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Decentralizing Music Streaming and Web3 with Roneil Rumburg

Posted by Jeff Yasuda on Jun 7, 2022 11:00:00 AM

Behind every favorite artist, song, or lyric, is a story you've never heard. Music is highly personal, and our experiences with it shape our memories, thoughts, and desires. So much goes into every note and lyric behind the scenes, which is why we’re bringing you Voices Behind the Music to share untold music business tales. Our guests range from artists, producers, and managers to tech creators and more, each sharing their unique past experiences, current projects, and visions for the future. Voices Behind The Music is presented by Feed Media Group, the leading B2B music licensing platform.

Hosted by Jeff Yasuda, CEO, Feed Media Group.

 

 

Roneil Rumburg is co-founder and CEO of Audius, a digital streaming service that connects fans directly with artists and exclusive new music. Audius is fully decentralized, owned and run by a vibrant, open-source community of artists, fans, and developers all around the world. Founded in early 2018, Audius serves millions of users every month, making it one of the largest crypto applications ever built.

Prior to Audius, Roneil most recently co-founded Kleiner Perkins' early-stage seed fund, KPCB Edge. At KP, he was responsible for seed investments into Blockchain and AI companies, including Lightning Labs.

Roneil attended Stanford University and previously co-founded a Bitcoin peer-to-peer payment company called Backslash.

 

 

Podcast Transcript

[00:00:00] Jeff: The intersection of music and tech is more than a crossroads, it's a launchpad. I'm Jeff Yasuda, CEO at Feed Media Group, and this is Voices Behind The Music. Today, I'm here with Roneil Rumburg, CEO and co-founder of Audius. Audius is a decentralized music streaming platform enabling artists to build a fan base, distribute their music, and monetize it via its native cryptocurrency audio.

As of December of last year, it had almost 6 million monthly unique subscribers and over a hundred thousand artists using the platform. Prior to founding Audius, Roneil was an engineering partner at Kleiner Perkins Edge, a seed stage investment fund. And prior to that, he held various roles as a software engineer before founding Backslash, a peer-to-peer Bitcoin payment company. 

Back in 2013 while at Stanford, Roneil explored the massive opportunities around digital currencies. He then met the Audius co-founder Forrest Browning, and they hatched the idea around creating a decentralized streaming platform around a community-operated version of SoundCloud. 

Now the tech wasn't ready quite yet. In fact, Web3, wasn't even a coined term at that moment, as it was first uttered a year later by Ethereum co-founder Gavin Wood in 2014. But, the seeds were planted for Roneil and Forrest to launch the concept for Audius in 2018. I am super, super excited to hear more about how Audius is challenging traditional streaming platforms like Spotify and Apple with its approach.

Roneil, welcome to Voices Behind The Music. 

[00:01:55] Roneil: Thank you so much for having me and what an incredible introduction.

[00:01:58] Jeff: Fantastic. For starters, Roneil, tell us about Audius. What prompted you to start the company? 

[00:02:06] Roneil: Yeah. I think you summarized things pretty nicely there. Audius is a music discovery and community platform that connects artists and fans directly. We really see that direct piece being the key differentiator here between Audius and a lot of the other music distribution tools that exist and the way we achieve that is by being fully decentralized.

So there's a network of node operators, artists, and fans that together actually cooperatively run this streaming ecosystem for the benefit of the people using it. I think the biggest difference really between Audius and like Spotify, Apple Music, Amazon music, and the traditional DSPs as we talk about them, really is in that engagement model between artist and fan.

When an artist is sharing content on one of those DSPs, they're giving it to a distributor who's then putting it into the service. When the service is paying out revenue, it pays it to either the rights society or the distributor who then pays it to the artist. In the case of Audius, it is completely direct. When a user consumes a monetized offering from an artist that money goes directly to them in real time.

Going a step further than that, it's all the data and kind of understanding of that fan base, who are these people? Where are they, how did they find your music? How much were they engaging with it? All of these sorts of questions. And from that, the ability to leverage that information to do things like sell digital merchandise and other things directly to those fans. From a user experience perspective, Audius is much more similar to SoundCloud. I think we can co-exist with Spotify and the apple music's and whatnot of the world in the same way that like YouTube and Netflix can co-exist on the video side of the kind of media distribution ecosystem.

[00:03:54] Jeff: Sure, and it sounds like you can also coexist with the labels and the publishers. In some ways, I imagine if an artist achieves a certain degree of success on your platform, there's potentially an opportunity to up market or upstream if you will, to a label or publisher that obviously has their baked-in distribution and marketing mechanisms already in place. 

