The following MBW blog comes from Lohan Presencer, CEO of Ministry of Sound.
A year ago, I implored fellow record executives in the major labels to stop giving away music.
What’s happened since? Well, YouTube continues unabated with over a billion free users, SoundCloud has 150m, and even Spotify has 80m streaming music for nothing.
The argument goes that free streaming reduces piracy and drives subscription. But who had the fastest selling album in music business history this year?
You couldn’t find her on streaming services, free or paid.
The temptation is to categorise Adele as an exception, but surely she proves that world class music from a world class artist still commands a price?
Of course streaming has its place in the new world of music consumption, but its pennies per stream business model favours the massive catalogues of the major labels, penalising smaller independents who don’t have the same fat to live off.
“The temptation is to categorise adele as an exception. But surely she proves that world class music still commands a price?”
I also warned that Apple’s new streaming service would have a free introductory offer which the majors would queue up to support.
Sure enough they did, until a mutiny from the independents and Taylor Swift forced Apple into paying for it.
Apple now claims around six million subscribers after six months. But if that number doesn’t grow fast enough will they return to rights holders asking for an extended free trial or price reduction? And will the majors concede again?
Majors have always used their size to exert influence, supporting business models which are to their long term benefit. If all the music in the world is bundled with your phone, TV or internet in return for a monthly fee, the biggest labels end up with the biggest share of the cash.
But that influence is now squeezing the life out of the indies, the highly creative labels who often discover the next generation of superstars like Adele. And although streaming services like Spotify and Apple Music claim to support independents, they are complicit in our decline.
“Although streaming services like spotify and apple Music claim to support independents, they are complicit in our decline.”
Streaming has led to irreparable value erosion in music and it is also now having a huge impact on the charts. In June 2015 the UK singles chart, which had always been based on actual sales, incorporated streams for the first time. Of the thousands of new releases every week, Spotify can only give prominence to a handful.
Labels lobby Spotify to include songs on influential playlists, rather like hiring radio pluggers, only now these streams count towards the chart.
So the majors employ big teams to plug Spotify, leaving independents unable to compete. It’s much easier to get playlist support for global pop artists like Justin Bieber (who recently had three of the top four singles) than it is for development artists on smaller labels.
In 2005, independent labels accounted for 11% of sales of the top 100 singles in the UK and 9% of albums. By September 2015 those numbers had fallen to 6% and 4% respectively.
It doesn’t stop there. Universal now wants the chart to include video streams as well. If that happens the majors will gain more market share, giving them even greater negotiating leverage with streaming services.
Let’s be clear, it’s impossible to launch a music service without the three majors. They control an astonishing 75% of the music in the world. Which is how they can force start-ups to give them equity and large cash advances.
Deezer paid the majors $23 million in upfront cash between 2012-14. There were no equivalent payments to indie labels or artists.
Sony and Universal have also lobbied for higher royalties from internet radio services than those paid to independents. Surely all artists and labels should be equal? Or are some more equal than others?
“If we can’t afford to sustain our business, the only investment in new talent will come from majors.”
Every year the big guys manage to hold their own in a declining industry as a result of the huge advances received from digital music services.
That growth is at the expense of indies – from established labels like XL and Ministry of Sound down to the bedroom operators.
If we can’t afford to sustain our businesses, the only investment in new talent will come from majors. Music fans will lose out if businesses like ours can no longer afford to develop the superstars of tomorrow.
So if big streaming services really value the creativity that comes from the independent sector, we need a level playing field.
Upfront cash and shares in digital businesses should stop or be shared fairly and transparently with indie labels and artists, and indies should receive enhanced editorial and financial support, reflecting our significant and important musical contribution. Anything less will lead to further dominance of the majors and decline of the indies.
And when listeners use a streaming service, if they want to enjoy the delights our industry has to offer, they had better have their credit cards at the ready.Music Business Worldwide
