As streaming platforms conquer the music industry, Spotify wants to be your record label
Traditionally, the music industry works like this: an artist signs with a record label, which scores deals with various platforms (radio, streaming services, and other media), and then the music is put out through that platform. That means revenue from the music itself is split three ways: between platform, label, and artist. But now, market-leading streaming platform Spotify is looking to cut out the middle man, by offering to promote select artists’ music directly to audiences.
Despite growing at pace, and regularly beating the Street’s predictions, Spotify’s share price has suffered under the weight of a tech backlash over the last few months
Source: Yahoo Finance
It’s early days – musical artists rely on their labels to get airtime on radio and TV, and this year, the world’s top ten best-selling albums were all released or distributed by major labels. But there’s the possibility that this scenario is ripe for disruption. The U.S. music scene is the world’s largest, and streaming already accounts for three quarters of it. Spotify is the market leader, and eager to find a way to increase the revenue it can generate from its platform.
Spotify pays out more than 70% of monthly sales in royalties. Of that, the lion’s share goes to the label – artists typically take home around 15% to 20%. The company hopes that offering new artists a 50/50 split will wind up convincing many of them to upload their music directly. Spotify thinks it can put the music in front of a big enough audience to make that worthwhile, and trusts artists to do their own self-promotion. Early movers in the scheme, and the continued evolution of the music streaming market, suggests they could be right on both counts.
As CEO Daniel Ek wrote in a letter to investors earlier this year: “the old model favoured certain gatekeepers. Today, artists can produce and release their own music.”
Dominion holds Spotify in its Global Trends Luxury Fund
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