Last Call for Our Artist Survey

This is your last chance to take part in our global artist survey – we are closing the survey this Friday (19th April).

In partnership with independent distribution company Amuse, MIDiA Research is undertaking a detailed study of the music artist landscape. We are fielding a survey to the artist community, exploring issues such as:

  • What success looks like to you
  • Career aspirations
  • The importance of signing to a record label
  • Financial wellbeing
  • Maintaining creative control

If you are a singer, DJ, producer, performer, or in a band, then we’d love to hear your views. Just click the link to take the survey.

All of your responses will be treated as strictly confidential and will only ever be presented in aggregate as part of results for the entire survey – so never attributable to any individual. We will not use any of your responses to contact you again for any purpose, unless you specifically provide your email address to us in order to be interviewed in more detail for the research project.

We will also send you a summary of the findings so that you can see how you fit into the picture amongst your fellow performers, and benchmark yourself against their aggregate responses.

If you have any questions concerning the survey the please email us at info@midiaresearch.com

How YouTube’s 1bn+ Club is Changing the Face of Global Music Culture

Throughout 2018, while locked in a bitter war of words with rightsholders and creators over Article 13, YouTube quietly but dramatically expanded its role as the most powerful platform for creating global superstars. Nowhere is this better illustrated than with the YouTube music videos that have one billion streams or more. Not only did that number become bigger than ever in 2018, but the rate at which videos joined the 1bn+ club grew too. With music audiences fragmenting into algorithmically defined niches, YouTube continues to create truly global scale, mass market audiences.

As of Q1 2019, 139 music videos have joined the 1bn+ club, with a record 52 of those reaching one billion in 2018 alone. Not only are more YouTube videos joining the 1bn+ club, but they are getting there faster. On average, the 1bn+ videos released in 2018 got to that milestone ten times faster than those released at the start of the decade. But something very interesting is happening. Now that Latin America and US Hispanics are becoming a major constituency of the YouTube audience, Latin music videos are becoming the dominant part of the 1bn+ club. 63% of all 2018 videos that reached one billion streams were Latin music videos. YouTube is fast establishing itself as the consumption method of choice for Latin American audiences, and their listening behaviour is helping reshape the face of global music culture. In doing so, YouTube is helping to create a new generation of superstars – Latin superstars.

top 5 1b+ artists on YouTube midia

The artist with more 1bn+ videos than any other is Puerta Rican reggaetón and Latin trap artist Ozuna. He appears, either as the lead artist or as a featured artist, on eight, yes eight, videos with a billion streams or more, generating 10.1 billion streams to date. Although Anglo-centric artists fill three of the other top five spots, the tide is turning. In 2018 Latin 1bn+ videos generated three and a half times as many streams as Anglo-centric pop 1bn+ videos did.

There is another important, less obvious implication of the rise of Latin artists on YouTube. Latin America is now such a large part of the global streaming user base that it can generate hits that look global in scale, but in reality are only regional. India will start to do the same in 2019 and 2020. Record labels need to take a more nuanced approach to reading global-scale data trends. Just because a track breaks into Spotify’s Global 100 does not mean it is a global hit. In today’s world, global scale does not always mean global appeal.

Hip Hop, a tale of two streams

On audio streaming services Hip Hop is the ubiquitous genre, with its artists among the highest profile in the music industry. Spotify’s top three most streamed tracks of 2018 were all Hip Hop, while for Apple Music it made up the entire top seven. Among YouTube’s biggest tracks, however, Hip Hop is a minor player, with just 7% of 1bn+ videos. Demographics and geography play roles, but so do the respective relationships of the platforms with the major labels. The labels have more overall influence on Spotify and Apple Music’s programming, and additionally focus intense efforts on influencing their curated playlists (Spotify especially). Because Hip Hop is the priority genre for the major labels, all of whom have a strong US-centric worldview, Apple Music and Spotify end up with a strong Hip Hop skew. YouTube, however, is much less directly influenced by the record labels and relies on algorithms rather than programming to surface content for its users. YouTube’s genre mix thus more closely follows the tastes of its users, while Apple and Spotify’s more closely follow the priorities of the labels.

