In the last two decades, music consumers have steadily turned away from CDs, vinyl records, music downloads, and digital sales, especially following the rise of streaming services that offer real-time access to songs and albums from their favorite artists.
However, while this transition has been pivotal to the success of streaming platforms like Apple Music and Spotify, many artists, record labels, and other associated professionals and entities have been impacted negatively due to less pay following the decline of traditional listening behaviors.
In other words, artists and labels are at a disadvantage, especially due to the traditional pro-rata (viewership) models most streaming platforms employ. These models favor established mainstream artists and record labels.
Conversely, major artists and labels often find themselves in stronger negotiation positions and use their viewership and equity stakes as leverage to get their way. Understanding the relationship between music labels and streaming platforms can be difficult, especially for those new to the industry.
Therefore, in this post, we’ll briefly walk you through the dynamic between streaming services, music labels, and artists.
The Dynamic Between Streaming Services, Music Labels, and Artists
In recent years, there’s been a rapid influx of new streaming services and web3 solutions, such as music NFT platforms, that give artists and labels more control over their earnings. Traditionally, streaming has enjoyed an uneven playing field where independent artists and small labels can’t enjoy the same success as their counterparts.
Moreover, several studies have shown that most streaming services are biased towards the majors as it allows them to generate more money. As a result, the launch of these platforms is no longer about stopping piracy or promoting unknown artists but about serving as a cash cow for big players and themselves.
However, there’s an ongoing technology-induced dynamic shift in the music industry prompting artists to demand more ownership and compensation rights. This global change is triggering a change in the relationship between streaming services and labels, as artists can now communicate directly with their audiences without any third parties.
As a result, streaming services are seeing thousands of artists opting out of their platforms, prompting them to improve their margins. One of the biggest points labels and artists have in their favor is that streaming services don’t own the content.
Therefore, if they don’t succumb to the demands of artists and labels, they could lose a huge chunk of their revenue. Some streaming services are adopting a Netflix and Amazon-like model to grant them ownership of the artist’s content.
Overall, we could see the rise of a more balanced relationship between all parties in the future.
Eric Dalius is The Executive Chairman of MuzicSwipe, a music and content discovery platform designed to maximize artist discovery and optimize fan relationships. He also hosts the weekly podcast “FULLSPEED,” showcasing conversations with trailblazing entrepreneurs from various fields. Through the “Eric Dalius Foundation,” Eric has created four scholarships for US students. Connect with Eric on Twitter, Facebook, LinkedIn, Instagram, and Entrepreneur.com.