Rethinking Indie Streaming with Neil Sheehan of Vocana

Our guest this week is Neil Sheehan, the president of Vocana, a streaming platform built for independent artists and fans using a user-centric payment model. We talk about how that’s different from other streaming platforms, why social features haven’t worked on streaming platforms since the days of MySpace, and whether there’s room for indie-focused platforms in what feels like a Spotify-dominated world. It’s a great conversation

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Episode Transcript

Machine transcribed

[00:00:00] Dmitri: Neil Sheehan is the President of Vocana, a social music streaming platform designed for indie artists and their fans, where subscription dollars go directly to the artists you stream. Vocana stands out with its user-centric payment model. Social engagement features merch integration and listener data analytics to empower artists to connect them with their audience specializing in independent music.

Neil is founded. And successfully sold two companies. Hm. A band management and concert promotion firm. And standby records, a record label. Now with vna Neil is building a home for music's indie heartbeat and a more fair future for streaming. Welcome to the show, Neil.

[00:00:36] Neil: Thank you very much. Thanks for having me.

[00:00:39] Dmitri: Awesome. Well, this is gonna be fun. I think it's really interesting to talk about this user-centric model and how you came to that, how it operates and so forth. So let's dive in. Neil, you've called what Indie artists face on streaming services, unfair competition. Why do you see it that way and what needs to change?

[00:00:55] Neil: Well, I think we should unpack that first take a step back of what streaming was supposed to do for, music 15, 20 years ago in its infancy. if people can remember how music was distributed, was via CDs or some kind of medium, physical medium that you had to use some kind of distributor that was most likely attached to a.

Major label or a rack jobber, and you would get into stores and streaming came along to kind of democratize that, right? The distribution of music would now be for everybody in a very easy way instead of going to a store and then an any artist that could upload their music could now be listened to. And I think the maturation of streaming after 15, 20 years, we've tend to seed.

When you have 3 million new tracks going into, a Spotify or an Apple, or a user or a title. The democratization is there. It's now available to everybody, but is discovery there? So I think that's where the unfair competition comes in, where essentially it's not Spotify or any of these other DSPs faults, but there is now so much music and so much more independent music than major label music that discovery and payments are much.

So I think there's this unfair competition feeling for whether you are a DIY in your garage, or if you are with an indie distributor or indie label where it's hard to be found, you're a needle in a haystack. And the more that songs that go on and the more the algorithms favor major label distribution or major labels themselves,

The more unfair it becomes for somebody that's starting. So I think that's where we think where it becomes an unfair competition. It's, not because of the companies themselves, it's just the maturation of the market and how music is now engaged with, fans.

[00:02:37] Dmitri: Interesting. I mean, and I think some of that has to do with the, maturation of streaming as a, market, as a medium.

Um, how do you build a new streaming service right as this market is maturing?

[00:02:47] Neil: Well, look, I don't know if the market is truly maturing. I, I know in, what they would say primary countries like the us, and England and Canada, you know, maybe it's plateauing a little bit, but there are other countries out there.

There's billions more people out there that don't have access to streaming yet. Now, does that mean you have to go to a foreign market to, capture that niche? No. I just think, again, this may harken back to the discovery portion of things where, The mature market of people that are willing to pay for music, may have plateaued because they can't find anything new.

They're being served up the same four or 5 million tracks. So for A-A-D-S-P today to gain new subscribers, they're going to have to go into different verticals. You see it now with Spotify going into audio books. So I think streaming. has a bigger market play than they think. I just think you now have to bifurcate some of that and be able to advertise and prop up things that people will pay for in the streaming music market that they don't have access to today.

[00:03:46] Dmitri: Hmm. Oh, interesting. Okay. Yeah, so, I mean, one of the big differentiators here, and I think part of your thesis with Vocana has to do with this user-centric payout model. How did you develop your user-centric payout model and how does it work? What makes it different from some of the artist centric models that we've heard about that are already in use?

