Nigel Eccles (Vault) - How He’s Helping Artists Monetize Their Music, Fandom in the Digital Age and Lessons from Creating FanDuel

0:00This episode is brought to you by Vobin from Carta. Vobin from Carta is the easiest way to launch and run your venture investing. They offer SPVs and fund vehicles for GPs at all stages of the journey, from your first syndicate to operating a multi-million dollar venture fund. If you're interested in investing in startups, stick around after the episode where I chat with Gabriel Shin from the Vauban from Carta team, who shares his perspective and tips about how to start investing and how Vauban from Carta can get you set up. The link to Vauban from Carta's website is in the show notes. Vault itself is a multimedia format.

0:35we support pictures, video, text. We have artists that put their stems in there so that their fans can download and play with the stems. We've had artists use it for ticketing. So you buy a new artist by the EP. And then as part of that, there's a QR code that gets into their first concert. That's pretty cool. And we've seen, and we've started to do a lot more of live recordings. And so the artists can actually sell it at their event. and 24 or 48 hours later, the fans get notification to say, hey, your live recording is available. So that concert that you went to last night, suddenly you can listen to it again.

1:16You can listen forever. That's pretty cool. Hey, I'm your host, Mike Gelb, and this is a Consumer VC podcast where we discuss the intersection of venture capital and consumer innovation. If you're enjoying the show, also subscribe to my newsletter at theconsumervc.com where you'll receive new episodes straight to your inbox and a weekly recap of all the consumer deals that are happening. Please note that all content and episodes are for informational and entertainment purposes only and is not investment advice. This episode is brought to you by Vauban from Carta. Vauban from Carta is the easiest way to launch and run your venture investing.

1:52They offer SPVs and fund vehicles for GPs at all stages of the journey, from your first syndicate to operating a multi-million dollar venture fund. If you're interested in investing in startups, stick around after the episode where I chat with Gabriel Shin from the Vobin from Carta team, who shares his perspective and tips about how to start investing and how Vobin from Carta can get you set up. The link to Vobin from Carta's website is in the show notes. Thank you to my brother, Rob Gelb, for the introduction to our guest today, Nigel Eccles, the co-founder and CEO of Vault. Vault is introducing digital music collectibles as a new format for collecting exclusive, authenticated and limited run collectibles from your favorite artists.

2:36This episode really brought me back. I actually worked in the music for the first part of my career and I'm an avid music listener. So I love thinking about what the future of the music industry is going to look like. Previously, Nigel also co-founded and was the CEO of FanDuel, which FanDuel is the number one sports book in the US and a leading daily fantasy sports platform. We discuss why he left FanDuel, how we got into crypto, how artists are currently monetizing their music and the void that Volt fills, the type of artists they're looking to attract, how he thinks about fandom in the digital age.

3:12I love this one. Without further ado, here's Nigel.

3:18Nigel, thank you so much for taking the time, for being here. How are you? I'm good. Thank you. It's good to be on the show. Yeah, thank you. Really appreciate it. Um, so why don't you start from, well, I guess kind of the beginning a little bit on the vault side, what was your introduction to crypto web three and, and this world? Yeah. So probably my first introduction was 2017. If you remember the 2017 bull run, um, and like, I, I like building consumer products. and when I saw crypto and particularly the promise of Ethereum, I was like, wow, this is really cool. And I sort of thought, wow, is this a cool technology that I could build some cool products on?

4:03And when I looked at it in 2017, like it wasn't, you know, I remember buying Ethereum then. I was like, oh, this is cool. And I remember looking at all the other tokens and going, hmm, not really sure what that does. Don't really know what that does. You know, sort of go down. So the actual like use cases, you weren't entirely sure. They were non-existent, right? There was a lot of promise. And I kind of got disillusioned of them. It wasn't even anything to do with the price, because I didn't really understand why they were going up. And there wasn't really any reason why they were going up. It was just like speculation.

4:36And then it didn't really surprise me. It crashed in 2018, because I just didn't, like, I loved the vision. I just didn't think it was being delivered. And then in 2020, again, came around. And actually, some of the first ones I got back into was like Nifty Gateway and Top Shot, because I saw that those were use cases, right? Like, you know, the art market is a real use case, you know, that you can actually show ownership of digital assets. That's really interesting. And I felt that both of those platforms had done a nice onboarding for kind of normals, right? The people that didn't understand MetaMask, Wallace, and seed phrases and all these complicated things.