So, what does the rise of Latin artists and the under-performance of Hip Hop on YouTube say about today’s global music landscape? For me, it is this:

Anglo-centric artists have been the global superstars for decades because it took the marketing dollars of big, global record labels to make them. Now, large scale, regional audiences can have the same impact, by just listening.


This post highlights just some of the data and findings that are going to be revealed in our forthcoming report: 1bn+ Music Videos: Latin Takeover

 If you are a MIDiA client and would like to get early access to the data email enquiries@midiaresearch.com

 If you want to learn more about how to become a MIDiA client, email stephen@midiaresearch.com

Calling all Artists!

In partnership with independent distribution company Amuse, MIDiA Research is undertaking a detailed study of the music artist landscape. We are fielding a survey to the artist community, exploring issues such as:

  • What success looks like to you
  • Career aspirations
  • The importance of signing to a record label
  • Financial wellbeing
  • Maintaining creative control

If you are a singer, DJ, producer, performer, or in a band, then we’d love to hear your views. Just click the link to take the survey.

All of your responses will be treated as strictly confidential and will only ever be presented in aggregate as part of results for the entire survey – so never attributable to any individual. We will not use any of your responses to contact you again for any purpose, unless you specifically provide your email address to us in order to be interviewed in more detail for the research project.

We will also send you a summary of the findings so that you can see how you fit into the picture amongst your fellow performers, and benchmark yourself against their aggregate responses.

If you have any questions concerning the survey the please email us at info@midiaresearch.com

Here’s How Spotify Can Fix Its Songwriter Woes (Hint: It’s All About Pricing)

Songwriter royalties have always been a pain point for streaming, especially in the US where statutory rates determine much of how songwriters get paid. The current debate over Spotify, Amazon, Pandora and Google challenging the Copyright Royalty Board’s proposed 44% increase illustrates just how deeply feelings run. The fact that the challenge is being portrayed as ‘Spotify suing songwriters’ epitomises the clash of worldviews. The issue is so complex because both sides are right: songwriters need to be paid more, and streaming services need to increase margin. Spotify has only ever once turned a profit, while virtually all other streaming services are loss making. The debate will certainly continue long after this latest ruling, but there is a way to mollify both sides: price increases.

spotify netflix pricing inflation

When Spotify launched in 2008, the industry music standard for subscription pricing was $9.99. So, when its premium tier was launched in May 2009, it was priced at $9.99. Incidentally, Spotify racked up an initial 30,000 subscribers that month – it has come a long way since. But now, nearly exactly ten years on, Spotify’s standard price is still $9.99. Its effective price is even lower due to family plans, trials, telco bundles etc., but we’ll leave the lid on that can of worms for now. Over the same period, global inflation has averaged 2.95% a year. Applying annual inflation to Spotify’s 2009 price point, we end up at $13.36 for 2019. Or to look at it a different way, Spotify’s $9.99 price point is actually the equivalent of $7.40 in today’s prices when inflation is considered. This means an effective real-term price reduction of 26%.

Compare this to Netflix. Since its launch, Netflix has made four major increases to its main tier product, lifting it from $7.99 in 2010 to $12.99 in 2019. Crucially, this 63% price increase is above and beyond inflation. An inflation-adjusted $7.99 would be just $10.34. Throughout that period, Netflix continued to grow subscribers and retain its global market leadership, proving that there is pricing elasticity for its product.

Spotify and other streaming services are locked in a prisoner’s dilemma

So why can’t Spotify do the same as Netflix? In short, it is because it has no meaningful content differentiation from its competitors, whereas Netflix has exclusive content and so has more flexibility to hike prices without fearing users will flock to Amazon. If they did, they’d have to give up their favourite Netflix shows. Moreover, Netflix has to increase prices to help fund its ever-growing roster of original content, creating somewhat circular logic, but that is another can of worms on which I will leave the lid firmly screwed.

If Spotify increases its prices, it fears its competitors will not. Likewise, they fear Spotify will hold its pricing firm if any of them were to increase. It is a classic prisoner’s dilemma.  Neither side dare act, even though they would both benefit. Who can break the impasse? Labels, publishers and the streaming services. If they could have enough collective confidence in the capability of subscriptions over free alternatives, then a market-level price increase could be introduced. Rightsholders are already eager to see pricing go up, while streaming services fear it would slow growth. Between them, there are enough carrots and sticks in the various components of their collective relationships to make this happen.

