Tag Archives for " record labels "
The major record labels seem to have it out for Spotify, but the platform is contributing mightily to their bottom lines. It’s been reported that the company has already paid $1.2 billion dollars in royalties to the music industry this year, and over $5 billion lifetime. The platform is paying out around $133 million per month, and over $4.4 million a day, according to Music Business Worldwide.
Spotify recently announced that it now has 40 million paid subscribers, which goes a long way to contributing to that royalty payout. Apple Music, the next most popular streaming music platform, has less than half that at 16 million. The music industry currently favors Apple Music because it doesn’t offer a free ad-supported tier like Spotify. Allowing users to access music for free, even with ads and listening limitations has been ridiculed by artists, songwriters, publishers and labels, but many platforms, including Spotify, feel that it’s important to introduce users to the the value of streaming music first before asking them to pay. That said, many users are now hip to the the benefits of streaming music and that introduction may no longer be as necessary as it was previously.
Regardless, Spotify’s royalty payments are now a huge part of the revenue stream for most labels. Even though that amount still doesn’t make up for declining CD and download sales, the streaming user numbers are steadily rising, and many feel that it’s only a matter of time until streaming makes up the largest segment of recorded music industry income. Spotify might be leading the way, but until it eliminates its free tier (which has been rumored), the company will still receive the wrath of the industry. It won’t be alone, however, as other companies offering the same free tier will be lumped in the same boat, as the industry tries to move away from anything free.
Now that Brexit has unleashed its shock and horror on the financial markets worldwide, other much smaller sectors are wondering how it will affect them as well, and the music business is no exception.
The traditional music business (meaning record labels) is run by a crafty street-wise bunch that know how to roll with the punches, and that’s why I think they’ll find a way to come of this with a net gain when all is said and done.
Most of the analysis of the situation that I’ve read so far centers on the fact that doing business in both the UK and Europe will be more expensive because of the escalated operating costs associated with keeping offices either in London or in Europe. Travel, labor, and finances will all take a hit as costs rise because of the increased paperwork involved.
It’s a fair premise that will likely play out that way, but remember that the industry has a talent for turning lemons into lemonade (although usually that doesn’t apply to the artists).
For example, back in the ‘60s, all record producers were just staff personnel of the record label, and paid as such. After Sir George Martin had huge success after huge success with The Beatles that netted EMI hundreds of millions of dollars in profit, he didn’t get as much as a Christmas bonus, let alone a raise, in appreciation for his efforts. As a result, Sir George bolted and became what amounted to the first independent record producer, demanding his own royalty on the records that he produced in the process. Of course, an exodus of successful record producers followed, and it looked like the major labels had a huge new cost on their hands.
The lemonade came when the labels hit on the idea of passing off this new cost to the artist, and the producer royalty has been the responsibility of the artists ever since. The record labels came out ahead because there were now fewer employees on the payroll, and this new very expensive cost wasn’t theirs to worry about.
Another example came in the late 80s when recording budgets where skyrocketing. At the time, the labels paid all the invoices resulting from the recording process no matter how large or small. This resulted in an accounting nightmare, with vendors constantly upset with slow payments, and everyone in the supply chain from the artist on down being constantly hassled about it. The budgets were higher than ever, resulting in more invoices than ever, requiring more accounting manpower than ever to keep up. [Read more on Forbes…]