‘The Odds Are Against You’: The Problem With The Music Streaming Boom Music streaming

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WWith the streaming revolution breathing new life into a once moribund music industry collapsing under falling CD sales and widespread piracy, the world’s largest record companies – Universal Music, Sony Music and Warner Music – have regained their financial momentum.

After facing financial ruin a decade ago, the trio, who control the vast majority of the world’s biggest hits with a roster of talent ranging from Taylor Swift, Ed Sheeran and Coldplay to the Beatles, Adele and Korean mega-band BTS , is now valued at a combined $ 100 billion (£ 73.8 billion) as investors bank on the titans as the biggest winners in the streaming boom.

“Music is fundamentally a superstar business,” says Mark Mulligan, analyst and CEO of Midia Research. “The streaming economy works very efficiently in a lot of ways. Music is now seen as stable, so large institutional investors are flooding the space as they view streaming as a safe and predictable asset. But they want to invest in the bigger companies and the majors have that market share, they have more artists – the bigger ones – they have more streams, more of everything.

It was the sustained gold rush of streaming that spiked shares of Universal Music – the world’s largest music company which was launched by its French parent company, Vivendi, earlier this month – , valuing the company at 45 billion euros. Purchased for $ 3.3 billion in 2011 by Sir Leonard Blavatnik, Warner Music, the world’s third largest music company, has reached a market cap of $ 22 billion since its IPO last year.

The big music companies have been able to use their strength to strike increasingly profitable deals on streaming royalties with leading platforms such as Spotify. The basis for this bargaining power was highlighted in a report by the Intellectual Property Office released last week, which showed that the top 1% of artists made up 80% of all flows and 10% made up 98%. % of all fan streams. .

And among the most popular tracks, major music companies own three times as many rights among the top 10% as those owned by independent labels. In any given week, nine of the 10 best-selling songs in the world – Stream Cash Cows – are owned by one of the Big Three music companies.

The success of large music companies has been criticized with a select committee of MPs inquiry into the streaming economy released this summer calling for a “complete reset” of royalty payments to musicians, after concluding that only large groups and labels make money with the current system.

“You can’t help but feel exploitative”: Eliza Shaddad. Photograph: David Wolff-Patrick / Redferns

“Streaming has become such an important part of our record releases, and obviously can offer brilliant opportunities and open doors for songs – but without fair compensation for songwriters and performers, it can’t help but. feel exploitative, ”said singer-songwriter Eliza Shaddad. “Streaming is clearly the future of music and as such needs to do more to help artists build lasting careers. “

Drake, one of the 1% superstars who made deals with Universal and Warner with a net worth of hundreds of millions of dollars, amassed more than 5 billion streams last year, the highest number of all the artists in the world.

However, the number of UK artists managing just 1 million streams nationwide in at least a month last year was around 720, according to the IPO. After various royalty cuts, that can leave the musician as little as £ 1,500 a month, according to Midia Research.

IPO admits that at least 12 million streams per year in the UK, and more in overseas markets, along with ‘other sources of income’, are all needed to ‘make a sustainable living from music’ . “Streaming only adds up when you have billions, not millions, of streams,” says Mulligan.

The pandemic has shut down the live music industry, which most artists rely on for the bulk of their income, causing musicians to carefully examine the details of their contracts regarding streaming revenue.

Tom Gray playing with the band Gomez.
Tom Gray playing with the band Gomez. Photograph: Leon Morris / Redferns via Getty Images

“[Most] artists can’t even buy a cup of streaming tea, ”says Tom Gray of the Gomez group, founder of the campaign group Broken Record. “Most, with the exception of the Most Successful or Flavor of the Month, have a limited or fixed audience once they’re established. 99% of artists won’t see the benefits of streaming and that’s not how the economy is supposed to work.

Streaming critics argue that despite the growing number of subscribers to music services such as Spotify, Amazon and Apple, which have fallen from 86 million in 2015 to around 550 million by the end of this year, the average price paid per month continues to drop so many are on cheap deals.

At the same time, the digital age has made music release simple: there were 5 million new self-liberating musicians last year, and a staggering 65,000 new songs are uploaded to streaming services. each day.

All of this means that the royalty pie is not growing fast enough to spread large payouts across more and more songs and artists. The IPO report found that 64% of musicians in the UK earn £ 30,000 or less.

Estimated Breakdown of Monthly Music Streaming Subscription Fee of £ 9.99 in UK

“It really only serves the aggregators – the big bands and streamers that just keep growing,” says Gray. “Let’s face it, the odds are stacked against you.”

However, IPO research also offers a more nuanced picture of winners and losers in the age of streaming. The report found that overall, musicians derive the same income in real terms from recording rights revenues as in 2008 – the pre-Internet era – and that the royalty income received by artists through physical and digital sales have grown 42% since then, far more than the 8% increase in record label revenue growth.

“The share of royalties that artists and songwriters order in the streaming economy is considerably larger than the share they have made from CDs and downloads,” said Geoff Taylor, chief executive of the organization. industrial, the BPI. “The idea that artists aren’t getting a fairer share of streaming, we never thought that reflected the factual situation.”

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The report found that 68% of musicians polled by the IPO said that overall their incomes had either stayed the same or increased since 2015, and that life at a big label was better paid on average at 51 £ 800 a year, despite the fact that artists spend years repaying advances made by labels to pay for the production, marketing and distribution of their music.

Taylor says the democratization of the digital age has created more success stories. Around 2,000 artists reached 10 million UK streams last year, which is considered the equivalent of selling 10,000 albums, double the number that sold so many physical copies in 2007.

“More artists are successful in the streaming economy than in the CD economy,” he says. “But of course there are also others that don’t succeed, because there are just so many more on the market now. I think streaming has been good for smaller and taller players. If we can make more money from streaming, it will benefit everyone and increase the value of the streaming economy. “

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