Some people say the modern music business lacks entrepreneurial new independent record companies. Those people haven’t met Stef van Vugt.
The 25-year-old Dutchman founded Strange Fruits (now Fruits Music) in 2016 while studying music as an aspiring DJ.
The label-cum-playlist company now has millions of followers on Spotify, where it’s racked up tens of billions of streams.
From Dance Fruits (5.4m followers) to LoFi Fruits (7.3m followers), Fruits Music’s playlists have become a phenomenon on Spotify – but not without controversy.
For one thing, Fruits Music ‘buys out’ the rights to all its tunes from artists who work with the company (although it does continue to pay through royalties as part of these deals).
In addition, in order to better ride the Spotify algorithm, the lead ‘artist’ name on all of the tracks the company produces is Fruits Music itself (or one of its sub-brands).
This creates similarities to the ‘fake artists’ that caused controversy for Spotify a few years back.
Last year, Rolling Stone wrote an exposé of Fruits Music playlists – particularly Rain Fruits Sounds – that are designed to maximize payouts from Spotify (via its ‘pro rate’ royalty model).
Rain Fruits Sounds contains over 2,000 ‘tracks’ of rain noises, many of which are just over 30 seconds long.
Every time one of those ‘tracks’ gets played, Fruits Music increases its market share of Spotify’s royalty pool – ultimately ensuring it gets paid more each month, and ‘real’ artists get paid less.
On this MBW Podcast (supported by Voly Music), Music Business Worldwide founder, Tim Ingham, grills Stef van Vugt on the story of Strange Fruits, accusations that its actions hurt ‘real’ artists, the ‘gaming’ of streaming playlists – and what the exec thinks about a shift to ‘user-centric’ licensing on streaming platforms. (Van Vugt’s answer to that last one might surprise you.)
Listen above or read an abridged/edited excerpt below…
You said in that Rolling Stone article last year that strange fruits is now spending eight-figure sums annually on marketing – i.e. tens of millions of dollars. What does that tell us about your size and success as a business today?
We are not backed by investors, we are not some private equity company. We are just a 25-year-old guy with a great team around [him] that started five years ago with a budget of €5,000.
That has snowballed into what [Fruits Music] is today by us reinvesting into [marketing to] show more people the great music that we have to offer them.
Last year, that [meant] a cash flow of €20 million that we actively reinvested into marketing and frontline A&R to create more amazing music. I’m pretty proud of that.
Let’s talk about the deals that you have in place with artists and creators whose music you sign. What do those deals look like?
We have a solid ever-growing team of music producers who receive meaningful fees and [ongoing royalty] income on the music that they create.
That [became] especially big during COVID, where a lot of artists that normally [played] shows or they had other income streams, were like: ‘Okay, how am I going to make this happen?’
We came in to say like, ‘Hey, here is XYZ number [upfront], and here is your participation in the long term royalties of the success that we’re going to have, because we’re advertising our catalog so much.’
With that, we’ve been able to get a really strong solid group of music producers that just have a phenomenal way of [creating] music full time.
how many of them are there?
In total, I think we have between 50 and 100 people that, on and off, on a monthly basis work [to create music in] all the various musical styles that we put out.
The Rolling Stone piece last year focused a lot on the rain playlists you make, and the fact many of the tracks in there are just 30 or 31 seconds long – just long enough to trigger a payment from Spotify. the moral argument against you doing that is this: because of the pro rata nature of how Spotify and other services payout, you’re taking money from hard-working artists and labels as in every single time one of your 31 Second rain tracks gets played.
Normally when somebody shows [an industry/company] that something is broken – that the system is broken within the guidelines of the industry, because we were not doing anything illegal – [they are] rewarded for it. ‘Hey, we showed this [problem] at scale; we took an enormous risk [on] something that shouldn’t exist.’
With this one, I feel like once the genie’s out of the bottle, it brings up a larger conversation in the music industry where there are certain gatekeepers protecting their own interest. I’m not referring there to just the majors; it’s larger organizations that work with them and others that are also involved.
I feel like, when [someone] highlights something that is broken, you should fix it, or you should look at, ‘Okay, how can we make it different so that it does work?’
Bohemian Rhapsody is over five minutes long. Playing that track would trigger one payment on Spotify; in the same time, you could squeeze in a few 30-second Fruits Music rain tracks that would all trigger a payment. that just doesn’t seem right to me.
It doesn’t seem right to me either! So that’s why we’ve highlighted it.
We took the risk of investing so much resource, time and effort into: ‘Hey, this is what’s wrong in many verticals.’ Nobody’s ever done that to the scale that we did. It got to a point where we [as a company] were out-streaming Justin Bieber and Adele on a daily level, it was just insanity.
There are really easy fixes for it, such as the user-centric payment model, complemented by some other ways of paying [artists] based on retention that could solve, basically, what we did.
“We have millions of people listen to the playlists daily, [telling us] how much we help them with specific things they had troubles with.”
But [let’s] also not get into a conversation where we are saying: ‘Hey, this is premium music. And this is less premium music.’
Because at the end of the day, it’s up to you, the audience, the user that paid for a subscription, to decide where they feel like something has value or not.
