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The Rise of Independent Music Artists

In the past, to succeed in the music industry, you needed to be under the wing of a big record label with the resources to promote your music. Artists struggled to get noticed by big names in the industry so they were not able to have their shots.

J.Cole once said he waited outside Jay Z’s studio in 2007 for almost 2 hours just to give him is mix tape. And when he finally saw Jay Z and handed him the mix tape, Jay Z looked at him and said “Man, I don’t want that.”

That was the typical story of almost every big artist that became famous over 2 decades ago. They had to get through the “O.Gs” in the game to make it to the top.

But the game has changed now!

Independent artists are the ones carrying the industry. And they don’t seem to be relenting.

Over 9.5 million tracks were released by independent music artists around the world in 2020, 8 times more than the 1.1 million tracks released by major labels.

Despite a decline in sales in the early pandemic months, the recorded music sector recovered in the remaining months of the year, marking the sixth year in a straight of gain. In record label trade revenue figures, worldwide recorded music sales increased 7% in 2020 to $23.1 billion. And most of that revenue was generated by independent sound recording owners.

Let’s take a closer look at how independent music artists are influencing the industry and the amount of growth they have contributed in recent years.

Independent Music Artists are Driving the Expansion of Streaming

Revenue from streaming services totaled $14.2 billion, up 19.6% from 2019, and $2.3 billion more than in 2019. As a result, streaming revenue growth continued to accelerate in 2020. However, Spotify's revenue growth decreased in 2020 compared to 2019, indicating that the company is now meaningfully underperforming in the market as a result of the emergence of local players in emerging markets and the rapid growth of YouTube.

The major labels underperformed in the streaming market for the first time, albeit not all majors were equally impacted. Warner Music Group (WMG) and Universal Music Group (UMG) both performed significantly worse than Sony Music Entertainment (SME), which was totally in line with the rise of the streaming business.

Independent music artists and labels, however, both outperformed the market significantly, expanding by a combined 27% and raising their combined market share for streaming to 31.5%.

But how have they influenced a shift in the market share for record labels?

Shift in Market Share

The majors and Merlin's proportion of Spotify streams decreased to 78% in 2020 from a high of 85% in 2018. Label market shares often advance at a rate that is practically glacial in the recorded music industry. This change is nothing short of tectonic in contrast. Not only is there a new growth pattern in the recorded music industry emerging, but there is also a new breed of independent copyright owners emerging.

The headline states that independents' (copyright owners) market share increased from 29.7% to 31.1% in 2020. The percentage in 2018 was 28.3%. Gained market share is over three full points. In a rapidly expanding sector like streaming, large revenue growth is required to fuel such significant movements in market share.

According to Spotify data, majors increased by 14%, Merlin decreased by 3%, artists direct increased by 28%, and non-Merlin independents increased by 49%. The biggest winners in 2019 were artists direct and non-Merlin independents.

Compared to larger, more established organizations, these two divisions have learned how to exploit their smaller scale to be agile and play to the specific rhythms of streaming. They are the new vanguard of music strategy for the streaming era.

Now all the stats and figures aside, how did we get here? What changed? How are Independent sound recording owners now topping the game the “O.Gs?”

You guessed right – streaming!

How Streaming Has Given Independent Music Artists More Opportunities

The opportunity for artists and labels of all sizes to access international audiences is the undeniable advantage of the streaming era. However, the majority of small record labels lack the size and resources necessary to directly license and distribute to streaming services, therefore they instead turn to the rapidly growing market for digital distributors.

The major record companies have made a name for themselves in this market as essential players, distributing independent labels directly or through their distribution networks. The value that they give to independents is evident, but the revenue passes via the majors’ accounts, and thus major label revenues are inflated by independent revenue, thereby inflating the market share of the majors.

“With the help of the data we collected for our independent label survey, we were able to separate the majors' total revenue from this "embedded" distributed independent label revenue in order to determine the "actual" market share of independent labels, which is based on who owns the copyright rather than just who distributes it”. Here you can find the full report from Media that explains how independent labels and artists are bigger than what we might think.

How Streaming Has Changed the Entire Music Industry

A decade or two ago, fans of music had three options: buy physical records, purchase tracks and albums on an online store like iTunes, or downloading them illegally for free compromising the security of their computers as well. All of that has altered since then.

Music streaming, which has also fundamentally altered how customers listen to and purchase music, has shaken up the music industry. Customers may now access music at a much lower cost than was previously possible thanks to music streaming services, which offer millions of recordings from tens of thousands of artists for a monthly subscription fee.

For instance, the two most well-known music streaming services, Apple Music and Spotify Premium, each have monthly fees of around $10, as opposed to $1 for each song on iTunes.

Similar to how Netflix and Hulu impacted how people watch television and movies, music streaming services like Spotify and Apple Music have transformed how people listen to music. Now anyone with singing talent is free to manage their music.

But for how long? What should we expect in the coming years?

Music streaming services are used and favoured all over the world. So, as long as streaming platforms keep growing in popularity, we can expect independent artists to keep churning off the larger market share in the music industry.



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The Rise of Independent Music Artists

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