[00:04:19] Roneil: That's exactly right. It's one of the coolest things to see in the past two years that the product has been live. Our folks at some of the major labels and at some independent labels as well have actually been mining Audius for kind of up and coming talent, trying to capture people that are on the cusp of breaking out or maybe have broken out, but before others have realized so you're absolutely right. 

And then on the flip side of that too, there's there are mechanisms available for signed artists to engage on Audius as well, so long as they can get approval from the right parties on their end. 

[00:04:54] Jeff: Got it. Got it. So if we could take a deeper dive into that. So let's say I'm an artist, I have a recording. I want to distribute it, I want to monetize it and take control. I imagine this is a scenario where I own all the publishing as well, I own the sound recording. I imagine that if I'm working with a PRO, that's potentially okay? I don't know, but you could really break it down. I show up to your website, to your product. Then what? 

[00:05:27] Roneil: Yeah quickly on the PRO bit, so you would as the artist be responsible for notifying the PRO that collection is not going to happen around this specific content. The flow goes directly to you as a creator. 

[00:05:39] Jeff: So a PRO is a performing rights organization that handles the publishing side of the equation. There are two copyright owners in music, one is the owners of the master recordings which are typically the labels and the other is the publishing, which is really on behalf of the songwriters. So the work on behalf of songwriters and publishing companies to collect, what's known as performance royalty. 

[00:06:12] Roneil: Yeah that complicating bit aside, so you're the artist, you show up the Audius and let's say for simplicity's sake, you don't have a kind of a PRO set up or deal in place. There's just an upload button. You can click upload content, drag in what you have, put in some metadata and click share.

And that's now available on the Audius network. That's not monetized by default though. That's just free. If you want to start to monetize content on Audius, you can flip the switch to either mark that content as monetized, or you can gate access to it based on some set of inputs that you define.

[00:06:49] Jeff: So how does an artist monetize? 

[00:06:53] Roneil: There are two ways today. So one is through the ongoing distribution of these Audius tokens. So there is on a recurring basis there are tokens distributed to users of the Audius network based on where their relative usage has been. Let's say you and I are the only two people using Audius, my content is listened to like once and yours is twice. In that round of rewards, you would earn two-thirds of the rewards and I would earn one-third of the reward.

Scaling that up to all the users and whatnot, there's a fixed supply of tokens being distributed on a recurring basis. Those tokens can be earned based on how much engagement your content is driving if you're running a playlist, how much your playlist is being curated, if you're running nodes on the network, how many people people are utilizing your node. There are all these kind of different ways that you can earn your way into a share of that earnings.

So that's kinda side number one. Number two is the direct user engagement. So if you, as the artist are specifically charging users to do things around your content, you can earn revenue from that. The vast majority of users on Audius and usage on Audius has actually just been free so far.

 I think there's a kind of mentality generally in our community that a fan on Audius will be worth more over time than a fan on other platforms. So I think better, for worse, there's this land grab mentality among artists that the more fans I can aggregate today, the more valuable that fan base 

[00:08:27] Jeff: Sure, and makes sense. I think what would be interesting is to understand a little bit, if an artist is selling merch, I understand that there's a fixed or potentially limited supply of the tokens. But let's say I earned those tokens as an artist.

How do I actually convert that into a currency like a US dollar? Go through that process, or can I? 

[00:08:51] Roneil: Yeah. Yeah. There are various ways to do that if the artist chooses to. The tokens are designed to be used within the network, so if you come back and state the tokens you've received and do things with them, that's the predominant use case. But it's a permissionless openly available Ethereum-based token, so there are places where that is available. 

[00:09:15] Jeff: Got it. Got it. Very cool. And are you a musician? Are you part of it? I just want to understand the founder's story. How did you create, or how did you come up? And I did touch upon it earlier you met your co-founder Forrest at Stanford, but what was your manifesto or thinking behind creating Audius? 

[00:09:35] Roneil: I was a musician in a past life, but not a very good one. I was a drummer for a number of years and -

[00:09:42] Jeff: Oh, cool. 

[00:09:43] Roneil: I destroyed my hearing a bit along the way. I talk a little bit louder now, but it's fine. That was in middle school and high school and ended up, I had two sort of competing interests which it's been really fun to get to bring those two worlds back together in my work at an Audius.

But I was very into music and especially at that time, this was in the mid two thousands, post hardcore, that sub genre of I don't know what you even called it. 

