Last call for the global independent label survey

With 2020 now comfortably behind us and public companies in their earnings cycle, a clear picture is starting to emerge of how the global recorded music market performed. MIDiA is midway through fielding the global independent label survey that will help create the definitive view of how the independent sector fared in 2020 and its contribution to the global market. 

We are fielding the survey now in order to create global market figures over the coming weeks. Getting this done now is important as it is the period when the global view of the market is shaped, particularly among the investor community. 

So, if you are an independent label and you have not yet taken our survey then do so now, by following this link: https://www.surveymonkey.co.uk/r/DCM3VXG

We have had a great response so far and have already collected data accounting for billions of dollars of revenue. All labels that take part in the survey will get the full results and a copy of the final report when it is published, for free.

In addition to the detailed country level market sizing report that will come later in the year, we will be feeding the results into our global market shares report that will be published in the coming weeks. All independent labels that take part in the survey will get a copy of this report for free also.

Once again, the survey link is here: https://www.surveymonkey.co.uk/r/DCM3VXG

If you have any questions please send an email to info@midiaresearch.com

Global independent label survey

MIDiA Research is conducting a major study of independent label revenue in order to create a definitive review of the independent sector’s contribution to the global music market. MIDiA conducted this work for a number of years on behalf of the Worldwide Independent Network and is now independently creating a dataset for 2020. The last WINTel study can be found here. We are calling for all independent labels, of whatever size and geography, to complete our survey which can be found here.

Why this survey is so important

The most common method used to determine the global market share of independents is to take total recorded music revenues from MIDiA or the IFPI and then deduct the revenues of the major labels. This is how the independent sector has been measured for years. However, it under-represents the value of independents because many independent labels are either distributed directly via majors or via one of their wholly owned distribution arms such as the Orchard. This means that independent label revenue appears within major label revenue. Although MIDiA’s figure is higher than the IFPI’s to reflect the latter’s under-reporting of independents, the method still under-represents independents whichever total market figure is used.

The purpose of this survey is to pick up where WINTel left off, to separate out the revenue that is distributed by majors and allocate that directly to the independents, thus revealing the larger, actual independent market share based on ownership of copyright rather than by the company that distributes the revenue.

What is needed from independent labels

The survey asks a number of questions about each record label’s revenue, growth and the distributors it works with. We appreciate that this information is highly sensitive which is why we treat the data with utmost care and confidentiality, just as we did when we fielded the survey on behalf of WINTel.

As with all our previous surveys, all responses will be treated as strictly confidential. No individual responses will ever be shared. Instead, all responses will only ever be aggregated into national and international numbers. The respondent-level data will be stored securely, encrypted in an offline location and will never be shared with any third party whatsoever.

What is in it for independent labels

MIDiA will provide a full summary of the final, aggregated results to all independent labels and distributors that participate in this survey. The final data will present independent label market share data globally and at country level.

In addition, the survey asks respondents about issues such as how the global pandemic has affected their business and how confident they feel about 2021. We will also be providing this data to all respondents, enabling them to benchmark themselves against their peers.

Next steps

We are fielding this survey throughout December and the start of 2021. Once the survey fielding is complete MIDiA will build its market share model using the results of the survey and other inputs such as reported company financials and input from direct conversations with a number of larger independent labels.

As a reminder, at no stage will any label-level data be seen by anyone else other than the MIDiA analysts working on the project and they will not share any of this information with anyone else.

The survey can be found here: https://www.surveymonkey.co.uk/r/DCM3VXG

We look forward to your participation. No independent label is too big or small to take part. If you have any questions regarding this project then email info@midiaresearch.com

What AWAL’s $100k artists mean for the streaming economy

Kobalt’s AWAL division announced that ‘hundreds of its artists have reached [the] annual streaming revenue threshold [of $100,000]’. Make no mistake, this is major milestone for a record label that has around 1% global market share. It is compelling evidence for how a label built for today’s streaming economy can make that economy work for its artists. So, how does this tally up with all of the growing artist concern in the #brokenrecord debate?