However – and here’s the crucial part – rightsholders would have to construct a framework where streaming services would get a slightly higher margin rate in the additional subscriber fee. Otherwise, we will find ourselves in exactly the same position we are now, with creators, rightsholders, and streaming services all needing more. When Netflix raises its prices it gets margin benefit, but under current terms, if Spotify raises prices it does not.

The arithmetic of today’s situation is clear: both sides cannot get more out of the same pot of cash. So, the pot has to become bigger, and distribution allocated in a way that not only gives both sides more income, but also allows more margin for streaming services.

Streaming music in 2019 is under-priced compared to 2009. Netflix shows us that it need not be this way. A price increase would benefit all parties but has to be a collective effort. Where there is a will, there is a way.

Kobalt is a Major Label Waiting to Happen

Disclaimer: Kobalt is a label, a publisher as well as a Performing Rights Organisation (PRO). This post focuses on its label business, but does not presume to overlook its other aspects.

Lauv Kobalt

News has emerged of Kobalt potentially looking to raise an additional $100 million of investment, following a 2017 round of $89 million and a 2015 $60-million round led by Google Ventures. Kobalt has been the poster child for the changing of the guard in the music business, helping set the industry agenda by pursuing a creators-first strategy while

building an impressive roster of songwriters and artists at a scale that would have most indies salivating. But it does not have its sights set on being the leading player of the indie sector, instead playing for the big game: Kobalt is the next major label waiting to happen.

So, what makes Kobalt so different? In some respects, nothing. Most of what Kobalt is doing has been done before, and there are others plotting a similar path right now (e.g. BMG, United Masters, Hitco). What matters is how it is executing, how well backed it is and the scale of its ambitions:

  • Moving beyond masters: In the old model, artists signed away their rights in perpetuity to record labels, with nine out of ten of them permanently in debt to the label not yet having paid off their advances. The new model (i.e. label services) pursued by the likes of Kobalt, reframes the artist-label relationship, turning it one more akin to that of agency-client. In this rebalanced model artists retain long-term ownership of their copyrights and in return share responsibility of costs with their label. This approach, coupled with transparent royalty reporting, lower admin costs and continual tech innovation has enabled Kobalt to build a next-generation label business.
  • Laser focus on frontline: In a label services business the entire focus is on frontline, as there isn’t any catalogue. An artist signed to such a label therefore knows that they have undivided attention. That’s the upside; the downside is that the label does not have the benefit of a highly-profitable bank of catalogue to act as the investment fund for frontline. This means that a label like Kobalt often cannot afford the same scale of marketing as a major one, which helps explain why Kobalt is looking for another $100 million. However, there is a crucial benefit of being compelled to spend carefully.
  • Superstar niches: In the old model, labels would (and often still do) carpet-bomb TV, radio, print and digital with massive campaigns designed to create global, superstar brands. Now, labels can target more precisely and be selective about what channels they use. Kobalt’s business is based around making its roster superstars within their respective niches, finding a tightly-defined audience and the artists they engage with. The traditional superstar model sees an artist like a Beyoncé, Ed Sheeran or a Taylor Swift being a mass media brand with recognition across geographies and demographics. The new superstar can fly under the radar while simultaneously being hugely successful. Take the example of Kobalt’s Lauv, an artist tailor-made for the ‘Spotify-core’ generation that hardly registers as a global brand, yet has two billion audio streams, half a billion YouTube views and 26 million monthly listeners on Spotify. By contrast, heavily-backed Stormzy has just three million monthly Spotify listeners.
  • Deep tech connections: The recent WMG / Spotify spat illustrates the tensions that can exist between labels and tech companies. Kobalt has long focused on building close relationships with tech companies, including but not limited to streaming services. This positioning comes easier to a company that arguably owes more to its technology roots than it does its music roots. The early backing of Google Ventures plays a role too, though with some negative connotations; some rights holders fear that this in fact reflects Google using Kobalt as a proxy for a broader ambition of disrupting the traditional copyright regime.
  • A highly structured organisation: One of the key differences between many independent labels and the majors is that the latter have a much more structured organizational set up, with large teams of deep specialisation. This is the benefit of having large-scale revenues, but it is also a manifestation of ideology. Most independents focus their teams around the creative end of the equation, putting the music first and business second. Major labels, while still having music at their core, are publicly-traded companies first, with corporate structures and a legal obligation on management to maximise shareholder value. Kobalt has undoubtedly created an organisational structure to rival that of the majors.

