A new report from American investment bank Citigroup says that $43-billion was generated from music in the U.S. last year and, of that, musicians received about $5 billion (or 12 per cent) while record labels and digital services received the biggest shares as streaming becomes the backbone of the industry. The good news is that musicians’ percentage is up from just seven per cent in 2000.
“Artists’ share of music revenues is small. In 2017, artists captured just 12% of music revenue with most of the value leakage driven by the costs of running a myriad of distribution platforms — AM/FM radio, satellite radio, Internet distributors — augmented by the costs (and profits) of the record labels,” the report states.
Part of discrepancy, according to the report, is that the structure of the music industry has remained static while the ways music consumers are interacting with and spending on music has changed drastically.
The report also explains that the growth in artists’ revenue share (from seven to 12 per cent since 2000) is mostly because of growth in the concert industry, of which artists receive a greater percentage compared to recorded music.
“The bulk of the improvement is not driven by the growth in music subscription services. Rather, it’s driven by the strength in the concert business,” the report says. “Music labels act as intermediaries for subscription services (Apple, Spotify) but are largely excluded from the economics of the concert business. As such, growth in concert revenue is particularly helpful to artists.”
The report predicts that there are three significant ways that the music industry’s structure could change. First is what it calls vertical integration, meaning concert promoters could merge with an existing distribution platform, such as a streaming service, for example. Second is horizontal integration, meaning a consolidation of distribution services. Lastly, in what the report calls “organic forms of vertical integration,” the authors predict distributors like the streaming services could become labels, too. In a sense, this is already happening as it has been revealed that Spotify is signing direct licensing deals with emerging artists, effectively cutting the labels out of the equation (though Spotify CEO Daniel Ek says that this doesn’t make them a label).
For the full report, CLICK HERE.