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Why the music industry needs the video gaming industry's help to scale virtual concerts
Posted By : Laura Holness
Posted Date : April 8th, 2019
Marshmello's concert in Fortnite may have happened over two months ago, but it continues to be on the tip of the music industry's tongue as a groundbreaking precedent for how music and gaming will converge in artists' careers.

Over 10.7 million people attended the show in real time (followed by an additional tens of millions of views on YouTube), making the event one of the farthest-reaching virtual musical gatherings to date. But aside from the Fortnite game itself and its accompanying scale, little about Marshmello's show was actually anything new.

The concept of virtual concerts is at least 15 years old and was first popularized by Second Life, a world-building platform that many artists and labels leveraged in the early 2000s to build their own concert venues and connect with fans in avatar form. (In fact, festivals were built into Second Life's DNA, as founder Philip Rosedale was inspired to build the game after a transformative trip to Burning Man.)

Unsurprisingly, virtual-reality companies were also earlier movers in staging virtual shows. For years, TheWaveVR has been hosting in-app concerts and immersive album experiences with artists like Imogen Heap and Jean-Michel Jarre, as well as its own annual creator festival Groundswell featuring custom 3D visuals crafted by its 'resident DJs.' Post-Second Life, Rosedale is now working on a social-VR platform called High Fidelity that has already hosted its own festival, as well as virtual meet-and-greets with Giraffage and Ryan Hemsworth.

Beyond VR, Minecraft also hosted the in-game festivals Coalchella and Fire Festival (not to be confused with the infamous Fyre Fest) in the months leading up to Marshmello's Fortnite show, featuring the likes of Anamanaguchi and Hudson Mohawke as headliners. Both events crowdsourced designs for the festival grounds and stages from scratch, paralleling Minecraft's open-ended, sandbox nature.

While musicians and gamers have collaborated culturally and commercially for decades, a newfound appetite among younger generations for virtual entertainment experiences is poised to catapult these kinds of collaborations to unprecedented heights.

Music companies need this shift more than ever: historically, they've struggled to sustain social music and concert experiences on their own dime, facing obstacles such as the miniscule reach of VR or the fickleness of standalone social apps (remember Twitter Music, or The digital gaming industry's expertise in pricing models and user engagement-and the cultural cachÃ?Â?Ã'Â?Ã?'Ã'Â?Ã?Â?'Ã?'Ã'© and social glue that games like Fortnite have amassed over the last several years-could help finally rewrite this narrative for good.

Second Life-which was launched in 2003, a few years into the recorded-music industry's precipitous decline in the wake of piracy-provided a prescient, if cumbersome, look at how world-building games could serve as platforms for human connection and commerce in adjacent industries such as music.

Pulling off a virtual concert in Second Life required several, painstaking steps: 1) building an avatar of oneself from scratch, complete with the appropriate clothing and musical instruments, 2) building a venue (which required 'owning land' in the game, i.e. renting server space), with potential features ranging from bars to merch tables to port-a-potties, and 3) recording performances live in the real worl' whose audio would then be piped through the vehicle of said avatar into said virtual venue. Artists could earn income in the game either from performance fees paid by third-party venue owners, or through tip jars and in-app payments from users and fans.

The performances themselves had rather high latency (around a 20-second delay on average), and it was reportedly rare for a given gig to bring in more than $20 for an artist-but some select entrepreneurial minds found greater success over time. Atlanta-based singer-songwriter Grace Buford, who performed in Second Life as Cylindrian Rutabaga, was earning some $10,000 a year thanks to in-game fan donations and CD sales; Nashville-based Von Johin signed a record deal after his avatar was scouted in his own Second Life venue.

Of course, major labels were among the most active participants in Second Life's music scene as well. Sony Music hosted a Second Life-exclusive album preview for Ben Folds; Warner Music's Sire Records held an in-game listening party for Regina Spektor and built a fan club for Talib Kweli (with the virtual form factor of a Brooklyn brownstone); with the help of developer Jordan Bigel, Universal Music built dedicated virtual gathering spaces for Chamillionaire and Hinder. Players could purchase virtual branded jackets from Hinder for 500 Linden dollars (around $2) apiece, just as Fortnite players today can buy Marshmello's in-game branded skin for 1,500 V-Bucks ($15) each.