Earned fandom

Kobalt is a next-generation label and it is plotting a course to becoming a next generation-major. That success will not be reflected in having the rosters of household names that characterise the traditional major model, but instead an ever-changing portfolio of niche superstars. The question is whether the current majors can respond effectively; they have already made big changes, including label services, JV deals, higher royalty rates, etc.

Perhaps the most fundamental move they need to make, however, is to understand what a superstar artist looks like in the era of fragmented fandom. The way in which streaming services deliver music based on use behaviours and preferences inherently means that artists have narrower reach because they are not being pushed to audiences that are relevant. This shifts us from the era of macro hits to micro hits ie songs that feel like number one hits to the individual listener because they so closely match their tastes. This is what hits mean when delivered on an engagement basis rather than a reach basis. Quality over quantity.

Majors can still make their artists look huge on traditional platforms, which still command large, if rapidly aging audiences. But what matters most is engagement, not reach. It is a choice between bought fandom and earned fandom. In the old model you could build a career on bought fandom. Now if you do not earn your fandom, your career will burn bright but fast, and then be gone.

What the 2018 Success of the Beatles for UMG Tells Us About Where Streaming is Heading

Universal Music Group recorded an impressive €6 billion in revenue in 2018, bolstering a JP Morgan valuation of $50 billion. No doubt, UMG is enjoying a purple patch, riding and driving the wave of recorded music industry growth. But as with an any industry transition, progress is not linear and the past can have a lingering embrace. In UMG’s earnings report lies a small but crucial detail that point to the fact that the music industry’s path ahead may not be quite as straight as it first appears: the continued success of the Beatles.

The Beatles were UMG’s fourth best seller in 2018 

On page 13 of Vivendi’s year-end financial report, the Beatles’ ‘White Album’ is listed as UMG’s fourth best seller in 2018. It finished ahead of frontline artists including XXXTentacion, Migos and Ariane Grande. Above it were Drake’s ubiquitous ‘Scorpion’, Post Malone’s ‘Beerbongs & Bentleys’ and the soundtrack to ‘A Star is Born’. On the one hand this reflects the continued importance of the Beatles as a revenue driver for UMG. The Beatles, along with Abbey Road, were among the ‘crown jewels’ that UMG gained when it acquired EMI in 2012, so it is encouraging for UMG that the Beatles continue to deliver top tier revenue. However, Beatles revenue is not only a very different thing from Drake revenue, it also highlights the earnings divide between physical sales and streaming.

Streaming’s twin promise

The long-term promise of streaming is the combination of:

  1. Delivering larger audiences
  2. Replacing near-term, large volume revenue for a longer-term, annuity-like income model

Item number two happened very quickly; item number one is still in progress, but moving sufficiently enough to ensure many artists are now able to earn meaningful streaming income. However, we are not yet at our streaming destination, which is illustrated by the prominence of the Beatles in UMG’s 2018 sales. A ranking that owes little to streaming.

The Beatles are not a streaming powerhouse

According to the BPI, music from the 1960s accounted for just 3.6% of catalogue streams in the UK, which represents about 2% of all streams. Let’s assume the Beatles account for 40% of those streams – which is probably a generous assumption, this would mean the Beatles represented 0.8% of the $9.6 billion of streaming revenue in 2018, which translates as $79 million, which in turn equates to 2.7% of UMG’s 2018 streaming revenue. A meaningful amount for sure for a single artist, but not that significant in the greater streaming scheme of things. Therefore, the Beatles did not get to be UMG’s fourth biggest seller through streams. Instead, it did so through physical sales.

midia beatles umg

The main release in 2018 was the 50th Anniversary edition of the White Album. This premium physical release includes a $25 edition, right through to a $145 deluxe box set. With such high-unit prices, only small numbers need be sold to generate meaningful revenue.

