Welcome to the latest episode of Music Business Worldwide's Talking Trends, supported by Voly Music.
In this episode, MBW founder Tim Ingham discusses the market share threat that the major record companies currently face on Spotify from DIY distribution platforms – and the millions of independent artists they service.
As music from these independent artists swamps streaming services, the majors' refusal to allow the music they distribute to fall under a certain perceived quality threshold limits their ability to compete on volume / scale with the likes of DistroKid. (A prime example of this refusal: Universal Music Group's Spinnup shutting down DIY distribution last month; it now only distributes music from invited artists.)
As a result (amongst other factors), the majors' cumulative market share on Spotify is statistically falling – down by a full 10% from 2017 (87%) to 2021 (77%).
We hear from Rob Stringer, Chairman of Sony Music Group, who last week told investors that Sony has widened its own distribution net – via The Orchard and AWAL – to work with more independent acts, and counteract the market-share erosion created by DIY distribution.
However, Stringer noted that a proportion of this DIY-distributed music isn't of a good enough quality to be considered anything more than "flotsam and jetsam".
Ingham theorises that the majors may soon pressure Spotify to pay out higher royalties for 'quality' or 'premium' artists – especially those who attract subscribers to its service – versus the tens of thousands of tracks uploaded to streaming services daily.
Ingham wonders aloud if the majors' business model "can only triumph long term if streaming companies start acknowledging that 'quality' music is deserving of a higher rate of royalty payment than 'flotsam and jetsam'.
"In other words, will Spotify agree that not all music is worth the same, or that a play of Bohemian Rhapsody is intrinsically worth more than a play of a large man's elongated burp? "
Adds Ingham: "Defining the parameters of what constitutes 'premium' music versus 'flotsam and jetsam' is going to be fun. Music by its nature is subjective. You might think a certain track or an album is complete dreck; I might think it's celestial, and vice versa. That's part of what makes the industry so much fun."
He continues: "Lest we forget that the other week I was on this very podcast telling Music Business Worldwide listeners that I had seen an app – Soundful – that can create studio-quality music via machine learning at the touch of a button, and every single one of its tracks is original.
"There is no reason technology like this won't soon be able to create millions of tracks per day at the touch of a button, and then upload all of them to Spotify within seconds.
"Imagine the threat that kind of tidal wave of music hitting services daily brings to the major record companies and their need to dominate market share on Spotify and other platforms.
"So: if the majors are going to take the argument to Spotify that some music simply deserves more financial respect than other music, surely they are now compelled to do so sooner rather than later."