It’s complicated. The short version is that we have a superstar economy in streaming quite unlike the old music business, one in which artists on smaller independent labels have just as much chance of breaking into that exclusive club as those on bigger record labels. Given that AWAL states its cohort of $100k+ artists grew by 40% (assuming they mean annually) while global label streaming revenues grew by 23%, the implication is that AWAL is getting better at doing this than the wider market. And it is the implied growth of the rest of the market where things get really interesting.

(A model with more than 50 lines of calculations was required to build this analysis so I am going to walk through some of the key steps so you can see how we get there. Bear with me, it will be worth it I promise you!)

Finding the third data point

To do this analysis I am going to share one of MIDiA’s secrets with you: finding the third data point. Companies, understandably, like to share the numbers that make them look good and hold back those that do not help their story. Often though, you can get at what that third number is by triangulating the numbers they do report. A really simple example is if a company reports its revenues and subscribers but not its average revenue per user (ARPU), you can get to an idea of what the ARPU is by dividing revenue by subscribers (and if you have a churn number to work with, even better).

In this instance, Spotify gives us the ‘second’ dataset to go with AWAL’s ‘first’ dataset. In early August, Spotify reported that 43,000 artists generated 90% of its streams, up 43% from one year earlier – you’ll note how similar that 43% growth is to AWAL’s 40% growth. Combining Spotify’s data with AWAL’s, we now have what we need to create the picture of the global artist market.

Superstars within superstars

Spotify generated 73 billion hours of streams in 2019, which equates to around 1.3 trillion streams. Interestingly, taking its roughly $7.6 billion of revenue, this implies that its global per-stream royalty rate (masters and publishing, across free and paid) stood at $0.00425 – which is a long way from a penny per stream. This highlights how promotions, multi-user plans, free tiers and emerging markets are driving royalty deflation. But that’s a discussion for another day…

For the purposes of this work let’s assume that the average artist royalty rate (across standard major, indie and distribution deals) is 35%. Spotify’s 90% of streaming label royalties in 2019 was $3.9 billion, which translates to an average artist royalty income of $29,221 for each of those 43,000 artists. That is obviously south of AWAL’s $100k cohort, which illustrates that those AWAL artists are not just superstars but an upper tier of superstars.

$66,796 is good, as long as you don’t have to split it

But how does this look outside of Spotify? Firstly, the top 90% of global streaming label revenues was $10.8 billion in 2019. We then scale up Spotify’s 43,000 top-tier artists to the global market and deduplicate overlaps across services and we end up with a global base of around 56,000 top-tier artists earning an average of $66,796 per year from streaming (audio and video).

$66,796 is a decent amount of annual income but it looks a lot better if you are a solo artist than, say, a four-piece band splitting that revenue into $16,699 slices. Interestingly, AWAL seems to skew towards solo artists (94% of AWAL’s featured artists are solo acts) so the $66,796 goes a lot further for them than an average indie label rock band.

And then there’s the remaining 99% of artists…

But of course, this is how things look for the most successful artists. What about the remainder that have to share the remaining 10% of streaming revenue? That remaining label revenue is $1.2 billion of which $0.7 billion (i.e. 57%) is Artists Direct. That means the entire global base of label-signed artists that are not in the top tier have to share 4% of global streaming revenues. This translates to an average annual streaming income of $425. Artists Direct meanwhile earn an average of $176 (only 59% less than those non-superstar label artists).

The 90/1 rule

The key takeaway then is that streaming is levelling the playing field for success. Consistently breaking into the top bracket is now achievable for artists on major and indie labels alike and, if anything, independents are enjoying progressively more success. But this is a very different thing from all artists doing well. Music has always been a hits business. Streaming is widening the distribution but with less than 1% of artists generating 90% of income, the spoils are far from evenly shared. Music streaming has taken Pareto’s 80/20 principle and turned it into a 90/1 rule.