[00:04:05] Neil: Yeah, it's a, question we get routinely. you guys are doing exactly what Deezer and SoundCloud are doing. let me take a step back. Deezer has a artist centric system, right? That is not a user-centric system. let's define what the two are. Artist centric is essentially, your subscription dollars go into this large pie, and it's called prorata.

That money then gets. Divvied up by market share. So even though you may be listening to the most indie of independent bands, whoever you listen to, that subscription dollar is gonna go to the largest market share. So Taylor Swift, Drake mgk, so. What they have. Deezer, has a true prorata model. They just have double boosting of certain songs.

 there's different ways to actually get more money based on an algorithm. so that is true artist centric. It's not a true user centric system. SoundCloud has a. User-centric system, but there's a caveat to that. There's loopholes. You have to be part of SoundCloud Premier or repost to actually get into the user-centric system.

So what we did is we kind of went to the heart of who created user-centric. That was Mike Fki at SoundCloud. He became an independent contractor. He came in, and basically Adopted essentially what SoundCloud was doing, but made us more prolific at it. There is no bells and whistles. You just jump in as soon as your subscription dollars go out.

It goes to the main artist that you listen to and that's it. There's no, you don't have to be part of a distribution platform. There's no boosting of plays, et cetera. So it's the most true user-centric system there is, and nobody's tested this yet. we'll see. The proof will be in the pudding if people get paid more, fair or not, but you can do very quick math that if you have.

10 people subscribing to an entire platform and they just listen to you. you're gonna make $10. Doesn't matter how many streams they get, right? So how long is it gonna take you to make $10 on Spotify or Apple or another service? Versus if 10 people are listening to you paying 10 bucks each, right? So,

It's unique. and I think we will see, because we only have independent content, that we will, show that independence and DIY if you are within our system, would definitely make more money than if you were on A DSP that had the Prorata model.

[00:06:11] Dmitri: so wait, let me see if I've got this right.

So you're saying that a certain percentage of a subscription from a user will be divided across. The artists that they are streaming and that's how the royalties will be paid out.

[00:06:24] Neil: Exactly. So if you take the, if you really take the model of $10 and you say you're listening to 10 artists a dollar.

Each of you, the subscription would go to those, artists that you're listening to. So has nothing to do with the amount of streams. It's the direct artists you're listening to. So you're only listening to a certain number of artists. That's where the subscription dollars would go. There's no pro route of model, there's no pooling of, user subscriptions.

It directly goes to the artists you listen to.

[00:06:49] Dmitri: How does Vocana make any money if all that money's going out to these? Uh,

[00:06:53] Neil: well, obviously we are. Like any other, DSP. There is a, we pay, Performance royalties, a mechanical royalty. Right. those are things that need to go back to the artist as well.

And then there's a, market share that we have, obviously a, cut that we take, and it's less than 30%. So on a $10 subscription, $7 of that is obviously allocated to the artist.

[00:07:12] Dmitri: Got

it. Okay. Got it. how come nobody's done this yet?

[00:07:16] Neil: Uh, major labels don't want it. I think they have, uh, anathema towards user-centric.

 it doesn't work for them. obviously prorata props up. Major label content or the most listened to content because your subscription dollars goes towards the largest market share of, you know, of the lister. So, I think Deezer, is trying to do that with their artist centric model.

Even though it's prorata, they did a deal with universal. but again, it's not a true user-centric model. SoundCloud has obviously tried it and is doing it in some form or fashion, but again, you must be part of their distribution model before you even got that. or you have to be with a label that they've signed up that deal with.

So I think it's, two parts. It's the major label system doesn't like it, so any large DSP won't be able to do it. And b, if you want to run it, it's difficult because nobody's ever done true user-centric reporting. So you're literally starting, at a baseline and trying something that nobody's ever done before.

So that in and itself is, you have to find really good owners and founders that wanna put money

into something like that.

[00:08:17] Dmitri: So as Vocana becomes successful, you'll see, as you mentioned, this bifurcation of indies going to something like Vocana, because they can't. they just don't get paid as much or it takes forever to get the kind of payment they want from a major DSP.

 but then you're creating like this, little indie, I shouldn't say little this indie ecosystem, this self enclosed ecosystem in a sense that may not have the biggest hits on it, but is for people who are looking to discover new independent music.