To illustrate the point, let’s assume UMG collects around $15 of the $25 retail price and $100 of the $145 edition. To generate $7.5 million of label revenue, UMG would need to sell just half a million copies of the $25 edition and only 75,000 of the Boxsets. To generate the same $7.5 million from streaming UMG would need to have 62.5 million people each streaming 15 tracks from the album. $7.5 million is incidentally also roughly the amount a label would earn from selling a million copies of a standard priced album.

Streaming cannot yet match CD-era album revenue metrics

This gets to the heart of the matter of why streaming is creating, alongside a welcome growing body of middle-tier artists, a small handful of megastars. To replicate physical sales success, an artist must have exceptional streaming success. To replicate standout physical success requires as yet ungraspable streaming success.

For example, the number one album in the US in 2000 – NYSNC’s ‘No Strings Attached’ – sold over nine million copies, which would require 600 million people each streaming it all once — roughly 8.5 billion streams — to generate the same income. That is more streams than the entirety of Drake’s 2018 Spotify streams across the entire planet – Drake was Spotify’s most streamed artist. In short, streaming is currently large enough to make record labels grow, but not yet vast enough to create artist-level revenue on the same scale that that the CD peak once did.

Longer-term revenue may, or may not, add up.

The counter argument is that over a number of years the revenue will add up to the equal. But even with that assumption, an album would need to generate around a billion streams a year over eight years to replicate the success of NSYNC’s ‘No Strings Attached’. No easy task when you factor in the dynamics of streaming consumption i.e. playlists replacing albums, new music being pushed over catalogue etc.

None of this is to suggest that streaming is failing, nor that UMG’s revenues are in question. Both are doing well. Instead, it is evidence that we still have much distance to go with streaming before we can start seeing artist-level successes on a par with the peak of the industry. Though of course streaming-level success needs measuring differently than CD-era success, so these comparisons provide context rather than performance targets.

Will there ever be another Beatles’ greatest hits?

One intriguing post-script to all of this is that with download revenue falling by 15% in 2018, and physical by 7%, the days of large-scale album sales are long gone. When this is considered alongside the Beatles’ under-representation on streaming, the elephant in the room is whether UMG would ever risk releasing a Beatles greatest hits album for fear of underwhelming sales numbers damaging the Fab Four’s legacy. The last greatest hits was ‘1’ back in 2000 during the EMI years. Might it just be that UMG bought the Beatles too late ever to release their last ever greatest hits?

Why First is Far Less Important Than Best

Following Marshmello’s ‘live’ performance in Fortnite which was seen by 10 million simultaneous gamers, there has been the inevitable chorus of ‘but 2nd life did this more than a decade ago’. As I referenced in my blog post over the weekend “In game live experiences like this are nothing new…”. The big deal with the Fortnite Marshmello gig was not whatwas done but how it was done.

It combined integrated merchandise (Marshmello dances and skins), a global shared experience that was also personal (only 50 gamers per game) and unique gameplay (gamers floated up into the sky). But perhaps smartest of all, this was not an event for Marshmello fans in the way that previous virtual concerts have been. This was a Fortnite event sound-tracked by Marshmello. Players were there because it was a Fortnite event. Marshmello though had instant credibility because he was part of the Fortnite experience (and of course being masked is a perfect brand fit). So instead of playing to an audience of existing fans Marshmello was handed, on a plate, millions of new fans in an instant, who they felt like they were part of something. (Wait for a major surge in streams of ‘Happier’). These are the reasons the Fortnite Marshemello event was so important, not simply because it was a virtual gig. This is what innovation looks like when executed well.

inniovation execution midia

Execution is everything in innovation. The history of technology is defined by first movers that created a category but failed to go the distance, with an early follower learning the lessons from the first mover and then executing with market winning implementation.

The hard reality is that first movers bleed out on the cutting edge of invention, early followers prosper on the wave of innovation.

Marshmello Just Live Streamed on Fortnite…So Just What is a Concert?