Independents Grew Fastest on Spotify in 2019, But There’s a Twist

Tomorrow (Wednesday 29th April) Spotify announces its Q1 2020 results, at which point we will find out whether it had a COVID-bounce like Netflix did (adding 15.8 million subscribers in Q1) or whether growth slowed. But before that, there is one little detail from Spotify’s 2019 Annual Report which warrants a closer look. Hidden away in the commentary there is this innocuous looking line:

“For the year ended December 31, 2019 [Universal Music Group, Sony Music Entertainment, Warner Music Group, and Merlin] accounted for approximately 82% of music streams.”

The same line is in Spotify’s 2018 Annual Report with the figure at 85%. So, the majors and Merlin indies saw their share of Spotify streams decline by three percentage points in 2019. That in itself is interesting and builds on the narrative of the streaming tail getting longer and fatter, with the superstars losing share. But with a little creative thinking we can do a lot more with this three percentage points shift.

Using MIDiA’s label market shares data for FY 2019 we can do a full breakdown of Spotify’s streaming revenue. Applying shares for streaming volumes to streaming revenue, and shares for the total streaming market to Spotify is not methodologically pure and has margins of error, but it is a broadly sound approach and lets us do the following:

  • First we apply the percentage share to Spotify’s annual revenue
  • Next, we take the majors’ share of streaming revenues for 2019 and apply them to Spotify’s streaming revenue
  • We can then deduct the majors from the majors + Merlin total to leave us with Merlin’s revenue
  • Then we apply the independent artists streaming share to the Spotify revenue which leaves us with one remaining segment: ‘other independent labels’

spotify streaming griowth by label type

What emerges is a hierarchy of dramatically different growth rates, ranging from just 11% for Merlin labels through to a dramatic 48% for independent artists and an even more impressive 58% for ‘other independent labels’. This provides further evidence of the way in which (much of) the independent sector continues to thrive during streaming’s continuing ascendancy.

spotify streaming growth by label type

Most intriguing is the 58% growth for ‘other independent labels’. I am using the quote marks because this is essentially an ‘all others’ bucket and so captures music entities that don’t fit the traditional classification of ‘label’. This includes AI generative music and of course library music companies like Epidemic Sound.

It is of course important to consider that growth rates are not absolute growth – the majors still added much more new Spotify revenue in 2019 (€1 billion) than all of the rest put together. Nonetheless, the difference in growth rates is stark and only Spotify will be able to answer questions about how much of this is organic versus how much of this is driven by the way that it engineers its recommendations and programming.

Whatever the causes, the effect is clear: streaming benefits everyone but it benefits some more than others.

2018 Global Label Market Share: Stream Engine

Recorded music revenues grew in 2018 for the fourth consecutive year, reaching $18.8 billion, up $2.2 billion from 2017. Streaming was the engine room of growth, up 30% year on year to reach $9.6 billion. For the first time streaming became the majority of label revenue (51%), and its growth continues to outpace the decline of legacy formats. Major label rankings remained unchanged in 2018, but the majors enjoyed varying fortunes and the continued meteoric rise of Artists Direct points to market transforming changes that are reshaping the entire business of record labels.

2018 was shaped by three key factors:

  • Continued growth: Global recorded music revenues grew 7.9%. Though 2017 revenues grew by a higher 9.0%, the market grew the same in absolute terms in 2018, adding $1.4 billion of net new revenues as in 2017. Since 2015 the total market has increased by 26%, adding $3.9 billion of net new revenue.
  • Stream powered: Though relative growth is slowing, streaming added the same amount of net new revenue – $2.2 billion – in 2018 as it did in 2017. Though 2019 will see mature streaming markets such as the US and UK slow, mid-tier markets such as Mexico and Brazil, coupled with Japan and Germany, will ensure that streaming revenues grow by another $2 billion in 2019.
  • Artists Direct:The major record labels retained the lion’s share of revenues in 2018, accounting for 69.2% of the total. Changes in global market shares typically move at a relatively slow pace, particularly at a major vs independent level. However, Artists Direct – i.e. artists without record labels – are changing the shape of the market, growing nearly four times as fast as the total market to end 2018 with $0.6 billion of revenue.

midia music market shares 2018

There were mixed fortunes in terms of market shares. Universal Music and Warner Music both gained 0.6 points of market share in 2018, up to 30.3% and 18.3% respectively, with Sony Music losing 1.5 points of share in 2018. Though Sony’s 2018 revenues were constrained in part by the company implementing new revenue recognition practices in 2018, Universal’s market share lead over the second placed label is now an impressive 9.7 points.Artists Direct and Independents together accounted for 30.8%, though this figure is measured on a distribution basis (i.e. Major revenues include independent labels distributed by majors and major owned companies). The independent share based on an ownership share will therefore be higher.