[00:10:12] Jeff: Punk, probably..

[00:10:14] Roneil: That music was so technically interesting on the drum side, that's what I really enjoyed playing, really enjoyed learning, going to those shows, and being in that community.

But I also really loved making software and building things and seeing people use that. Not physical things, but like software things. Certainly, society pushes you more towards one of those than the other, and my parents certainly did as well. So I ended up spending a lot more time making software and lost interest in playing music.

 I stayed close to music as a fan. Somewhere along the way, became a bigger fan of dance music as well.

 But ended up in my kind of friend group with Forrest, my co-founder at Audius and a number of others who were very into dance music and going out to dance shows and have some friends that were either trying to be producers or were slowly making it as producers of dance music.

 That was where we started to notice these problems that SoundCloud was having. It was that folks felt just kind of completely disenfranchised in these decisions that SoundCloud was making with respect to how discovery works, how curation works, and how the community is treated.

And there was this Exodus of users starting from around 2015 or so from the communities that we were in. And then that was just what planted the seeds as you described it to say, there must be a way to do this, that actually like enfranchises and includes the creators, that's what makes these platforms valuable.

And seeing SoundCloud's value be just decimated in the process of losing their community through a series of poor decisions. We felt designing Audius in this way and making the users of Audius the kind of controllers and operators of Audius as well, was the path towards being resilient to these issues.

[00:12:03] Jeff: Now did you start with the artists? In other words, you first focused and built your product for the artists with the thesis that brings the artists and the fans will come? 

[00:12:15] Roneil: We did, yeah. In the early days there was actually a time when the product was not publicly accessible. When it was very broken and early in kind of those alpha building phases. We were just onboarding artists by hand. One by one, we'd sit with every artist we onboarded on a zoom call and watch them use it and iterate on that.

But we've always been artists first. I think that philosophy has served us well so far in that if you can provide artists value, they do have the ability to direct their fan base to different places. And if they feel fans on Audius are more useful and valuable to them than fans on other platforms, they've been the source of all the growth that we've had. 

All the folks working on and around Audius and the whole ecosystem around Audius had never spent money on paid user acquisition, marketing, et cetera. It's all just been this word of mouth. 

[00:13:09] Jeff: Wow.

[00:13:10] Roneil: And then bringing their fans along for the ride.

[00:13:13] Jeff: That's terrific. And I had mentioned some of the numbers earlier that I found in some posts, are you able to share where your numbers are now in terms of artists? 

[00:13:24] Roneil: Yeah. So today we've got about seven and a half million monthly listeners and around 250,000 artists. Actually, I think those numbers at that time were low on the artist side from where they actually were, but yeah, it's been a fun three, four months here. 

[00:13:42] Jeff: That's just incredible growth. Also, we do have a lot of founders that listen to this podcast as well. And so maybe can you talk a little bit about how you as a business monetize and work with these artists in such a way where artists feel like they're benefiting, the fans are benefiting. So can you spend some time talking about that? 

[00:14:01] Roneil: Totally. Yeah. And to your point, I think that was exactly the problem that the first company I worked for kinda ran into. Both inability to monetize, but also a sort of broken market dynamics. 

With Audius, we are a lot more thoughtful I think about how to approach whether there is a real business opportunity here. The way Audius has set up the network is monetizable and monetizes, but the company that built the first version of Audius is not the nexus by which that monetization happens. And actually, the way that Audius is set up today, our company will never be able to make money. It is possible, but the community would have to vote to put some take rate in place that would be funneled to us that we actually, I don't think it's something we would ever advocate for actually.

 So let's talk about the network first, which is to say when users are paying artists to consume things on Audius, 10% of every one of those payments gets routed to folks who are using staking the token. So if you run a note on Audius, you're staking tokens to access features on Audius, if you're using the token to vote on governance decisions, so anything and everything about Audius that can be changed is actually controlled by this governance process.

 Even shipping new versions of the software that powers the network and things like that, go through this governance process. But All of those, kind of anyone who's engaging in those areas with the token earns a percentage of the payment flow that happens across Audius. So pretty straightforward to understand, it scales with if there's 10 times as much payment volume that means 10 times as much value capture for folks using the token. But the token is not our company and that's like the key difference here, right?

Our company's role in all of this is to build new features on and help maintain all of the open-source software that powers the Audius network. But ultimately, we serve at the pleasure of the community and we sustain our work by asking the community for grants. 

