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Direct Service Providers (DSPs) are the core of the music industry now. The last IFPI Global Music Report shows that nearly 70% of all industry revenues are generated by DSPs.
But does this mean that music is becoming more “democratic” and that the power of the major labels is no longer controlling the artists that people can discover?
If record labels no longer had anything to offer, they wouldn’t exist. And there’s no evidence that any major label is under any serious threat.
In fact, as the music industry has seen an increase in revenues of over 54% in the years between 2014 and 2020 and even more in 2021, which was the most profitable year this millenium, it’s fair to say that labels are having a good time at the moment.
And artists still seek out labels even in an age where it’s hard to make money as an artist (streaming may be huge but an artist typically sees $0.01 or less per stream and many need a million streams or more just to earn a living).
This is because the labels provide experience, resources, and connections to access a broader market but also because labels often provide cash upfront for recording costs, physical media, etc.
However, that doesn’t mean that DSPs are powerless to influence the music people listen to, either.
The labels still bring value to artists but in 2016, the top 100 tracks on streaming platforms accounted for more than 10% of all annual audio streaming.
In 2021, that figure had dropped to under 5%. That means that the music people are listening to on DSPs is substantially more varied than it once was.
On top of that, the “discovery” points for music are ever-broadening, one of the big deals in the industry this year is TikTok. The video-sharing platform is becoming a huge vehicle for both music discovery and for artists to go viral, completely skirting the traditional music industry and the labels.
Interestingly, data shows that TikTok users are also more likely to spend money on music and to be more invested in that music than the general population is.
However, there is still a gap between creators on TikTok and creators in the larger DSP marketplace with many TikTok users being unaware of how to take their viral creations to other platforms such as Apple Music and Spotify.
It is hard to quantify just how much benefit independent artists are getting from the current relationship with DSPs.
We know that the DSPs are investing a fortune in data science, for example, but we don’t know how this is impacting specific categories of artists.
There’s no doubt that services like Spotify do shine a light on indie acts but there are no official figures on the percentage split with traditional labels.
And worse, while these services may be essential for acts to be discovered, there is no doubt that compensation remains shockingly low, particularly for independent acts.
And, for now, at least there’s no sign that labels are suffering in the new streaming environment, even though artists may be.