More of the same, but change too

In many respects 2018 was a re-run of 2017: total revenues grew in high single digit percentage terms; streaming was the engine room of growth and added more revenue than the prior year; Warner Music gained most major market share; Universal Music added more revenue than any other label; Artists Direct gained most market share.  But it is this latter point that may say most about where the overall market is heading. The range of tools now available to an artist are more comprehensive than ever before, while deal types that labels are offering (e.g. label services, joint ventures) are changing too. Artists are effectively able to custom-build the right model for them. The market will always need labels, but what constitutes a label is becoming a fluid concept. And in so becoming, it may put us on the verge of the biggest shift in record label business models since, well, ever.

These findings are highlights of the MIDiA Research report: Recorded Music Market 2018: Stream Engine. If you are a MIDiA client you can access the full report, slides and datasets here. You can also purchase the report and all its assets here.

Independent Labels Grew Global Market Share to 39.9% in 2017

The global independent label trade body WIN has just published the third edition of the Worldwide Independent Market report. You can download the entire report for free here. As regular readers will know, MIDiA Research has conducted this study on behalf of WIN for each of the three editions, collecting an unparalleled volume of data from many hundreds of independent record labels right across the globe. This highly detailed, company-level data is provided to us on a strictly confidential basis and enables us to create a precise and authoritative view of the global independent sector. Think of it as the IFPI Recorded Industry in Numbers for the independent sector, but with the additional benefit of greater detail on how the labels operate. This year MusicAlly wrote the text of the report.

‘Why is this report necessary?’ you may ask, ‘surely you can just deduct the major record labels’ revenue from the IFPI global total. There are two key reasons why this is essential:

  1. There is additional Artists Direct revenue that the IFPI cannot and does not track, such as CDs and vinyl sold directly at gigs by bands, and artists selling directly to fans on DIY platforms such as Bandcamp and Pledge Music
  2. Large portions of independent label revenue are distributed via major record labels, or wholly owned major record label distributors, such as the Orchard (which is owned by Sony Music). This revenue appears in the major labels’ financial statements and thus appears as major record label revenue

In the Worldwide Independent Market report, we add in the portion of Artist Direct revenue that is not tracked by the IFPI and we additionally carve out the independent label revenue that is distributed via majors and allocate this back to the independent sector. We are able to do this because the independent labels tell us how much of their revenue is distributed via majors, and which companies they use for the distribution. This added up to $1.5 billion in 2017.

So, methodology out of the way, here are the headlines.

midia wintel indie market share

Independent revenue grew by 11.3% in 2017 to reach $6.9 billion, which compares to a total growth of 9.7% for the major labels, which in turn meant that the independents’ share of global revenue grew from 39.6% in 2016 to 39.9% in 2017.

midia wintel indie market share

Growth was not evenly distributed though. For example, Brazilian independent revenue grew by 30% while in Japan it fell by 1%, which resulted in a slight growth in major share in Japan, a market in which the western majors have long been a minority player (market share was just 36.6% in 2017).

As with the total market, streaming was the engine room of growth, increasing by 46% to reach $3.1 billion, representing 44% of all revenues (the share was 34% in 2016). Physical and downloads both fell, by -2% and -22% respectively. As for major labels, independent labels are on path to becoming streaming-first in revenue terms.

midia wintel indie market share

One of the really interesting themes to emerge from this year’s work was the loyalty that independent labels enjoy from their artists. When offered, 77% of artists choose to renew their contracts with their independent labels, with that rate above 90% in Spain, Brazil, the Netherlands and Denmark.