We have millions of people listen to the playlists daily, [telling us] how much we help them with specific things they had troubles with.
You’re in favor of a switch to user-centric royalties on streaming services? I find that surprising – because it’s not ideal for elements of your business model!
Again, we’re not backed by some investor: I can say whatever I feel like saying and what I truly believe.
With this, I feel like [a switch to user-centric] is the right move for the music industry. But just user-centric alone will not be enough to fix what [Fruits Music] has highlighted to be wrong with the music industry.
I feel like there has to be multiple factors [considered], where [uploaders] should be incentivized to create quality music, whether that is three minutes long, five minutes long, six minutes long or 10 minutes long. It doesn’t really matter.
On your most successful playlists – Lo Fi fruits, music, dance fruits, etc. – you use the playlist names as the primary artist names on the tracks. It’s kind of like the label (or in this case the playlist) is the artist. I’m presuming that brings an algorithmic benefit on Spotify. But how would you respond to the idea that doing that is wiping out credit for the ‘real’ artists behind these tracks?
[Fruits Music has] tried to innovate and try new things; some things work, some things don’t. If we just operated within the framework that has been set over the last 10 years [for] how streaming labels should operate, not much excitement would happen.
What we did here is say, ‘Hey, we have this brand, it’s an omni-brand that we’re trying to establish across different genres. And it’s really difficult for a music fan to grasp what to follow because they are being over-delivered music, with 60,000 songs [uploaded to Spotify] a day.
‘We want to build IP and we want to build brand. So how are we going to connect those things in a way that makes it easy, in the long run, for people to connect with us and know where to find us?’
“For a company like Fruits Music, you have to build IP, and you have to build brands that are able to not be disrupted.”
I do believe we are moving into a user-centric world. And people are not going to say: ‘I want to listen to X/Y/Z artist,’ when [the world] is split up into a million different artists.
So [for a company like Fruits Music] you have to build IP, and you have to build brands that are able to not be disrupted.
In the new industry that’s coming, where it’s all focused on brand and IP, you want people to say, ‘Hey, Alexa or Siri: I want to listen to LoFi Fruits Music.”
But if for some reason streaming services decide to make sure own LoFi Fruits Music [equivalent] playlist, then our playlist would not be there [as the first option in the voice search]. But the artists [with the same name as the Fruits Music playlists] still would be.
So it’s all preparation for possible outcomes in the next few years, and making sure we are set up for the long run instead of just quick success.
I suppose the sadder aspect of you, labeling everything as your own IP, is that these artists creating this music aren’t getting that recognition. They’re just getting a handshake and maybe a fee upfront plus a royalty stream; they’re not getting the opportunity to build fan bases and build careers off your success.
What you see [today] is a lot of musicians that don’t want to be the next superstar. They just want to create music – they just want to make something that’s meaningful – and they have 20 or 30 aliases that they put music through.
That’s something that’s a trend in society in general, where you have all these virtual artists, virtual YouTubers that pop up left, right [and center]; the team behind [these projects] are extremely passionate about what they’re doing, [but] they don’t seek confirmation publicly of: ‘Hey, this is what I made.’
Let’s talk about Strange Fruits – now Fruits Music – itself. You’ve made your brand and presumably your fortune. What does the future look like? And on what platform or platforms is that going to take place?
It’s really important to us that we are not just seen as a dance label anymore, but that we serve a variety offerings in audio.
We have actually three main things that we focus on: (i) Creating the best music and playlists on the planet for you to listen to when you’re studying, relaxing or whatever you might [be doing]; (ii) [Providing] meaningful income for musicians that work with us; and (iii) [Being a] commercially conscious company which is sustainable.
We think Fruits Music is positioned to be really strong in the music business. We are in various music niches that are habit-based, and I feel like we have good brands within those spaces, where I don’t see many competitors.
We have a diverse catalogue, we represent a hefty amount of titles, and we’re ready to scale up this year; anything or anywhere where the attention goes, we’ll be.
“We’re launching various branded entertainment products – including an app called Sleep Fruits that we’ll be launching in the coming weeks.”
We hope to be working a lot closer with streaming services. We’re really excited to work more with Spotify and Apple Music and see where we can position our brand in a way for people to find us and the music that we create.
Other than that, we do have a lot of complementary new exciting initiatives that are coming up.
We’re launching various branded entertainment products – including an app called Sleep Fruits that we’ll be launching in the coming weeks. It’s basically a whole app [dedicated to] well-being, meditation, stories, different audio, and [allows users] to play around with songs, manipulate them [to] make your own soundscapes.
Also I feel like, with Covid, we didn’t really have the opportunity to do a lot of stuff in live. So there will be a lot of fun over the coming few years to see what that [Fruits Music] melon would look like on a live [stage].
What we’ve done [to date] is basically the perfect storm around having the right products at the right time in the right quantity, and then supplementing that with marketing tech and systems to efficiently scale to the level that we’re at today.
Within that process, we’ve also stumbled upon how broken the music industry is.
I love change. Anything that changes is good.
We are a really young company with roughly 15 to 20 people in the office. It’s just an extraordinary time to be alive. I’m 25, I’ve done a lot of cool stuff in the music industry, and I’m excited by all the other things we can do.