Because of Second Life's impact, commentators were predicting as early as 2006 that its success could potentially [make] multiplayer video game worlds the next frontier of touring. Yet over several years, the game lost its traction in the public consciousness, with a reported churn of up to 30%; as of December 2017, only around 600,000 users were still regularly using the platform, out of over 36 million total accounts created. The world had to wait through several more years' worth of technological and cultural change before the vision behind Second Life could once again become viable for the masses.

Thanks in part to shifting behaviors among Gen-Z consumers-71% of whom readily identify themselves as 'gamers,' according to Ypulse-artists as far-ranging as Marshmello, Juice WRLD and The Black Madonna have become more proactive in elevating gaming culture in their own brands and creative output.

On the industry level, there's also a clear financial incentive for music companies to cash in on games. The digital gaming market generated a reported $125.3 billion in revenue in 2018-already over $40 billion more than what the recorded-music market is projected to make by 2030 (namely $80 billion, the latest ambitious estimate from Goldman Sachs).

This discrepancy is even more compelling upon the realization that some of the most lucrative digital games are free-to-play-i.e. free to download, with the ability to purchase additional levels, avatar customizations and other features in-game. In contrast, the music-streaming sector has largely homogenized itself into the fixed model of monthly subscriptions, with nearly no opportunity for incremental revenue from consumers.

The most popular music-streaming services do share some higher-level characteristics with the most popular games: tens of millions of active users, higher frequency and duration of daily usage, expansive geographic reach, multi-device functionality and some sort of multimedia capability.

But that's where most of the similarities end, particularly with multiplayer games. The typical music-streaming experience-as exemplified by Spotify, Apple Music and their competitors-prioritizes individual taste and leanback utility over lean-in social dynamics. Naturally, games like Fortnite that involve competition and collaboration among multiple players present the opposite kind of value.

In her book How Games Move Us: Emotion By Design, human-computer interaction researcher Katherine Isbister outlines three building blocks that help evoke richer emotions from players in multiplayer environments: coordinated action (e.g. lift[ing] and carry[ing] boards together), role-play (e.g. avatar customization tools and expression controls) and social situations (e.g. live text and/or video chat).

Marshmello's Fortnite concert featured all of these elements: coordinated action in the form of players flying up into the air when the beat dropped, role-play in the form of custom avatars built into the wider Fortnite game and social situations in the form of users chatting with each other, either through the native voice-chat feature or on third-party platforms like Twitch.

Moreover, at least for younger generations, social interactions in Fortnite's virtual world feel just as real as they would otherwise feel in a brick-and-mortar environment. As Matthew Ball, former head of strategy at Amazon Studios, recently wrote, many players treat Fortnite as a daily social square-a digital mall or virtual afterschool meetup that spans neighborhoods, cities, countries and continents.

In this paradigm, audience members would tune in to virtual festivals on Fortnite as much to socialize and mobilize with each other as to watch a musician who happens to be performing onstage (which is arguably identical to what happens at real-life events like Coachella and Glastonbury anyway). The game becomes a means to unlock something deeper across a network of users, rather than an end in and of itself.

We see this new ecosystem emerging that we call virtual entertainment-interactive entertainment that's made in game engines, but isn't explicitly a game, Adam Arrigo, CEO of TheWaveVR, tells me. A virtual concert in a game like Fortnite or Minecraft is a great early example of the potential scale these experiences can achieve now.

In fact, there is already demand among music fans for shared, social music moments online-as exemplified, for instance, by Ariana Grande attracted a record 800,000+ concurrent viewers for the live premiere of her music video thank u, next on YouTube.

But building social music moments into a standalone product is much easier said than done, and such products seldom survive the world of stubborn licensing practices and fickle consumer tastes. Consider the flooded graveyard of listening-room sites in the early 2010s, which allowed friends and strangers to gather in a virtual chatroom and DJ songs for each other by pulling in links from SoundCloud, YouTube and other sources.

The most popular of these sites was, which raised $7.5 million in VC funding, hosted over one million virtual DJ rooms playing over 400 million songs and secured licensing deals with all major labels over the course of its brief, two-year lifespan. Some indie labels were even using their own rooms to scout unsigned artists, mimicking similar A&R behavior from Second Life.

But like many other social music apps, the company nonetheless struggled to find an actual business model that offset the costs of running a fully-licensed service (and they prided themselves on being free of traditional advertising). Traffic to the site dwindled to less than half its peak within just six months, and the company shut down in 2012.