A nuanced, but crucial takeaway from this year’s research is that the independent sector is booming, but that the major record labels are important partners in that growth, providing independent labels with the global scale tools and teams that they need to compete in this increasingly global music market.

Global Recorded Music Revenues Grew By $1.4 Billion in 2017

2017 was a stellar year for the recorded music business. Global recorded music revenues reached $17.4 billion in 2017 in trade values, up from $16 billion in 2016, an annual growth rate of 8.5%. That $1.4 billion of growth puts the global total just below 2008 levels ($17.7 billion) meaning that the decline wrought through much of the last 10 years has been expunged. The recorded music business is locked firmly in growth mode, following nearly $1 billion growth in 2016.

Streaming has, unsurprisingly, been the driver of growth, growing revenues by 39% year-on-year, adding $2.1 billion to reach $7.4 billion, representing 43% of all revenues. The growth was comfortably larger than the $783 million / -10% that legacy formats (ie downloads and physical) collectively declined by.

Universal Music retained its market leadership position in 2017 with revenues of $5,162 million, representing 29.7% of all revenues, followed by Sony Music ($3,635 million / 22.1%) while Warner Music enjoyed the biggest revenue growth rate and market share shift, reaching $3,127 million / 18%. Meanwhile independents delivered $4,798 million representing 27.6%. However, much additional independent sector growth was absorbed by revenue that flowed through digital distribution companies owned by major record labels that were thus reported in major label accounts.

MRM1804-fig0.5.png

But perhaps the biggest story of all is the growth of artists without labels. With 27.2% year-on-year growth this was the fastest growing segment in 2017. This comprises the revenue artists generate by distributing directly via platforms such as Believe Digital’s Tunecore, CD Baby and Bandcamp. All these companies performed strongly in 2017, collectively generating $472 million of revenue in 2017, up from $371 million the year before.  While these numbers neither represent the death of labels nor the return of the long tail, they do reflect the fact that there is a global marketplace for artists, which fall just outside of record label’s remits.

 

Up until now, this section of the market has been left out of measures of the global recorded music market. With nearly half a billion dollars of revenue in 2017 and growing far faster than the traditional companies, this sector is simply too large to ignore anymore. Artists direct are quite simply now an integral component of the recorded music market and their influence will only increase. In fact, independent labels and artists direct together represent 30.3% of global recorded music revenues in 2017.

A Growing and Diversified Market

The big take away from 2017 is that the market is becoming increasingly diversified, with artists direct far outgrowing the rest of the market. Although this does not mean that the labels are about to be usurped, it does signify – especially when major distributed independent label revenue and label services deals are considered – an increasingly diversified market. Add the possibility of streaming services signing artists themselves and doing direct deals with independent labels, and the picture becomes even more interesting.

The outlook for global recorded music business is one of both growth and change.

The report that this post is based upon is immediately available to MIDiA Research subscription clients herealong with a full excel with quarterly revenue from 2015 to 2017 segmented by format and by label. If you are not yet a MIDiA client and would like to learn more then email info@midiaresearch.com

Global Recorded Music Revenues Grew By $1.1 Billion In 2016

Following on from the global market share numbers we released on Sunday, here are our findings regarding the growth of the overall market.

Throughout 2016 as the major label earnings were coming in there was a growing awareness that 2016 was going to be a landmark year for the recorded music business. It finally looked like streaming was going to push the industry into growth. Now with full year numbers in, the picture is even more positive than it first appeared. The recorded music market grew by 7% in 2016, adding $1.1 billion, reaching $16.1 billion, by far the largest growth the recorded music business has experienced since Napster and co pushed revenues into free fall.