On Saturday I watched my 12 year old son scoff down his meal so that he could rush upstairs to get logged on with his friends in time for a Marshmello live streamed event on Fortnite. As you can see from the video (click the link in the image to go through to a MIDiA post with the video) this was Marshmello appearing as a Fortnite character, on stage with his music playing. Meanwhile Fortnite players moved around the ‘concert venue’ showing off their dance moves – all of which of course had been purchased in app with Fortnite VBucks.

marshmello fortnite

(Click the image to link through to the MIDiA blog which includes a video clip)

For my son and his friends this was every bit a shared live experience, each of them talking to each other via Xbox Live and dancing with each other on screen. In-game live experiences like this are nothing new, but it may just be that we are beginning to get to a tipping point in shared gaming experiences for Gen Z that will shape their entertainment expectations for years to come. Tweens and teens are already spending more time socializing via social media than real world contact, connected gaming is adding to that mix. Whereas most games played with friends have been first and foremost a shared gaming experience, Fortnite is teaching a new generation that the game itself is merely a platform for shared experiences. Meanwhile Marshmello gets to ‘play’ to potentially millions of new fans right across the globe.

Welcome to the future of live entertainment…..or rather, welcome to one of the futures of live entertainment.

Artists Direct and Streaming the Big Winners in 2018

With less than two weeks of 2018 left, the die is largely cast for the year, but we’ll have to wait at least a couple more months for the major labels to announce their results (though WMG still hasn’t declared its calendar Q3 results), and then another month or so for the IFPI numbers. So, in the meantime, here are MIDiA’s forecasts for 2018 based on the first three quarters of the year and early indicators for Q4.

midia research 2018 music revenues and market shares

To create our end of year revenue estimate, we collected data from record labels, national trade associations and also confidential data from the leading Artist Direct / DIY platforms. We plugged this data into MIDiA’s Music Market Share model and benchmarked against quarterly and full year 2017 growth.

The headline results:

  • Recorded music revenue will hit $18.9 billion this year: This represents an increase of 8.2% on 2017 which is a slight lower growth rate than 2016–2017, which was up 9%. However, net new revenue ($1.4 billion) – is almost exactly the same amount as one year previously. The recorded music market appears to be settled into a steady, strong growth pattern.
  • Streaming revenue up to $9.6 billion: The 41% growth rate of 2017 may be gone, replaced by 29%, but the absolute amount of new revenue generated was, as with the recorded music total, the same as 2017 $2.2 billion. There was enough growth in the big mature streaming markets – the US especially – to ensure that streaming continued to plot a strong course in 2018. Though the fact that total revenues grew by $0.8 billion less than streaming revenue, indicates the pace at which legacy formats continue to decline.
  • Artists Direct the big winners: MIDiA was the first to quantify the global revenue contribution of the Artists Direct (i.e. Independent Artists, DIY etc.) last year when we published our annual market shares report. Now we can report that the spectacular growth registered by this segment continued in 2018. Total Artist Direct revenue was $643 million, up an impressive 35% on 2017, i.e. more than three times faster than the market. Unlike the rest of the market, Artists Direct revenue growth is accelerating in both percentage and absolute terms, with market share up from 2.7% in 2017 to 3.4% in 2018. (It’s worth noting that only a portion of Artists Direct revenue is measured by the IFPI. Categories such as at-gig CD sales aren’t captured by either the labels or measurement companies that national trade associations depend upon to measure the market. So, expect the IFPI’s global recorded music total to come in closer to $18.6 billion).

It was another great year for the recorded music business, with streaming consolidating its role as industry engine room. Here are the key takeaways for 2019:

  • Global recorded revenues will grow once again in 2019 – this rebound has a good number of years left in it. Even if label revenues hit $25 billion (where the market was at in 2000 before the decline) in real terms (i.e. factoring in inflation etc.), that would actually be around half the actual value. While it is not realistic to expect a $50 billion market, getting towards the inflation-reduced $25 billion is certainly a realistic target.
  • Streaming growth will slow in the big mature markets (US, UK), but impact will be offset by growth in markets such as Japan, Germany, Brazil, Mexico. Overall market growth, though still strong, will be slower.
  • 2019 will be a coming of age year for Artists Direct, label services companies, JVs and other alternative models that have been establishing themselves in recent years. It’s never been a better time to be an artist, as long as you and / or your management are clued up enough to know what to ask for.