5:16And so I actually think they should get a lot of credit for bringing people into the space because they did. They actually made this smooth onboarding flow. And I think they did a nice job. And that's kind of when I got back into it and then really started to get deeper into technology. I also, I would say, getting into Solana pretty early was something I was like, wow, now we can build something that is consumer, like consumer ready, because with Ethereum, it's fantastic. And I love the Ethereum ecosystem, but I can't build a consumer product that has like$5 to$10 transaction fees. I need something that's got transaction fees in the sense.

5:58So that was kind of my first in 2017 and then latterly into 2020, sort of latter part of 2020. So some of the reasons, I guess, what got you into it, you were interested in the technology from the beginning. I mean, you didn't quite, the use cases just weren't there, but you like the idea of what the use cases maybe could be. And also just in terms of price and the transaction fee and gas prices going down and are considerably cheaper on a Solana versus Ethereum. That kind of, then you started to realize, okay, I could actually build a true kind of consumer platform using this technology. That's right.

6:42Yeah, I just, I felt like Solana was an L1 that was built for consumer. Like, I still think Ethereum is really interesting, but it's mostly financial products. And I'm kind of not that interested in those. Like, I think they're interesting, but it's not what I want to build. And so that's why Solana to me was like, oh, this is an L1 that is built for consumers. We can actually build consumer products on top of this. And is this part of when you were thinking about all this, was this during around the time that you were deciding to leave FanDuel? Oh, no. Well, 2017, I guess, was one of the last years I was at FanDuel.

7:21So, yeah, it certainly was at that point. I was sort of thinking about what I might do next. So I did look at it then. Absolutely. Okay. Got it. Got it. And so all this, I guess, when you're thinking about crypto and thinking about using Solana, this came out eventually as Volt. Why did you decide to focus on music? And what were kind of the underpinnings that eventually became Volt? Because we thought ownership was really interesting. We thought ownership of digital assets was really interesting. We kind of thought it was weird. With these digital assets, you had ownership but not exclusivity.

7:59And by that, I mean a physical asset. If I have a Lamborghini, for example, in the driveway, I don't. I have a Ford Explorer. But I not only own it, I can prove I can own it. I'm also the only person who can drive it. Me and my family are the only ones. So I have both ownership and exclusivity. Whereas with NFTs, you have ownership. Like I own this CryptoPunk or my instance, I own a Solana MBS. And I can prove that I can own it, but it's not really exclusive. Everyone can pretty much have the same experience with me with that NFT. They can right-click and save it. They just don't have the financial return of owning it.

8:41I thought that was actually quite weird to use the music analogy again. And it was interesting in music because there's this format we talk about as music NFTs, and there's thousands of these, but I don't have to buy them to play them. but in the music world, in the analog world that's not true you have to go and physically buy the album and so we sort of felt the right format for music would have exclusivity look if you love this music you want to support this artist you actually could buy it and only then can you play the music and so when we started exploring NFTs and looking at that technology we very quickly kind of sort of fail on the music industry as the industry that could most benefit from really an evolution of the NFT technology.

9:33Yeah. I think when I think about, you know, kind of like the CD days, like I, that's actually my background. I came from the music, I was in the music business for about four years. And I think about the CD days, obviously you do that, that ownership, you, you have exclusivity you know, you, you need to put the CD into a CD player in order to play it. And so you actually need that physical, but you know obviously these were mass produced right in terms of scarcity it wasn't quite it wasn't quite that um where of and i think that maybe and i'd love to hear your thoughts about this but part of when we think about scarcity in the digital space for artists i would imagine what's kind of tricky is part of the allure is that there is like a certain limited quantity which you actually don't you don't actually have that when it comes to CDs.

10:19Yeah. And I think, I think there's kind of pools in two direction. I think there's a pool to sort of ubiquity, you know, so for music to be everywhere. And so it doesn't help an artist like Miley Cyrus wasn't going to drop her music in a format that only a couple of thousand people could access. She wants to get as wide as reach as possible. And streaming is the best model for that. But at the same time, there are also super fans who not only want that song and know that song and know the album, but actually want to collect that album. I would love the bonus tracks and the additional content. And the problem with streaming is that those fans are, to use an industry term, under-manetized.

11:08to use a fan term, give me something to buy, right? Like, I love this artist. I would buy everything that they produce because I love them. I love everything they do. And today, like Marissa is a good example. I go to her merch page and I can buy a beach towel, a tanning set, and a puzzle along with her music in what I would call antique or vintage forms, which is vinyl and CD. So there's something wrong there that she's selling beach towels. And the thing is the dominant format to listen to music is, is on the phone. So why don't, why doesn't she have a format that she can drop her album with bonus tracks that are only available in this format that only our top fans care about that they can buy.

