Main Themes

1. Streaming

What's nice to see is that the recording music business seems to have accepted the internet as a part of life now. They're embracing online approaches to building an audience, spread the word, and even as the place where the recordings themselves are heard.

As a result, streaming has shot up as the most profitable part of the recording business in the United States.

2. The Role of the Labels

However, just because it's all online, doesn't mean it's free. Record labels continue to be a major investor in talent, since reaching a mass audience still requires significant investments, even though the platforms have changed.

It means that labels are now investing in artists as brands, and not just in the recordings as a separate entity – which also means they like their cut on the artists' revenues to come from more than just the recordings.

The goals of the artists tend to be much bigger than just releasing one album, so the labels do their best to help artists reach those achievements by introducing them to worthy collaborators and extensive industry network.

3. Promotion

Easy distribution of music and social media platforms have sure made putting your music out there more achievable, but it also means the market place is much more crowded. The value of marketing and clever engagement campaigns has actually increased dramatically.

The findings presented here draw from a report published by the RIAA & IFPI, called Investing in Music.

The Internet

Finally the music business and the internet are on the same side.

The evidence is overwhelming and everywhere. Almost every music fan follows some of their favourite artists online, which means the most followed humans across key social platforms are musicians; and streaming has taken off as the leading form of music consumption and is actually the main drive for the 11.4% revenue growth of recorded music in the US.

Streaming Generates over 50% of All Revenue

Streaming doubled year on year from 2015 to 2016, and now accounts for over half of generated revenue for recorded music in the US.

Paid Subscriptions

And the real key here, is that it was the paid subscriptions that shot up in 2016.

Create Bigger Pie

While physical sales have certainly declined – the streaming has increased the total pie by over 30% since 2013.

Find the charts featured here.

Record Labels Are Still Major Investors in Talent

So the labels invest about $4.3 billion in talent annually.

While the digital music marketplace has been transformed by the growth of new services, artists still turn to record companies to help them cut through the almost infinite amount of music available to reach a mass audience.

Case Studies

The reports delve into the music careers of eight global artists, revealing a common theme. The artists were good on their own, but getting signed by a label was what lifted them to new and global heights – as well as providing support both through connecting the artists to collaborators, and managing hype and momentum.

Breaking an artist to a significant audience unlocks a wide range of revenue opportunities, from live to merchandising, but requires a significant investment.

It costs up to $2 million to break an artist, when you take into account development costs, marketing and video production, and tour support. It's hard to break as a global artist without a solid backing from a label, given the required level of investment.

What's more, most artists want to be signed – and they want to produce an album.

Still, The Labels Want to See Artist's Initiative on Social

One common factor cited by many executives is the change from signing artists who are almost at the beginning of their careers to ones that are already starting to
generate momentum.

When the labels are looking to sign new talent, they obviously look to the act's musical skill and connection with an audience like they always have.

What has changed, is that they don't just observe live performances at small, local venues anymore; but they also look to following on social and the kind of momentum the artists have built themselves.

Income Diversification Relies on Having a Strong Audience

It always comes back to the same thing.

While all these areas can generate income for artists, and record labels, they are all possible because an artist has reached a significant audience through their recorded music. Only when that is done can the other channels begin to generate income.
– Frances Moore, CEO of IFPI
& Alison Wenham, chairman of WIN

Revenue in music comes from having a solid amount of following. When an artist has a strong enough brand – and that's the right word, when touring and recording revenue starts flowing – that's when opportunities for brand partnerships, merchandising and synchronisation deals open up.

“All artists have goals beyond selling music – they want to sell out Madison Square Garden; appear on Letterman; play at Coachella. We use our relationships to help develop their careers and achieve these goals.”
– Julie Greenwald, chairman and COO of Atlantic Records Group

Obviously, the record labels are also interested in being a part of those revenue generating opportunities. This shows itself in a more and more common approach to a record deal – one were the record company offers a multitude of services, and then also expects a cut from more sources than just the recording revenue.

Easy Distribution

= Croweded Market Place

“The mere existence of streaming services will not create hits or break artists. You still need an army of people to amplify the artist’s message, helping them cut through the 30 million tracks out there to draw attention to their great album.

In fact, given many streaming services are global platforms, they make the thoughtful, creative and global campaigns organised by record companies even more important."
– Stu Bergen of Warner Recorded Music

As we're sure just about anyone knows by now, just because it's easy to post your music somewhere doesn't equal to having someone care about it.

As the cost of distribution approaches zero, more people share their music, creating a more crowded market place, where getting the attention of an audience is more difficult. As a result, the value of marketing has gone up exponentially.

That process is not any easier than it was before the turn of the century. The right influencers who can give the artist momentum can take months to pick up on it, and traditional media still plays a significant role.

In other words: it takes time and it takes work. It's not just using social media, it's about using all available outlets to strengthen the message, to build up a hype required to introduce a new artist to the market.

The Value of Building an Audience – First

When Australian band 5 Seconds of Summer was signed to become a global act following their first album debuting at number 1 in their home country, the label and management teams got to work right away.

And what did they do?

They focused on building the boys online following as much as possible. They grew their following from 250k to 4million. The result was when their sophomore album debuted at number 1 in over 70 countries on iTunes.

It's a Fan First World

Social media is about creating a connection between the artist and the audience. Why? Because the audience wants it, likes it, and has come to expect it.

‘Streaming raises the bar – people will only keep listening if they like the music.’

– Glen Barros, president and CEO, Concord Music Group

Streaming puts the audience in control of every track they listen to. The real time analytics associated put more pressure on the industry as a whole to bring forward only that which truly connects.