[00:08:46] Neil: Yeah, uh, look, what we've done so far, it's, we've already licensed most of the independent content.

We have deals with downtown artists and label services, cd, baby, distro kid. We're talking to Merlin right now. So we already have 45, 50 million tracks on here. so if you have music out there as an independent person, using an independent distributor, we probably have your content already. We also encapsulate you in this full circle social media, circle as well.

So you can now share content, listen to content, know who your fans are, get your fans email addresses, you know exactly who's listening to you. and on top of it, hopefully get paid, more than you would on another DSP. I would never tell anybody not to go to Spotify or any of these other DSPs. I use Spotify, right?

 that's where your major label content is, et cetera. But I think. The long tail approach of this, you will see artists in their first quarter or their first six months of their distribution checks. You know, they may have two or three streams, but they made four or $500 on our platform versus what they would get, you know, three or 4 cents on millions of plays.

 on a larger DSP. So. Again, wouldn't tell anybody to pull their music off of any other DSP. Go make whatever money you can. But I think the long tail approaches they will see in their distribution check that they'll make more with us.

[00:10:01] Dmitri: Interesting. This is gonna be really interesting to see what happens with this, to have this pure user-centric payout model that hasn't been filtered through additional payouts somehow, or market redistributions and, and things like that.

It's gonna be exciting to see. Um, it's a, it's a great experiment, Neil.

[00:10:17] Neil: Yeah, well look, it's when I came on board four years ago, you know, it's taken four years to build. We wanted to solve four problems here at kind of the unfair pay, right? Everybody was complaining, especially the last three years of, you know, demonetization of certain number of streams and people weren't making as much money.

So that was one of them. And then giving data back to bands. Most of them just get a heat map or something when they look at their analytics. May say you have. A thousand people that listen to you in, New York? Well here we give actual email addresses back and actual first person data back so they can actually build those things up.

And again, with the unfair competition, if we only have independence, on the platform, you're not competing against major label algorithms or playlists or things like that. And then lastly, kind of the social aspect. You know, most people were sending bands, had link trees sending people to four or five different places.

And here we have all of those things in one. your social community is here at the same time. So it's definitely an experiment. It's four problems that we wanted to solve and you can't really run a business without solving problems. So we looked at the independent landscape and said, these are probably the four problems that if we can solve two or three of

them, that would be great.

[00:11:23] Dmitri: Hey, let's dig into some of that. Neil, you, you, so you have a, focus on human curators. You know, we've talked a bit about algorithms in this conversation. Tell me more about how you recruit, engage these curators, and, and who are they? How does that work?

[00:11:35] Neil: So we took the approach that, look, algorithms are not bad, but what you've seen from larger DSPs that the longer the algorithm goes, it's going to propagate the top listening funnel.

Right? So There's 12 million artists on Spotify. There's 3 million songs that go up a day, but they're only pushing. Top four or 5 million. So how could we get away from that? And it was, go back to the old school. if you went to an old record score back in the day, you would go to a record store and you would see the manager's wall.

And the manager's wall had a bunch of different CDs on there that they, they curated themselves. Same with college radio DJs. If you remember the CMJ days. Those guys were curating their own playlists, so we thought, why aren't we doing the same thing? There's a bunch of indie music out there that nobody's propping up, so why not go after?

College radio DJs now people that are taste makers that may have run, old indie magazines like Alternative Press. We use Paige Owens as a tastemaker right now. So getting those people on and they have some acumen in a certain genre, they can go through our catalog, create a playlist, and then they're on our home feed actually pushing up and propping up independent artists that would probably never get on a playlist anywhere else.

[00:12:41] Dmitri: That is fun. I can't wait to see what kind of music gets discovered that way. And so there's so many great music critics and curators out there, and it seems like they've been a little lost in the current era. And so it's great to get those folks back into the mix. Now you also have talked about some social features.

They've been so hit or miss for streaming services, maybe ever since MySpace. Why is that the case?