So we ask the community to vote to give us grant money out of the kind of treasury of funds that backs Audius and that treasury came from when the network launched, there was a percentage of the token supply that was held back in this treasury that could be used. So yeah, it sounds very complicated but it's really simple. 

I think when you think about it from a philosophical perspective, these are meant to be common goods, right? The things that we've built with Audius, the people that are using them to their benefit, are really meant to be in the hands of the people who use them. And any profit motives for a specific company or a specific set of individuals who have a privileged position over the network would ultimately lead to the same problems that SoundCloud and like every other sort of a thing that's tried to build around this use case has fallen prey to.

[00:17:06] Jeff: Wow. So it is so decentralized from the perspective that you, as the maintainer of this platform, don't have a guaranteed revenue source and to a large extent, almost like Wikipedia, right? Where look, if the users don't step up and provide a grant to you, then market dynamics will say, my God, I can't pay my rent.

I can't pay for the servers anymore so I'm going to shut this thing down and people understand that, and they'll come to your rescue per se and pay you a fair price for your essential services, which are again at the pleasure of the community. 

[00:17:49] Roneil: Yeah. And I think the Wikipedia comparison is a good one. The one difference is that I think where Wikipedia and so many other non-profit kind of causes have had problems is that there's no common incentive layer for the people. Me and you and everyone else can go search whatever we want on Wikipedia, get this amazing value back from it. But There's not really a way for that to capture value in the way that things are set up today. Maybe there's a world they start using advertising or some other means to start to monetize from the angle of sustaining and supporting their work.

Because this is a common good that we all benefit tremendously from, but it has this tragedy of the comments problem where no one feels sufficiently motivated to step up. In the case of Audius though, because there is this revenue stream that the network is generating, there's a kind of express incentive among the folks who are benefiting from that revenue stream to see this sustain itself, support itself, be a going concern.

But the check on the work that our company does, and there were a few other companies in the Audius ecosystem now that do this grant work. If we're doing a bad job, the community vote to defund us if they want to, and that's their prerogative. As you said, we serve at the pleasure of the folks that are voting to allocate funds to us. And yes, it's an interesting dynamic.

[00:19:18] Jeff: It's an interesting dynamic. I'm not sure what my view on that is. It's a very brave scenario. Let me ask this question from an investor perspective. Number one, have you taken outside capital? And then number two, how do your investors feel about, this maybe you'll get paid, maybe I won't get paid sort of scenario? I mean that's I know too black and white but, yeah I'd love to hear your oughts on that?

[00:19:43] Roneil: We made sure to keep incentives aligned on that front as well, which is to say like we told investors from day one. So we have taken outside money from folks that you may know, like General Catalyst, Kleiner Perkins, and Lightspeed, on the traditional investor side. And then a number of great crypto native investors, like Multicoin, Blockchange, Standard Crypto and Collaborative Fund, and so on and so forth. 

We've had great folks come around the table with us. They weren't buying the token though. They weren't buying ownership of a company. So their incentives are also aligned there. We said, Hey, this company is basically a nonprofit, right? It's not formally in that status, but we're never gonna generate revenue and we don't ever plan to generate like mean revenue. This thing does capture value though, this thing being the Audius network, and you can be a participant in that. 

[00:20:36] Jeff: And invariably the value of the network will be priced accordingly in audio, the currency. 

[00:20:44] Roneil: Yeah, there's a market for it. So I can't opine on how the market decides what it does, but what we can do for the Audius community and ecosystem, is keep growing our user base and growing a payment volume flowing through.

[00:20:58] Jeff: Got it, but Sandhill invested in audio, in the actual currency as opposed to buying shares in the company, which traditionally is what most investors do. 

[00:21:09] Roneil: Yeah. So there were some mechanical things there, especially for our first round in 2018 where folks weren't equipped to hold tokens directly. But that at least was the intention behind their investment was, even if it was done via some holdings vehicle, it was ultimately with the goal of holding and using the token.

[00:21:29] Jeff: Got it. Got it. Got it. Let's up the level this for a second here, let's talk about web three macroscopically, and I know this is a bit of a softball because I'm sure you have a strong opinion. Is web three a fad? Is it here to stay? What's your view on that? 

[00:21:46] Roneil: Yeah. And actually, my opinion here may not be what you think, I think right now it is a fad. I think there are real use cases that exist in this fear serving real user needs. I'm obviously biased, but I think Audius is one of those. There's a handful of others that I'm really excited about that the founders are here for the right reasons and building for the right reasons.

