.
Replying to Nash076:Thu Mar 03 01:17:09 +0000 2022There is no other platform. There is absolutely *nothing* like Bandcamp. Even Soundcloud is a ridiculously pale shadow.
This is a fucking catastrophe for the entire music industry. twitter.com/Abstruse/statu…
…Okay, since I haven’t seen anyone else talk about it, let me talk about piracy for a second.
Bandcamp has always understood the truth behind piracy; most piracy is due to the market not providing a good product. People are generally happy to pay for their entertainment and compensate artists. The panic behind piracy is mostly due to an industry obsession with the perception of “lost revenue” and metrics, which has lead to an inordinate obsession over DRM and content management.
Bandcamp sees itself as a competitor to the natural phenomenon of filesharing, not that filesharing is an evil that they need to stamp out at the expense of their own business. As a result, they’ve consistently delivered a fantastic product and marketplace without ruining their site with elaborate schemes to prevent “malicious use.” You can look up a track by id, and just make an embed that links to it. People can click the embed to listen to the song, or click through to go to the website and buy a copy. It’s magical, and it’s exactly what the internet should be. Bandcamp is a breath of fresh air in this respect, as well as so many others.
Epic, meanwhile, is controlled by the Chinese multinational media conglomerate Tencent, which is exactly the kind of company that does go off on these revenue generation holy wars, even at their own expense. Just look at what they’ve been willing to do in order to monetize Fortnite. One only has to take one look at that to see that these are not people who place any meaningful value on human dignity or agency. So that worries me.
Anyway. On a lighter note,
Wed Mar 02 17:30:46 +0000 2022Pleased to announce that Beloved Independent Company has been acquired by Enormous Corporation. While we've declined similar options in the past, Enormous Corporation has promised not to change anything while delivering me, personally, just a buttload of money.
Replying to 0xabad1dea:Wed Mar 02 18:13:00 +0000 2022@0xabad1dea they might need to tweak the website a bit lol
Thu Mar 03 06:48:29 +0000 2022The silver lining when Epic acquires some big brand is that Unity didn't
Wed Mar 02 17:50:43 +0000 2022
Related Reading§
- “Our Incredible Journey”, a catalog of startup acquisitions and subsequent destructions
- Cory Doctorow, “Private equity doesn’t create value, it destroys it”, 2020
- Damon Krukowski, “A Tale Of Two Ecosystems: On Bandcamp, Spotify And The Wide-Open Future”, 2020
- Ethan Diamond, “Cheaper than Free”
- postmodernpostal, “Bandcamp: An Alternative to Music Piracy”, 2017
- Matthew Jinoo Buck, “How America’s Supply Chains Got Railroaded”, 2022
- www.bandcamp2.com