11:53And that's what we're trying to create that format that they can, that she can sell that to our top fans. Yeah. I mean that, that I think that's interesting just as a music fan, like one of my favorite bands is this band called Thrice that I grew up with. And, you know, when I, you know, and I'm, I'm like a, maybe an odd music, music listener. I'll listen to one track 300 times if I really like it. And just over and over and over and over and over again until like the, like the for a long time. And I like to actually experience that track maybe in different formats. So I might prefer like the live format of that track in different shows or you know how it's done acoustically and um and thrice did like i feel like they're like a few a few of their albums all um on uh spotify that not exclusively to spotify but like in a format of like them recording it live in studio and like that would have been you know so like i would gladly pay for that you know separately um and have it and have it be be more scarce and i i guess i'm and same with like another another one of my like in a different example um another band that i that i really enjoy jimmy world who um they they like post their demos of um or like have their their demos on spotify and i that's interesting to me because um you kind of see how the song was created a little bit just a glimpse like they have like the background vocals for example on one song that i love in the verse on the demo and they actually have it in the chorus, the background vocals there.

13:24So you just kind of see how the meat is made, so to speak. And I really like that. And that's rare on Spotify because that sort of content does not perform well on Spotify. And in fact, talking to artists, there's actually tons of content that top fans want, but actually they don't really put on Spotify. There's no workplace for it. So one example is alternative versions of the same songs are developmental versions. The other category, huge category, which is live music. So it's very little live music on Spotify. It doesn't perform well. Artists aren't that keen about it being on there. Sometimes it's not as well mastered, but fans want it.

14:05And so that again is a category that we're trying to build with Vault, which is live music. So you go to a show, you listen to an artist you love, and you walk away and all you have is a ticket stop. Well, what if 48 hours later you get a notification said you can buy the live recording for that for that event that you were at and you can keep it forever that's a format that we we're doing so do you do you feel like you are trying to establish new fan behaviors or do you think that you're trying to plug into and reward existing behaviors when it comes to fans I think we're trying to, I'd say we're trying to make unmet demand for fans, you know, that they already do want other ways of connecting with this artist.

14:58They do want additional music from this artist. They also kind of want to support the artist directly that they're not really doing through Spotify. by. So that, yeah, but, and, and, but them getting something that's sort of tangible. And I mean, tangible in the broadest sense, it's not actually physical, but it's something where they have ownership and they have something they actually can collect. Okay. Got it. So I guess it is in some ways rewarding existing behaviors because these are collectibles. This is nothing new when it comes to collectibles, but in terms of something that's new is the fact that it's like a digital form when it comes to ownership and not the physical.

15:40Yeah. I'll tell you a funny story actually about the format and how it's kind of all met demand. So a band that I love is an 80s rock band, actually from Northern Ireland where I'm from, it's called Stiff Little Fingers, if you're familiar with them. So I actually bought a live recording of theirs in vinyl about a month ago. And I've been listening to it ever since on Spotify. because it's just like I bought it, I want to listen to it, but I'm rarely at home and sitting in front of my record player. And so I still haven't opened it, but I've been playing it. It's probably the thing I've listened to most of the last month.

16:19And so I actually was displaying the behavior that we're trying to create with Vault, which is if that was available in the Vault format, I would have bought it, I would own it, and I could play it on my phone, which is basically where I listen to all my music. how how then do you feel about like quality so i think part of like the allure of like of like getting out the record player like like i have a record player and kind of like listen to music it's you know it's it's it's uh it's also like the quality of it being analog not uh you know non-compressed um for really kind of music geeks out there right um do you feel which of course like non-compressed music is you know huge files um and so how how also do you think about format when it comes to that side of it on like the listening experience?

17:04Yeah, so we certainly don't feel that we compete with vinyl. I personally love vinyl as a format. And I think it's great. I think it's fascinating. A lot of people collect vinyl even though there aren't record players. But it's funny, I have a record player, but I'll admit I don't play all of the vinyl that I buy. Which I think where we fit in is for a lot of music that is never going to be in vinyl or it's alternative, you know, like, so for example, singles. Like we have worked with a number of artists to create deluxe editions of singles that they've dropped. You're never going to make a vinyl of that.