I think the term and that kind of this ecosystem is in Vogue right now. The Current market dynamic in all public markets, crypto and equities, and everything else is hopefully going to lead to a cooling off of things. Which will mean the people who are here for the right reasons and building for the right reasons will stick around and we'll wash out a lot of these people building like X, but web three, right? 

Pick your existing web two business and let's decentralize it, but not really have a clear reason for why it needs to be decentralized. I think we had a very strong thesis, the commons of music distribution that had an opportunity to build up a kind of monopoly position in the future had to be something that was a common good treated like a utility of sorts. And that's what led to Audius being designed in the way that it was.

Crypto was like the means to that end. It was the most straightforward way from a technological perspective to achieve that goal. I know that sounds extremely cynical which I guess it is to some extent, but the thing that gives me a lot of hope is seeing how many users have come into this whole ecosystem, not just Audius, but even products like Metta mask, I think now have over 10 million monthly users of the Chrome extension.

There are a lot of real people here doing cool stuff. But then the last thing I'll say on this, I think is looking back in 10, 20 years we'll talk about like web three or like NFTs or any of these sort of terms the way that you would think of like HTTP or HTML from the nineties.

They were enablers, but the technology itself wasn't what was interesting. It was Facebook and Google and Amazon and the things you could do with it that changed our lives. 

[00:24:02] Jeff: Sure. It's what people did with the protocol that made it so powerful.

[00:24:05] Roneil: Crypto is the same. I think there will be a consolidated handful of really interesting use cases that could only be enabled by this that couldn't exist previously. We'll see.

[00:24:18] Jeff: You're clearly at the forefront of innovation within the music segment. And on that note, what do you see, what is the one thing that the music industry you think should be focusing on going through? 

[00:24:30] Roneil: I think the music industry is caught in this transition. So I think we're not the only ones that have recognized that this direct engagement economy will be a meaningful source of revenue in the coming years and in the future.

And I think the industry recognizes that they're trying to figure out how they play ball in that world. We're in a world where fans' engagement with recorded music is effectively valued at an all-time low, historically. It's valued at more than zero, which is good compared to 2001 or 2000.

But certainly compared to the era of CDs and LPs and everything else, but even since 2010 or so, since the advent of the streaming model of everyone paying a fixed amount per month a continually growing amount of engagement means that like each individual engagement has a smaller and smaller amount of value.

And fans are more willing than ever to spend on experiences and things that let them be closer to and engage more closely with their favorite artists. The question is, if the industry's economic models built around the ownership of copyright being the nexus of monetization, I think the brand equity of the artist is actually where monetization will be happening in this next iteration of the music industry.

[00:25:56] Jeff: Fans want access, period. Fans want access. They will pay for it if there's a special experience, that's unique, they will pay for that. And the artists could truly benefit. 

All right, so a couple of quick questions that we always like to finish with. What was the first album that you purchased? 

[00:26:19] Roneil: Oh, what a great question. It was enema of the state by blink 182. 

[00:26:24] Jeff: Whoa. 

[00:26:25] Roneil: I was six or seven years old when that album came out and a great album.

[00:26:30] Jeff: Oh, very cool. What about the first concert you attended? 

[00:26:33] Roneil: I think it was a monkey's concert when I was like four or five years old. But I do remember it. Yeah, it was my parents were just big monkeys fans.

[00:26:44] Jeff: Wow. Okay. And then what about starstruck moments? You must have interfaced with a lot of these amazing artists directly. Can you share any of those moments? 

[00:26:55] Roneil: Probably the first time we met Joel Zimmerman or a Dead Mau5, I was like a huge fan of his music.

He was one of our first advisors to come on to Audius. We got introed a few layers to get to him. And it was just wild to see. He was like, I feel like the reason I first started really enjoying what you could vaguely call electronic music broadly.

[00:27:16] Jeff: So you've had a chance to meet him and get feedback, he's an advisor to Audius? Oh my gosh. Wow. How exciting? Good stuff. Roneil, thank you again for being on Voices Behind the Music. Your views on decentralization in the music industry, your views on web three, on tech, this stuff is super fascinating. Can't wait to have you back on. 

[00:27:39] Roneil: Oh, thank you so much for having me. 

[00:27:42] Jeff: Thanks for listening to Voices Behind the Music, a Growth Network Podcast production presented by Feed Media Group. We're on a mission to make it easy, fast, and legal for businesses to use music to power the most engaging customer experiences. Make sure to subscribe to the podcast wherever you get yours and learn more about us at feedmediagroup.com.

 

 

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Topics: Music streaming, Music Industry, Music Tech