[00:13:03] Neil: Well, that was one thing we kind of wanted to recreate was the MySpace effect. Uh. in the early two thousands, bands used MySpace as their website, right?

[00:13:11] Dmitri: Mm-hmm.

[00:13:11] Neil: it was always MySpace back slash whatever band you were in.

 and you had a feed and you had photos and you could do so much thing. You know, there was a streaming player that was attached to it, so you kept these people on a flywheel. I don't know why it hasn't worked since MySpace. Obviously MySpace was kind of killed by Facebook. but I think you have to look at the business model of the DSPs that first started.

 apple and Spotify, et cetera, that first came out were just trying to be streaming platforms or they were just dipping their toe into streaming. They weren't looking at social. And once you get known for something as a business, people don't expect you to do something different. So I think for Spotify, when they tried some of these things, or SoundCloud.

It was You have to reeducate people on why they're there. They're not there just to consume music. They're now there to also be socially connected with some of these bands and other fans. And I think that the benefit of us is we're coming out as a social streaming network. We are not one or the other.

We're both. So I think that was the reason why it hasn't worked. They've tried to bolt that on to something that was already a business model. And I'll tell you just from experience of four years of doing this, it's very hard and very expensive to build both. So if you're a streaming platform, there's enough legality and, copyright stuff, moderation.

And then you tie a social platform. On top of that, there's, You're building two sets of companies for two different audiences. One is social and one is music, and it's very expensive. So, I can see why some of these larger companies decided either to pull because it costs too much, or the marketing of it.

 they just said, Hey, let's just stick with streaming instead of trying to prop up ourselves as a social streaming.

[00:14:40] Dmitri: So what does this music centric social ecosystem online look like? how does this work within a streaming universe?

[00:14:47] Neil: you know, I, can only speak for ourselves. I, I don't know.

 I'm not in the boardrooms of anybody else. I can say for us, it was again, one of the pillars of the four things that we wanted to solve was keeping people on a flywheel discovery, unfair competition, and actually just keep people in this loop. If you want to talk to the band, you can actually go on their profile page, message them, DM them, get in their feed, talk about their videos, comment on the songs.

And if you're a fan or a fan of another fan, you could now engage with each other. You can DM each other. you can create a hub so everything is done in one kind of funnel. Instead of sending people to link trees or multiple places, I mean. If you look at the live show, version of that today is you typically go to a live show with a group of friends.

You experience music together, right? And when you have a DSP, most of the time you have that on the side screen or you're doing three other things at the same time. You're not consuming that with multiple people. So I think if you could have this ecosystem where. All the fans and all the bands can get together and listen to music and all collaborate at the same time.

It's a perfect place for the bifurcation of streaming, right. Instead of sending people to multiple places to see an Instagram or a TikTok and then send them somewhere else to listen to your music here, you can do it all in one spot.

[00:16:04] Dmitri: that sounds exciting. I mean, there's been so much fragmentation between.

Where you listen to music, where you interact with bands, where you interact with friends, where you interact with other fans, it's like all over the place. And, I mean, it is so funny that it's taken this long to get back to a place where there is a social or truly social engaging platform that's focused on music.

[00:16:25] Neil: Yeah. I mean, you've seen some of it with, Roblox and these other places where trying to put people together, with listening to music and having some engagement together, and people are flocking to that. Right. I think COVID was unfortunate where it Kept people separated, but now you're five, six years post COVID.

And the younger generation doesn't remember it 'cause they were too young and they're like, Hey, I want to experience this with other people versus just experiencing all of this stuff in a silo. So, we're hoping kind of recreating the MySpace social and streaming aspect brings people back together to listen to music.

[00:16:57] Dmitri: Yeah. Very cool. All right, we have to take a quick break and when we come back I wanna widen a little bit and talk about what is going on with indie music as a whole. We'll be right back.

Okay, we're back Neil. And there are these two storylines that pop up a lot around indie music. One is that it's growing like crazy, and then the other is that it's struggling. I mean, certainly you see the independent venues closing. We've already talked a little bit about payouts, shrinking, all these different things are happening.