2nd-release-graphic

While it is too early to state that the corner has been turned, this is clearly a turning point of some form for the business. Underpinning the growth was streaming which grew by 57% in 2016 to reach $5.4 billion, up from $3.5 billion in 2015. Spotify has been key to this growth, accounting for 43% of the 106.3 million subscribers at the end of 2016. 2017 should see further strong streaming growth with another 40.3 million subscribers added, more than the 38.8 added in 2016. Apple Music and Deezer also both contributed strongly to growth and market share. Additionally, Amazon upped its game in 2016 and the introduction of the $3.99 Amazon Prime Music Unlimited Echo bundle could open up swathes of new, more mainstream users.mrm1703-fig0-5

Based strictly upon the recorded music revenue that is reported in financial accounts by the major record labels and / or their parent companies combined with trade association and collection society data, the 3 majors labels collectively generated $11 billion of gross revenue in 2016. Universal Music generated the most with $4.6 billion representing 28.9% of the market total. Sony followed with $3.6 billion (22.4%) and Warner with $2.8 billion (17.4%). These numbers do not include any corrections for any independent revenues that are recognised by major labels because they are distributed by majors or major owned distributors. Thus the ‘actual’ independent share will be higher but can only be accurately measured with a separate survey, so watch out for WIN’s forthcoming indie market share study that will do exactly this.

Volatile currency markets played a role in shaping the 2016 picture, with Sony’s revenues at the original Yen values increasing by just 0.9% but 13% in US dollar terms. In original currency terms, Warner Music was the standout success of 2016, with revenues increasing 11%.

To be utterly clear, these numbers represent the recorded music revenue that each of these companies report to their shareholders and to the financial markets. This is market share based purely on publically stated, financially regulated and audited filings. No more, no less. In this specific context record label recorded market share is simple arithmetic: the record label’s reported recorded music revenue divided by total global recorded music.

Conclusions

The recorded music industry changed gear in 2016 and the outlook is positive also with revenue looks set to be on an upward trajectory over the next few years. However, successive quarterly growth is not guaranteed. Streaming will have to work extra hard to offset the impact of continued legacy format declines as the 18% download revenue decline in 2016 illustrates. Thus, the midterm outlook is as much about legacy format transition as it is streaming growth. If streaming can outrun tumbling download and CD revenues as those walls come crashing down, then good times are indeed here.

Global Recorded Market Music Market Shares 2016

MIDiA and Music Business Worldwide have been tracking record label and publisher financial releases throughout 2016. In addition MIDIA has conducted market sizing work on the publishing sector and research for the Worldwide Independent Network’s (WIN) indie label market share project. Pulling all of these inputs together, along with reports from country trade bodies and PROs, MIDiA has created a recorded music market share model to provide a unique view of where the revenue flows in the global business. To ensure as representative a picture as possible all local currency data has been converted into US dollars at the currency conversion rates for the respective quarters. This removes the distortion effect that occurs when data historical data is retrospectively converted at today’s conversion rates.

midia-research-recorded-music-market-shares-2016

(MIDiA Research subscription clients can access the full 15 page excel spreadsheet with all of the underpinning data right now by clicking here.)

The Recorded Music Market In 2016

2016 was a big year for the global recorded music business, with record labels and publishers reporting growth almost across the board. Unsurprisingly, streaming was the driver of growth, increasing its share of label revenue from 23% in 2015 to 34% in 2016. However, the experience was far from uniform across the various corporate groups:

  • Universal: Universal is the world’s leading music group and that status remains firmly the case for 2016. Universal Music’s global record label revenue share was 28.9%, far ahead of the nearest rival Sony Music which had a 22.4% share. However, despite registering a 2.4% growth in USD terms (1.8% in euros), UMG’s share feel slightly from 30.2% in 2015. As with all labels, UMG had a big streaming year, seeing revenue increase by 56%, though this was just below the total market growth of 57%.  Universal Music Publishing’s market share was largely flat at 16.7% for 2016. Note: Although the Universal market share number reported here is smaller than numbers previously reported elsewhere it is grounded in widely accepted industry numbers. The IFPI reported global revenues of $14.95 billion for 2015 while Vivendi reported UMG recorded music revenues of €4.11 billion, which translated to $4.54 billion, which is a 30.2% market share for 2015. Also please note that a previous post had incorrectly reported a 32% decline in physical revenue for UMG in Q4 2016. 
  • Warner: Warner Music had the best major label performance in local currency terms, growing its revenue by 11% and its market share from 16.8% to 17.4%. On the streaming side Warner actually lost a little ground, seeing its market share fall from 19.3% in 2015 to 18.4% despite registering an impressive 51% annual growth in streaming revenue. What helped Warner’s total market share was the smallest local currency fall in physical revenue (just -1%) and the strongest local market currency growth in ‘other’ revenue, up 7%. Warner Chappell had a good year, growing revenue by 9% year-on-year and increasing its market share from 9.6% in 2015 to 10% in 2016.
  • Sony: Sony registered a US dollar growth of 13% in 2016, the highest of all the majors, increasing its market share from 21.3% in 2015 to 22.4% in 2016. However, Sony was helped markedly by the growing strength of the Yen against the dollar. In Yen terms SME’s revenue grew by just 0.9% in 2016. Streaming revenue was up 41.8% in Yen terms and 57% in dollar terms. SME’s streaming market share was flat year-on-year. Sony Music Publishing (including ATV) revenue fell by 1% resulting in market share falling from 24.3% in 2015 to 23% in 2016.
  • Independents: Independent labels saw revenue increase by 6% but that was not enough to prevent market share fall slightly from 31.6% in 2015 to 31.3% in 2016. However, these numbers reflect share according to distribution rather than ownership of copyright. Because so much independent label catalogue is distributed either directly via major labels or via distributors wholly owned by the majors, the actual market share is significantly higher. Watch out for WIN’s forthcoming 2017 indie market share report for a clearer picture of the indie sector’s contribution. On the publishing side independents had a strong year, seeing revenue grow by 6%, and market share grow from 49.4% in 2015 to 50.1% in 2016. Note that the independent numbers include revenue from leading labels in Japan (the world’s 2nd biggest music market globally) and South Korea (another top 10 market) where the western major labels are minor players.

(MIDiA Research subscription clients can access the full 15 page excel spreadsheet with all of the underpinning data right now by clicking here.)

Quick Take: Sony Music UK Buys Ministry Of Sound Recordings

Leading UK indie Ministry of Sound Recordings today announced its sale to Sony Music UK. While this is undoubtedly another case of a big major swallowing up a smaller indie, there is a much more important angle to this – surviving in the streaming era. Ministry of Sound is unusual in that it is a label with a relatively small catalogue, instead its business is built around compilations. In doing so it has built an incredibly robust and profitable business. No mean feat in the current climate. But Ministry’s core strength has also become an Achilles Heel with the onset of streaming.

Ministry licenses music from other labels to build its compilations. This approach works well in a sales model where proceeds are split between the respective parties. But in the context of streaming, any money generated by plays of tracks on a compilation go to the label that owns the track not to the label that curated the compilation. This is why Ministry compilations have been conspicuously absent from streaming services and it is also why Ministry ended up in conflict with Spotify when the streaming service initially refused to take down user playlists that replicated Ministry compilations and that used Ministry artwork.

At the time, the Spotify case raised the still-to-be-answered question of just how much curation is actually worth. Spotify and Ministry settled their differences but the underlying economics remain, and meanwhile Spotify also upped its curation game. Ministry thus faced the double whammy of increased curatorial competition and an inability to make streaming pay. Enter stage left, Sony Music.

With its co-owned Now brand, Sony is as good a fit as Ministry could find in a major. Sony for their part are getting one the most valuable compilation brands and immediate dance music culture credibility. Sony also has big digital plans for Now, which Ministry will no doubt slot into nicely. On top of this, because Sony own so much catalogue themselves, they can make the economics of compilations work in the streaming environment.

The fact that 25% of music subscribers still buy compilation albums show that however a good job streaming playlists might be doing, there remains a big demand for compilations, even within the core of streaming music aficionados. Curated playlists will continue to gain importance but compilations are going to live alongside them for a good long time to come. And all the while the distinction between what constitutes a playlist and a compilation will continue to blur.