17:50You'll never make a CD. But you might love that song and you might love it so much that you want to see the deluxe edition that has an alternative version of it, has a video of the artist the first time they ever listened to it. They might have the demo version. It might have the stems. There's things like that around it. Those are all things that, if I love that, I probably want that. So it doesn't really compete with vinyl. I think vinyl's great for what it does. This is just like an alternative format that kind of reaches different needs. No, I appreciate that example in terms of what like a deluxe edition could look like um the different ways like stems for example if you want to recreate it or just listen to like the vocals or the drums or or what have you maybe incorporate that into uh maybe your own type of uh uh music um endeavors um as long as it doesn't interfere i guess if you're trying to commercialize it with like copyright infringement and all that stuff like that but um but that makes sense that makes sense from um from that i know that vault is still pretty young, but what do you think so far with like the artists that you're partners with that fans you feel like are actually craving when it comes to maybe exclusive type of content versus maybe some type of content that actually maybe isn't as resonating as much when it comes to scarcity?

19:10Probably the strongest pull is for sort of unreleased or pre-released music. So, and also music that might never be released. So there's one artist we work with, Jordan Hart, who's a Canadian singer-songwriter. He's got an album coming up, and he dropped, he took eight songs that are in development, and he created it as an EP on Vault, and he basically, and he priced it quite high. He priced it at$30. And he said, these are eight songs I'm working on. Some of them are going to make the album. Some of them are not. But I wanted to share them with some of my fans to, like, you know, get some feedback.

19:49That sold out immediately. Like they were, that was, did really well. And I think that was a really good example where people were like, you know, this is rare. I love this artist. I get early view. That worked really well. Another format that worked really well is the live recordings. So there's a band called Telescreens in New York we work with. They did a live recording at the better end. And it's the only place where you can get that recording. So that has worked really, really well. So live recordings or kind of exclusive or maybe like the full album, which I mean, all like maybe the songs that were written.

20:24And then and then only, of course, a fraction of those goes on the actual record later. That's right. Or the other one that we've seen is like alternative versions. I'll give you one example, which again, go back to Miley. There's an alternative version of Flowers actually in her album. It's actually on Spotify. I think it's wasted there because I think it'd be much better to be an exclusive only in our vinyl only in our vault format because it's I don't think it's a mainstream song like the main one is because it's stripped back it doesn't have the instrumentals on it that's where I think there's opportunity how large do you think as an artist when you're thinking about which artists make sense for vaulting the platform.

21:10How large does an artist need to be in order to maybe start producing content that actually they can monetize on? Not that they're not monetizing on streams, but it's just kind of a fraction, but maybe like scarce content. Like how do you kind of measure fan bases? It's a good question. For us, it's less about listenership and more about engagement. So we've had similar artists in terms of, say, Spotify listenership, but some have had like really strong socials with super high engagement. And so example with that would be like Fletcher, who we've worked with, who signed with Capital. She's incredible engagement.

21:55And so when she says to her fans, I've created something special, go here and buy it. We got, you know, like we got an amazing conversion on that. so that's sort of more important than raw number of listeners because there's certain artists you listen to hate to admit it they're just fine but you're not you know like they're just fine for a lot of people right but they don't necessarily if they said hey I've got the special edition people are going to like rave about it and so it and in terms of size of artists some of our artists are really small like really small you know they've only been professional artists you know they've been working at it for a year or two they're not really monetizing on spotify in fact we've had artists you're getting checks from us before they're getting checks from from spotify um because we we can run small numbers there's no unlike vinyl where you're going to have like minimum you know runs here like we run with like 50 you know the the run will be 50 and And it was priced at$50 or$100, sorry,$5 to$10.

23:03So it's not a lot of money, but that might be the first check you ever make as an artist. That's the idea. Is the idea that any artist, any band could sign up for Vault no matter what the size is that they're on? Or are you kind of picking artists that maybe have some of maybe these key metrics when it comes to engagement to actually use a platform? So right now we're actually steering much more towards smaller artists than larger ones. Like the format would work great for larger artists, but it's more so that we can grow the community. Like we want to build inventory of lots of different artists.

23:44We want to grow our buying community. and we don't necessarily want to just sort of go and reach to some sort of superstar being known as a platform for that star. We want to actually build a sort of an indie community. So that's kind of where we're focused at right now. We do look for artists that have good, strong socials. So it's not really just where they are on Spotify, but more where are they on Instagram or TikTok, whatever their social of choice is. because one of the challenges is, is if they don't have strong socials, how are they going to find their audience? Like how are they going to find who their fans are?

24:23And that's, so we basically create the format for them. We give them the link and they can then market that to their fans. And if they have no route to fans, it doesn't really work. That makes sense because these artists, I'd imagine maybe became, even if they're small artists, maybe they're still artists that have a following. they came up through social media. So it's, um, Hey, like this is, um, which of course it's really challenging to monetize, um, on social media, just like how it's, um, really hard to monetize music. And so, and so vault, this is like an interesting, you know, uh, proposition for, for artists who did come up through social media of, Hey, these are actually tangible ways you can actually monetize your music.