Other competitors faced similar fates-including, which peaked at 50,000 users before collapsing the same year as did, in part because of difficulties negotiating licenses with labels.

In Second Life's wake, many of the music industry's attempts at implementing virtual concerts have been limited to partnerships with VR companies, nearly none of which have scaled beyond one-off strategic experiments.

Key players across the music industry-from event promoters, to indie and major labels, to adjacent big-tech companies like Facebook and Microsoft-have poured tens of millions of dollars into content and distribution for VR music apps, despite little to no financial return. At large, estimated revenue from all consumer-facing VR content in 2017 was just 0.005% of global recorded-music revenue that same year ($853,000 versus $17.3 billion, respectively), and more and more VR companies are laying off staff members this year amidst dwindling investment from venture-capital firms.

Part of the problem is that many of these VR-concert apps have not truly taken advantage of VR's unique capabilities as a technological medium-simply copying and pasting a more or less passive concert experience into a giant headset instead of imbuing the experience with more agency, accessibility and interactivity.

A handful of companies like TheWaveVR and High Fidelity have gotten closer to bridging this gap-framing their own music experiences not so much as static concerts or as games, but rather as open-ended canvases and construction toolkits for users to build and interact with their own worlds, in the spirit of Second Life.

But that still doesn't mitigate another stubborn obstacle in the VR industry: actually getting consumers to buy devices, let alone use them on a regular-enough basis to generate recurring revenue for a company.

Any projections about the future success of VR-native apps rely heavily on the as yet unproven assumption that consumers will jump on the next generation of headsets-including the Oculus Quest and HTC Vive Focus-that require no wires or external PC to operate and are priced several hundreds of dollars lower than the next model up. As Rosedale admitted to me over the phone: That's what I'm counting on as a platform provider, in terms of those devices getting into people's hands.

Hence any artist partnership with a VR company today will be stunted by external factors in other industries that are not necessarily core to an artist's fanbase or creative process. In contrast, by partnering with a more distributed game like Fortnite, Marshmello accomplished what simply would have been impossible with a VR-exclusive partner: meeting passionate, engaged entertainment consumers where they already are.

To summarize the above, gaming companies can help music companies implement virtual concerts at scale by providing not just access to captive audiences, but also robust, ready-made infrastructure for social role-playing, coordinated action, interactive content generation and incremental monetization.

Another underrated requirement for making virtual concerts successful is ensuring that artists and fans are comfortable interacting with each other through virtual representations of themselves.

At large, there is definitely a potential dystopian element to this, where artificial beings mediate the majority of emotional human connection, and face-to-face human contact becomes a luxury good. That said, a new breed of creative-IP companies driven by avatars and 'virtual influencers' is still gaining a significant amount of traction with younger generations, and drawing attention from investors.

The informal poster child of this scene is CGI influencer Lil Miquela, who touts over 1.5 million Instagram followers and whose parent company Brud is now worth a reported $125 million. Other startups targeting similar visions for the future include Toonstar, a venture-backed virtual influencer network with over 285,000 Instagram followers, and Replica Studios, a Techstars Music member developing an on-demand service for generating artificial voice actors.

Artists are now riding this wave and embracing avatar culture in their own careers and partnerships-from Childish Gambino developing his own Playmoji with Google, to the estates of Amy Winehouse and Roy Orbison planning their own hologram tours. In fact, musical avatar culture is strongest in Asian markets like Japan, where virtual personalities like Hatsune Miku and Kizuna AI each tout several hundreds of thousands more followers on social media than Lil Miquela.

On the company level, the rise of the virtual-influencer economy may create what TechCrunch's Jonathan Sheiber calls a new kind of studio system that is able to scale and monetize IP in record time with inherently less human overhead, and hence more profit, for the parent company. As Toonstar co-founder John Attanasio told TechCrunch: When we're working with creators or influencers they understand that you have this shelf life as an influencer, but as IP, that can go on in perpetuity.

Ironically, some top-down attempts to capitalize on avatar culture have actually been more expensive, rather than cost-saving. For instance, in an interview with MBW, Marshmello's manager Moe Shalizi shared that the two worked on the virtual Fortnite show for six months with Epic Games, gearing the DJ up head-to-toe with a body-motion suit and everything, with maybe 30 or 40 people surrounding him.