When we talk about Independent music, what is the story? What's happening here? What gives between these two different storylines?

[00:17:29] Neil: I think you're right. everything that you see today is, It's indie music's either thriving or it's dying. And I think you have to look at it from two different segments.

There will always be kids in a band, in a garage, picking up a guitar. There's a plethora of those kids everywhere, every day. So you can't say that indie music essentially is, cratering, because that's never gonna stop. The more people that are out being artists, the better for the industry of a whole.

So I don't think. The number of artists or bands will ever get to a point where independent music creators, there's always gonna be more independent creators than major label content. However, if you take the second side of that, the the vertical of venues, what I try to tell people is, especially on the local side of venues, a local venue where you go play, I hate to say, is not a connoisseur of independent music.

Some of them may be, and some of 'em may have a local booking agent. They may try to get some local talent in there, but let's. unpack what a local venue is. They're trying to sell liquor and beer. So if a guy gets on a microphone and farts for an hour and they do a register of $5,000, they will book the guy that farts for $5,000 because they're making money.

They're a liquor and beer business. So yes, some of these local venues are closing because they can't get people, whether they're farting or playing music to actually prop up revenue. Correct. So, until artists are. Drawing enough people to bring in revenue for a register to ding every day. Those venues are gonna hurt.

And the artists that can now, bring in enough people, they're actually only making money off of touring. So their prices are going higher. So now they're pricing themselves out of a small market or a small venues market. So I think that gets back to this, the streaming. Problem is bands aren't being discovered so they can't get enough fans in a local area to get people there, and they're not being streamed enough to be able to be found to go on a big tour.

So if we can kind of meet in the middle, You know, if Vocana could help that where in a local place you could now get enough streams, where you work with a local venue where you have enough, of a draw, you could probably prop up some of those venues and get them paid better and keep them in business.

But I think if we continue down this, you can't find local bands. They're not being paid well. They're not being discovered and nobody's listening to them. Local venues are gonna have a harder and a harder time to. Make money to keep the register open. they can't be everything to everyone. Everybody wants local venues to pay top tier money to local talent that bring nobody, and that's not gonna happen.

 they can't pay their bills that way.

[00:19:55] Dmitri: Yeah. I guess the live side is very different than the recorded side. but we do still see that the amount of music coming from independent recording artists is still growing like crazy. And this is where it gets interesting, I think for

[00:20:09] Neil: Yeah. if you look at the landscape in just five to eight years, you know what? The CD babies and the Distro kids of the world, these independent distributors are taking a ton of content, right? There's a ton of people making music. and now with independent distributors, you can get your music everywhere.

So yes, There's going to be more and more music coming, which looks great on paper. Like we just said, it looks like it's booming. But if you look at the other side of that, how do you make revenue for both the band and the company that's working with independent? That's where I think it kind of Kate, it's not getting to the amount of people that the independents are.

Right? Like there's just not enough revenue there yet to kind of prop up the indies that are there. So, it's difficult and I think it's, again, part of discovery and, how you get people to listen to more bands that are, kind of underserved today so that other independent places like the distributors, and the venues, the ticket people can make just as much money as they would with a major label.

[00:21:07] Dmitri: So I wanna rewind to something that's been in the news a lot that we haven't talked about yet. and it just seems silly for us to have this entire conversation about streaming and independent artists. Without getting into it, why are so many artists leaving Spotify?

[00:21:20] Neil: look, that's, uh, that's a loaded question.

 I think obviously there are. People that don't like certain things that Daniel Elk did with the money. there's political views there. He's since stepped down. Will people come back to Spotify? I don't know. but I, you know, I look at it from the information that we glean from all of these independent artists that come to work with us is they don't get paid.

So I think that's the biggest problem that Spotify or any DSP has, is. They, we've made it so simple for an artist to be able to create a song, put it through a distributor and get it on Spotify, but it's very hard for them to monetize that. So I think you have to have either a Vocana or somebody that's paying better.

