In the 2000s, The Smashing Pumpkins frontman Billy Corgan saw the disruptive nature of the early social media platform MySpace and saw the demise of record labels. But that’s not the case — neither MySpace, nor Facebook, nor TikTok. In fact, major music companies have become adept at using these platforms to defeat artists and maintain their market power. If there’s a breakout song on TikTok, record labels get into an old-fashioned bidding war. While social media has certainly disrupted the music industry, it has not eradicated the traditional record label model.
There have been many other game-changers over the years who have failed—at least on their own—to fundamentally change the way major labels do business, including independent distribution. After TuneCore launched in 2006, major record labels continued to sign artists and own their intellectual property rights, although broader “360” deals included more than just recorded music rights. Nor has the advent of streaming itself reshaped the structure of the major labels. The artists who have had the most success with streaming have worked with a major label in some way, whether it’s a traditional record deal, a joint venture, or in rare cases like Taylor Swift’s, a distribution deal.
Corgan may have been wrong about social media’s sole impact on record labels, but he wasn’t entirely wrong about its ultimate impact. When social media, independent distribution and streaming come together, it creates a powerful combination that changes the balance of power and forces major labels to change the way they promote music around the world. This dynamic is nothing new, but it becomes even clearer in 2024. .
A few years ago, Universal Music Group (UMG) invested heavily in acquiring the song catalogs of superstars such as Bob Dylan and Sting. Lately, the company has been focusing on its artist services model. In the past three months alone, UMG has acquired independent label groups [PIAS] and agreed to acquire Downtown Music Holdings for $775 million, although the proposed deal faced opposition from the independent music community and needed to pass regulatory scrutiny before being finalized. The company also acquired Outdustry, which has an artist and label services division focused on China, India and other high-growth emerging markets, and purchased a stake in Chord Music Partners, giving UMG more than 10 years of distribution and publishing management Responsibilities.
In fact, 2024 looks a lot like UMG CEO Lucian Grange Said he would. His January memo predicted the company would continue to expand globally, providing “a full suite of artist services” to labels outside of mature markets while “acquiring local label, catalog and artist services businesses.” To be fair, UMG is already on this path: in 2022 it acquired m-theory’s artist services company and named its founder, JT Myers and Nat PastorAs co-chief executive of Virgin Music Group, he will expand Virgin’s independent music division globally.
Warner Music Group (WMG) seems to be aware of the changing situation, because in Robert KinkelWhile serving as CEO of the company. exist Stephen Cooper During that era, WMG was the music industry’s major investor in Web3 startups. In contrast, Kyncl has chosen to focus on expanding WMG’s global footprint. WMG briefly expressed interest in acquiring Believe in March and April after the French company announced a CEO-led takeover of the company. It is worth noting that Believe has a global record services business and operates in developing markets, leveraging the “glocalization” of local markets and the ability of global streaming platforms to help spread music across borders. WMG eventually abandoned its bid for Believe, but Kyncl followed industry interest in emerging markets and bought stakes in Indian companies Divo and Global Music Junction.
This service model is not a completely original approach. Grainge writes that UMG is “creating a blueprint for the record labels of the future,” but UMG is doing what major music companies have always done: following trends and acquiring independent companies that build specific markets. Sony Music has already adopted this service model in partnership with The Orchard and AWAL, which it purchased in 2022 for $430 million. Indies such as Believe, OneRPM and Symphonic Distribution have become established players by combining distribution and artist services, while investors are turning to independents such as Create Music Group, which this year raised a $1 billion valuation $165 million) and independent companies such as gamma injected capital.
But this well-established blueprint is the hottest commodity in 2024. When the biggest record labels music companies feel they have no choice. The holy trinity of social media, independent distribution and global streaming platforms offers artists an alternative to the much-derided major label deal. Artists who want to own their intellectual property and have more creative control have never had so many tools for independence. This includes financing options such as an advance from a well-capitalized independent institution or a royalty advance from a new financial services company. When radio promotions and shelf space at brick-and-mortar retailers are not required, the independent model looks more attractive—not just to artists, but to major brands who are increasingly keen to buy it.
Ironically, the major labels’ embrace of the independent artist business model means that the independence of the music business is diminishing. Trade groups such as the Independent Music Association and IMPALA were quick to speak out against UMG’s deal to acquire Downtown, just as they did with Sony Music’s acquisition of AWAL. UK regulators ultimately concluded that AWAL was a “relatively small player” and that the deal did not significantly lessen competition. Time will tell whether competition regulators feel the same way about Universal Music Group’s (UMG) larger city-centre takeover. Regardless, independents have proven that the artist and label services business is a perfect fit for the modern music business. The next step is always integration.
