Why Epic Games’ Record-Scratch Bandcamp Buy Is a Necessary Evil

Why Epic Games’ Record-Scratch Bandcamp Buy Is Necessary Evil
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2022 is shaping up to be a dramatic year for M&A in the video games space, but the latest acquisition saw one prominent gaming entity turn its focus toward music.

Bandcamp, a popular platform for purchasing digital music files and physical music releases, is now officially owned by “Fortnite” developer and publisher Epic Games as of last week.

While streaming still leads music consumption, physical sales have nearly doubled from the first half of 2020, when the pandemic brought live performances to a standstill. Bandcamp has proven instrumental as a vector for struggling bands, artists and labels by granting them a platform to sell their work physically and digitally, with prices determined by each seller.

Launched in 2008, Bandcamp became an indie-friendly alternative to iTunes that affords musicians and labels 82% of sales after processing fees and Bandcamp’s 10-15% cut are accounted for.

In March 2020, Bandcamp gained further goodwill via a special fundraiser that dropped its cut of sales for one day. Now dubbed “Bandcamp Fridays,” this event has remained a fixture of the platform throughout COVID with the first Friday of each month providing the full portion of sales to sellers, resulting in more than $70 million in direct artist and label payouts as of January 2022.

Global usage of Bandcamp’s app for artists and labels rose sharply in May 2020 upon its announcement of continuing Bandcamp Fridays before doubling throughout 2021 as pandemic restrictions across various countries made international touring as complicated as ever, per Apptopia data.

Such usage of the artists’ app has since decreased steadily on a worldwide basis but is still well above the levels seen at the start of 2020. Bandcamp allows artists to charge for music livestreams of performances and new releases in addition to regular sales, which has undoubtedly extended incentive in using the service on top of better earnings than what streaming grants.

After the May 2020 Bandcamp Friday, music-review site Pitchfork spoke with who touted a clear preference for Bandcamp, as services like Spotify take as much as 50% of every dollar generated from streaming. Music duo 75 Dollar Bill claimed the $4,200 generated by nearly 700 buyers in two days from their new release was more than they had made from streaming services over the preceding six years.

The meaning of this to the music community wasn’t lost on Bandcamp co-founder and CEO Ethan Diamond, who in August 2020 said he thinks of Bandcamp as “a music company first” rather than a digital business.

As such, the decision to become an Epic Games subsidiary has taken some artists by surprise, with reactions ranging from skepticism over the company’s ability to remain in its current state of operations and scathing complaints over associating with Epic to feelings of betrayal.

Diamond has asserted that the company “will keep operating as a standalone marketplace and music community” and confirmed things like its own editorial operations are here to stay. But he also followed those assertions with a “however” statement acknowledging Epic will be involved with expanding the company’s international reach and further developing its internal tools and systems.

In other words: Bandcamp absolutely is a digital business in need of a digital master.

The Epic Games takeover comes after a year of the company’s consumer-facing app seeing global usage fall from its 2020 highs to below what was observed prior to March 2020, per Apptopia.

With the Recording Industry Association of America’s last mid-year report observing the continued decline of digital music sales amid increases for streaming and physical music, Epic’s decades of tech experience and current metaverse prominence via "Fortnite" may be what it takes to expand Bandcamp past a dedicated but still-niche support base of music lovers.

"Fortnite" alone boasts 350 million registered players and has a history of flashy virtual concerts, notably Travis Scott’s 2020 showcase that drew over 28 million unique attendees and just under 13 million concurrent observers. It also reportedly earned the rapper roughly $20 million altogether thanks to sales of in-game cosmetic items, not unlike merch fans would otherwise buy after an in-person performance.

If Epic already displays a prowess for making easy money off such microtransactions, there is real opportunity for cross-company integration enabling greater digital sales for Bandcamp artists.

Granted, Epic’s own dedication to its low 12% commission on Epic Games Store purchases makes it unlikely the company would drastically change Bandcamp’s similar proclivity for high artist payouts, especially since Epic previously lost face with legal challenges over the origin of dance emotes on "Fortnite." Plus, founder and CEO Tim Sweeney has his own legal axe to grind with Apple over its 30% cut of third-party purchases on the App Store, which Epic unsuccessfully argued was monopolistic in a California court.

Still, there is at least one major caveat by way of the other big player lurking in the shadows of this deal: Tencent. In addition to its 40% stake in Epic Games, the Chinese tech giant’s Tencent Music subsidiary has stakes in UMG, WMG and Spotify.

As popular music reviewer Anthony Fantano (aka The Needle Drop) pointed out in a video assessing the Epic-Bandcamp deal, Bandcamp sports robust communities of underground hip hop and electronic music artists whose releases are likely rife with uncleared samples. This could make Bandcamp susceptible to disruptive copyright claims by proxy of association with larger music entities via Epic, as was the case with Amazon-owned livestreaming service Twitch, which had to strike a deal with the National Music Publishers’ Association in 2021 after wiping countless backlogs of users’ recorded streams.

It’s too early to call whether Bandcamp has been dealt an irreparable blow to its image by gaining a corporate parent. But as far as those go, Epic is one that seemingly exhibits its own distrust of authority, not unlike the subject matter of most recorded music. That’s as ideal of a fit Bandcamp can get as it advances further into the digital realm by abandoning true independence.