 The more Spotify comes up with ideas like demonetizing, the first a thousand streams, doesn't bode well for their marketing to independent bands, right? gonna leave. I don't know whether they'll leave in droves. We see little pockets of it here or there. again, I'm not a proponent of somebody just pulling their music off.

Spotify. If you can get on Spotify and make money, then go do it. but I think people will continually leave. For a multitude of reasons, whether it's payment, they can't get discovered on there. So they feel like they're spending tons of money, you know, recording music and then not getting found and then not getting paid back.

 they can blame that all on Spotify if they want, and pull their music down. But whether that hurts or helps them, I don't know.

[00:22:41] Dmitri: Well, this has been really interesting to dig in with you about Vocana because your model alone and your features kind of tell a different story and it, kind of creates, I think an opportunity for hope for independent music.

But I will say before we wrap up, everyone assumes the streaming wars are over and that the winners are Spotify and the big tech companies that have more of an ecosystem play like an Apple Music, a YouTube, an Amazon. Is there a different future than that? Neil? What does it look like?

[00:23:07] Neil: Well, not to toot our own horn, but I would say yeah, I mean those guys have the major label market, right?

And I don't think they're ever that they will always be the 800 pound gorilla. that pays well for major label artists. But I think the other way is this bifurcation that people are talking about. I think we have to get into a streaming scenario where you don't have to start on Spotify.

You can start on a small service like Vocana. And instead of hoping. To get 25,000 streams on Spotify, which only pays you 80 bucks. or if you have, I think 99.8% of all the music on Spotify makes under $10,000. I mean, that's not even minimum wage. it just we have to come to a realization that there are always going to be major players and, we haven't.

The streaming business has not matured enough yet to bifurcate, to give people chances in different areas, right. Of streaming. And I think we saw that in the physical medium when CDs first came out, you could get into retailers, but people were slinging CDs on the side at venues, and we don't have that today.

You can't sling a stream, on the side. You may be able to sell or stream, at Vocana with less competition and make some money, and then potentially move to Spotify at some point. So I don't think it's, uh, I think they have a, a grasp, they have a stranglehold, but, um, there's plenty of room, in the streaming world for giving artists a chance at a lower level to make money and make their name.

[00:24:30] Dmitri: Well, this has been super interesting, Neil. It is Music Tectonics Week and you are here the day this publishes, on the podcast platforms. You're here at Music Tectonics this week. What are your goals when you come to a conference like ours?

[00:24:42] Neil: I speak at bunch of different conferences. I I also talk, you know, obviously any of these conferences are huge for networking, but, music Tectonics really focuses on, tech and you meet a bunch of cool founders.

You meet VCs, you meet labels and managers and people that are trying to find the next thing, to help music. and I think it's not just business oriented. It's a place where you can come and try to find like-minded individuals that are trying to help the music industry and all the artists and all the players involved.

I think some of the, conferences that you can go to feel very, car salesmany, uh, everybody's just walking around, where Tectonics is more of a, Hey, I know you and I know what you do. Let's put our minds together and try to find another way to do something else. so it's a great place to share ideas.

[00:25:26] Dmitri: I love that, Neil, I appreciate you saying that. I was at a, a meetup in Seattle a couple weeks ago and, one of the people there was working with a CEO of a smaller, record label and kind of an entrepreneurial founder and said, I need my CEO there to meet. Other founders and other CEOs to like share some of those challenges and do that kind of problem solving together that you were talking about.

So I really appreciate that perspective, Neil, what you're doing is really exciting. I can't wait to see what happens with Vocana. I'm looking forward to hanging out with you this week in Santa Monica and seeing what you do for independent music. It's been a blast talking to you.

[00:25:59] Neil: I appreciate it.

Thanks, Dimitri.

Let us know what you think! Tweet @MusicTectonics, find us on LinkedIn, Facebook and Instagram, or connect with podcast host Dmitri Vietze on LinkedIn, Twitter, and Facebook.

The Music Tectonics podcast goes beneath the surface of the music industry to explore how technology is changing the way business gets done. Weekly episodes include interviews with music tech movers & shakers, deep dives into seismic shifts, and more.