25:07That's right. And it's monetizing and like, you know, there's an interesting thing here which is you're monetizing your art it's not and it's kind of i always find it weird with with art being you are art or music which is art used to promote something else it's like it should be valuable in itself right it like you know it shouldn't be necessarily used to promote pepsi like that's fine okay you know sponsorship is a thing but like why can't we create a format that people that the music is great it's a great way to consume that music and people want to pay for it like that's what we should be aspiring to so we shouldn't be aspiring to the format of you know 30 seconds into a song you see like a pepsi ad and then the song keeps playing you don't think that's right i just think ad support of anything is is the lowest like it's the lowest form like i get it like but i just think that when you live in a world of abundance like surely you want to create something that's so special that people will pay for and not just endure ads for i you know because when you think about in maybe the heyday of the music business which back when cd sales were you know heyday of the music business from like a monetization you know side and um uh and everything um uh from that because i mean you could say that this is the Hayden for music just because the amount of scale you can get with, with some of these digital channels, but the Hayden music, music when it comes to actually, you know, when you actually sold CDs and that was the ultimate goal, what have you.

26:44And you actually had, you know, a lot of, a lot more consumer spend. I believe the business from like 2000 to now has dropped by, has dropped considerably in terms of how large it is. so the music industry from a revenue perspective inflation adjusted North America recorded music is down about 40 % over the last 20 years and that's a lot but when you compare it with say the video game industry they were both about a 20 to 24 billion dollar industry 20 years ago video game industry is up 5x music's down 40 that's stunning in my view that is stunning i mean where do you think that i mean you could say the video gaming industry but where do you think when you dissect music fans and where that consumer spend went when where where do you think it went i i always find that's i always find the answer to that question well it's unknowable but i also find that it's often not useful.

27:55Like I'll give you an example from when we were building FanDuel. When people stop playing, you often want to like, why did they not stick around? And the answer you often get was, well, I was just busy. I was too busy. Right. And that question is really useless. The answer is really useless because you're like, well, how do I make you less busy? I can't make this person less busy but actually what the the real answer is is your thing isn't a priority right your thing isn't valuable and so the answer is is boring like make your product better right and so you know did you like let's send them more notifications is not the answer the answer is to like make your product better and so you know the answer i say to that question is where did the money go well it went to other things that were kind of higher priority or you know they valued more and so the answer here is make the music more valuable make more valuable to own um and that's kind of the solution there as opposed to sort of trying to figure out where the money went like it might have you know for example it might have went to gaming you know and why did it go to gaming well because they valued it more and those formats also did a better job of of creating new formats that you know fans connected with and entrace them to spend their money on it well and so what's also kind of a little bit on that point what's been a what's been harder since this is a marketplace and of course there's always i mean well well in this case obviously you you need the artists first but uh to get their fans but how how do you go about what's been harder like convincing artists to come on the platform or their fans to actually purchase some of these exclusive offerings that the art that the artists have?

29:48I'd say our focus is very much been on the artist side. Because if we get the right artist with the right content, it sells. That's not been a challenge. the hardest part is getting it's sort of connecting with the artist and for them understanding what we're trying to do and for how them to sort of pitch it to their audience like what content should go in there and how they should sort of pitch it you know position it with their audience that's the hard part as long as we can do that we know that it'll sell well how has it been tricky at all you know with FTX and the countless number of kind of NFT scams that happened, you know, maybe like the past couple of years.

30:34And it just being, crypto Web3, it just being, you know, quite difficult to actually onboard people that don't understand it. And of course, these are, you know, consumers of music. They might not know, you know, NFTs, everything like that. Just on the actual, on the actual like artist side, do you find that the artist pull, it's depending on the artist, that that artist is kind of so powerful that in some ways doesn't matter because the consumer is going to jump through hoops for that artist in order to do it? Or has it been really hard to actually convince fans to actually subscribe and buy some of these products from their artists?

31:17Well, let me answer it this way. So the first thing I'd say is like, crypto has been such a disastrous industry. It seems to have attracted the worst types from every quarter of the globe. It is an amazing technology, but it has this magnet towards grifters and scam artists, which is really sad because it's a revolutionary technology. And building in it has been really challenging because, honestly, the brand of crypto, I think, is really, really bad. And the interesting thing that we found is that users understand ownership really well. They understand, oh, if I buy this, I own it. What does that mean?