Tech advances alter hierarchy of music industry, Financial Times
Independent record labels have made $1 billion from streaming services, according to a leading licensing agency, as technological advances have shaken the industry’s power structure. Merlin, which represents 20,000 independent labels, has reported that annual sales grew eightfold in five years, to nearly $400 million in 2016, outpacing the broader industry.
Digital music is a “more level playing field,” said Martin Mills, whose record company Beggars Group has launched artists from Adele to Vampire Weekend. When Mr. Mills founded the record company out of a London basement in 1976, recorded music was all about vinyl. But as music distribution has evolved from CDs to digital downloads and now streaming, the likes of Spotify are helping independent labels such as Beggars compete after years of domination by a few behemoths.
Streaming allows small record labels to reach global listeners without the hefty costs of pressing and shipping CDs, a roadblock that has helped keep the big three labels — Universal Music, Sony, and Warner — in command of the world’s popular music. The Oxford-educated Mr. Mills started Beggars when a punk band that had been rehearsing in the basement of his record shop asked for help putting out their music.
The company subsequently grew into one of the world’s largest independent labels but still struggled to deliver music to listeners in less developed markets, such as Mexico. Now, these regions are “far more accessible,” making up about 20 percent of revenues, he said.
Streaming has shaken the hierarchy of the music business, executives say. When CDs reigned, “labels would have to pay [retailers] for good placement in stores,” said Mark Mulligan from Midia Research. “Now the labels hold the power,” a hierarchy for which they can thank Apple co-founder Steve Jobs, who agreed to pay record labels about 65 per cent of revenues when he created the iTunes store, setting a precedent.
Sales in Brazil, which was a struggle to crack in the 1990s “unless you were Britney Spears”, now exceed that of France, said Charles Caldas, chief executive of Merlin.
Vocabulary
independent record label – a small music company not owned by a large corporation, “She signed her first album with an independent record label.”
streaming services – platforms that allow you to listen to or watch media online, “Many people use streaming services like Spotify to listen to music.”
licensing agency – a company that manages rights for music or media, “The licensing agency gave permission to use the song in the movie.”
shaken – upset or disturbed, “He was shaken after hearing the bad news.”
eightfold – eight times as much, “The company’s profits grew eightfold in five years.”
outpacing – moving faster than or exceeding something else, “Her skills are outpacing everyone in the class.”
broader – more general or wide-ranging, “He has a broader understanding of history after the course.”
more level playing field – a situation where everyone has equal opportunities, “Online platforms created a more level playing field for small businesses.”
basement – the floor below ground level, often used for storage or small spaces, “We turned the basement into a small studio.”
vinyl – a type of record used to play music, “He collects old vinyl records from the 70s.”
behemoths – extremely large or powerful entities, “The tech behemoths dominate the market.”
hefty – large, heavy, or substantial, “She paid a hefty fee for the concert tickets.”
pressing (CDs) – making physical copies of music CDs, “The band is pressing CDs for their new album.”
shipping – sending products to customers, “Shipping takes longer during the holidays.”
roadblock – an obstacle or problem, “The project hit a roadblock when funding ran out.”
rehearsing – practicing for a performance, “The band spent hours rehearsing before the show.”
putting out (distribute) – releasing music or content to the public, “The label is putting out their new album next month.”
struggled – had difficulty with something, “She struggled to finish the marathon.”
revenue – money earned by a business, “The store’s revenue increased after opening a new branch.”
reigned – dominated or was the most powerful, “Pop music reigned in the 80s.”
precedent – an earlier event or action that sets an example, “The court’s decision set a precedent for future cases.”
to crack (a market) – to successfully enter and succeed in a market, “The startup tried to crack the market for eco-friendly products.”
exceed – to go beyond a limit or expectation, “Sales this year exceeded our targets.”