Hence the most disruptive shift in the world of virtual concerts will take place once these same tools fall into the hands of artists and everyday users. At some point, it's going to stop being about the Marshmellos and Weezers of the world, and will start to be about any artist who understands the medium, says Arrigo, who adds that there are over 6,000 DIY virtual influencers in Japan who know how to use tools like Unity, VRChat and the VRM protocol to build virtual personas of themselves, and then stream to YouTube and embody the character in real time.

In a recent blog post, TheWaveVR's head of content and partnerships Nicole St. Jean described the company's resident DJs as advanced visual artists with creative prowess who . make custom stages and art using 3D creation tools like Google Tiltbrush, making visuals the hallmark of their shows. In other words, these DJs, and others around them building their own avatars and worlds in addition to their sounds, are equal parts sculptors and musicians.

This signals a new model of artist development that treats sandbox-game mechanics with equal importance as actual music production-and a new type of talent that will break uniquely and exclusively through games and other virtual environments, as opposed to relying on the incumbent ecosystem of Spotify playlists, short-form video apps and other traditional pillars of digital music marketing.

Remarketing an existing act through VR is exciting, but I'm more interested in breaking new acts, Rosedale tells me. What will certainly happen in the coming years is that someone will break out in VR as an original act, performing live as an avatar whose real-life identity is not known. Marshmello and Deadmau5 are already going in that direction with their own personas, and avatars in VR seem to be the logical end game of that.

While the history of music and gaming partnerships is several decades old, the actual business of virtual concerts remains an unstandardized, white-space market opportunity for entrepreneurs to shape for future generations.

To date, the majority of commercial deals between music and gaming have revolved around licensing the masters and publishing rights to songs (e.g. for Rocket League's in-game music and compilations, or for the Grand Theft Auto franchise's radio stations). Marshmello's Fortnite concert also likely required securing the recording and publishing rights featured in the DJ's mix-but what about the actual performance itself?

The way the media covered the concert in its immediate aftermath seemed to frame the event as a really well-placed advertisement for Marshmello, driving an unprecedented amount of conversion to proactive web searches and streams around the artist.

But once crucial piece of information that has not yet been disclosed is who was paying whom in that deal. Did Marshmello indeed pay Fortnite for an unusually extravagant advertising opportunity, or did Fortnite pay Marshmello as a traditional festival or concert venue would? Did the two parties split the hefty costs of production, or did one party front expenses more than the other?

The companies that move earliest in this space will get to set such terms for their successors. In fact, companies like TheWaveVR already see a clear opportunity to shift from an advertising- and impression-driven model for virtual concerts that favors the platform, to a more booking-driven model that centers the artist.

We want to build the Live Nation or AEG of the virtual world, and help artists create and distribute these mind-blowing shows to the tens of millions of players who are already in these environments, says Arrigo. We've spent the first three years of our company defining the format and technology required to build these virtual concerts, and we're now building a network of digital venues across this new ecosystem-in interactive streaming apps, AAA video games, places where audiences are already socializing virtually.

Building off the digital Live Nation metaphor, there may also be an opportunity to monetize virtual concerts not just by in-app donations or purchases of merchandise, but also from virtual brand sponsorships, the same way sponsors buttress much of the brick-and-mortar festival world.

Both music and gaming companies will have to change their internal organizational structure to reflect the demands of these new business models-and may end up looking a lot more like each other.

Writing about the ecosystem of virtual models and influencers, Betaworks general manager Danika Laszuk proposed that it's easy to imagine a near-future in which modeling agencies employ more developers and designers than scouts and managers. This same trajectory could very well apply to artist-management firms, record labels, publishers and concert promoters, all of whom could navigate the virtual-concert world more smoothly with the help of gaming expertise from in-house software engineers (and/or by buying out game developers altogether).

In the other direction, gaming companies could launch formal booking divisions within their in-house music departments, replicating a structure that already exists in the worlds of late-night TV and boutique fitness.

Shalizi most certainly had this two-way exchange in mind when he framed his vision for the future of Marshmello's enterprise as building the next Disney.

Other music companies should take note: pulling off the virtual-concert model at scale will require thinking not just like event organizers or direct-to-fan marketers, but also like movie studios and software developers. The fast-moving, digitally-adept gaming industry has all of these capabilities built into its DNA-plus many more that have yet to be realized in a borderless commercial and creative world.


Next Article : Dance dance revolution: How gaming became electronic music's newest frontier

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