Taylor Swift, Label Services and What Comes Next

universal-music-group-logoTaylor Swift has done it again, striking a deal with UMG that includes a commitment from the world’s largest label group to share proceeds from Spotify stock sales with artists, even if they are not recouped (ie haven’t generated enough revenue to have paid off the balance on their advance so not yet eligible to earn royalty income). This follows Swift’s 2015 move to persuade Apple to pay artists for Apple Music trials. That Swift has influence is clear, though whether she has that much influence is a different question. Let’s just say it served both Apple and Universal well to be seen to be listening to the voice of artists. But it is what appears to be a label services part of the deal that has the most profound long-term implications, with Swift stating that she is retaining ownership of her master recordings.

The rise of label services

The traditional label model of building large banks of copyrights and exploiting them is slowly being replaced, or at the very least complemented, by the rise of label services deals. In the former model the label retains ownership of the master recordings for the life time of the artist plus a period eg 70 years. In label services deals the label has an exclusive period for exploiting the rights, after which they revert to full ownership of the artist. Artist normally cede something in return, such as sharing costs. Companies like Kobalt’s AWAL and BMG Music Rights have led the charge of the label services movement. However, Cooking Vinyl can lay claim to being the ‘ice breaker’ with its pioneering 1993 label services deal with Billy Bragg, negotiated between his manager Pete Jenner and Cooking Vinyl boss Martin Goldschmidt. It may have taken a couple of decades, but the recording industry has finally caught up.

Major labels in on the act

The major labels remain the powerhouses of the recorded music business in part because they have learned to embrace and then supercharge innovation that comes out of the independent sector. Label services is no exception. Each of the major labels has their own label services division, including buying up independent ones. Label services are proving to be a crucial asset for major labels. The likes of AWAL and BMG have been mopping up established artists in the latter stages of their careers, with enough learned knowledge to want more control over their careers. By adding label services divisions the majors now have another set of options to present to artists. This enables them to not only hold onto more artists but also to win new ones – which if of course technically what UMG did with Swift, even though it had previously been Swift’s distributor. As with all new movements, examples are often few and far between but they are there. The UK’s Stormzy is a case in point, signing a label services deal with WMG before upgrading it to a JV deal between WMG’s Atlantic Records and his label #MERKY. For an interesting, if lengthy, take on why Stormzy and WMG took this approach – including the concept of secret ‘Mindie Deals’ that allow more underground artists maintain some major label distance for appearances’ sake, see this piece.

The early follower strategy 

In August 2018UMG’s Sir Lucian Grainge called out the success of UMG’s label services and distribution division Caroline, noting it had doubled its US market share over the previous year. UMG was already not only on the label services deal path but had identified it as a key growth area and wanted the world – including investors – to know. UMG has stayed ahead of the pack by pursuing an early follow strategy of identifying new trends, testing them out and then throwing its weight behind them. Before you think of that as damning with faint praise, the early follower strategy is the one pursued by the world’s most successful companies. Google wasn’t the first search engine, Apple wasn’t the first smartphone maker, Facebook wasn’t the first social network, Amazon wasn’t the first online retailer.

What comes next

The label services component of the UMG deal was actually announced by Taylor Swift herself rather than UMG, writing:

“It’s also incredibly exciting to know that I own all of my master recordings that I make from now on. It’s really important to me to see eye to eye with a label regarding the future of our industry.”

While this might betray which party feels most positive about this component of the deal, the inescapable fact is that other major artists at the peak of their powers will now want similar deals. Label services success stories to date had been older artists such as Rick Astley, Janet Jacksonand Nick Cave as well as upcoming artists like Stormzy. Now we will start to see them becoming far more commonplace in the mainstream.

But perhaps now is the time. Catalogue revenues are going to undergo big change in the coming years, as MIDiA identified in our June 2018 report The Outlook for Music Catalogue: Streaming Changes Everything. Deep catalogue is not where the action is anymore. For example, 1960s tracks accounted for just 6.4% of all UK catalogue streams in the UK in 2017, while catalogue from the 2000s accounted for 60.4%, according to the BPI’s invaluable All About the Music report. So, by striking a long-term label services type deal, UMG secures Swift’s signature and can still benefit from the main catalogue opportunity for the first few releases without actually owning the catalogue.

Label services have come a long way since Billy Bragg’s 1993 deal and Taylor Swift has just announced that they are ready for prime time.

Penny for the thoughts of Bill Bragg having paved the way for the queen of pop’s latest deal….