Why the Majors Aren’t Embarassed
By Patrick Clifton. How Raye’s BRITs win is a vindication for the majors’ diversification strategy and a masterclass in storytelling.
“For Raye, the Brits boost will be huge. For the major record labels that fund the ceremony it’s an embarrassment.” So ran a piece in The Times after Raye’s sizeable trophy haul at the UK’s annual BRIT awards. For the article’s writer, Raye’s win was a victory for independence and one in the eye for the major record label system.
The major record labels are owned by three global corporations; when people talk about “the majors” they can mean one of their frontline labels or the corporations themselves. It is these corporations that fund the BPI, the trade association that puts on the BRITs. Raye’s win isn’t an embarrassment for these companies. It is a vindication of their long-term strategy to diversify label ownership by buying up independent artist services companies, mitigating against the risk of a rapidly-changing environment for artist development and hit generation.
Raye’s album was released via The Orchard, a very successful global company that provides physical and digital distribution, label services, and artist services. According to trade publication Music Week, the album release was managed by “a new distribution partnership with LA-based Human Re Sources, which is part of Sony Music’s artist & label services operation The Orchard” (Sony bought The Orchard in 2015). Sony also owns AWAL, another services firm, having bought it a few years back from Kobalt. Universal Music owns services-and-distribution company Virgin (previously Caroline). It has an ownership stake in PIAS/Integral, who provide sales and distribution for a many well-known indie labels, as well as services to smaller indies and international distribution via Co-op, a business PIAS acquired when Universal bought EMI. Universal also owns Ingrooves, a digital distributor, now folded into Virgin. Universal acts as the conduit of distribution for smaller “indie” sales & distribution companies like Brighton-based Republic of Music. Indie labels and self-releasing artists can also look for a deal with the Alternative Distribution Alliance or ADA — a company under the ownership of Warner Music, who’s staff sit in WMG’s corporate offices in Wright’s Lane. According to Music Business Worldwide, Warner Music is in talks to buy Believe, the French-based independent distributor as well as owner of Tunecore, a leading entity in the DIY music services and distribution space.
The acquisition of these businesses began a few years ago when the rapid growth of mood and activity listening on streaming services and the growth in DIY content uploaded via services like Tunecore and Distrokid saw the majors’ share of streams decline. To mitigate against the impact this would have on revenue (streaming revenue is paid out according to share of consumed streams), they invested in distribution and artist services firms. Rob Stringer, the most senior executive at Sony Music, told investors in May 2021 (quoted in Music Business Worldwide) that “Our earliest point of differentiation going into the new chapter of streaming growth was that we purchased The Orchard at the right time. That is a market leader. That is how we are able to stop the dilution of music through the number of songs and tracks going into Spotify.” Rather than confront the model, their strategy was to buy the aggregators responsible for uploading this content, effectively buying back into a diluted royalty pool.
In the same interview, Rob Stringer also talks about the ability to upstream and downstream music to and from The Orchard. Exciting new music that bubbles up from scenes or niches and gains momentum can be moved on to one of Sony’s frontline labels and given the additional investment and attention to take it to the mainstream; new signings to those frontline labels that need a bit of time and space to develop artistically, or who could benefit from appearing to emerge from the grass roots, are given time within The Orchard’s system. Twenty years ago, I worked for a label distributed by Sony during the old physical music paradigm. We were trying to break into the market for club music, and they had no specialist distribution options for us; we weren’t able to engage the scenes we were trying to market to in the places where buzz around new records could begin. This up-and-down streaming is an intelligent answer to that problem based on today’s market conditions.
The Orchard has been very successful with artists like Jorja Smith, Skepta and Raye as well as more traditional indie artists like Noel Gallagher. Dave and Aitch manage their own musical output via Universal’s Virgin. Success stories within that infrastructure, they enjoy the resources of the world’s biggest and most successful music company. Dirty Hit’s roster of artists like The 1975 and Wolf Alice are released via Ingrooves. Over at Warner, A.D.A claims ownership for Central Cee’s success — the general manager telling Music Week back in March ’23 “ADA has a long history of breaking rap talent in the UK… but this one is on a global level…We’re №3 in Ireland, №6 in Australia, №9 in France…many of which are the highest ever placings for a UK rapper. It’s a true global success story for ADA today.”
The Record Label Crisis pointed to the challenges faced by frontline music labels, but as the name-checks above demonstrate, there are plenty of artists that have found success outside of the traditional label paradigm. Artists at grass-roots level can create new music and find their core audiences without record companies needing to invest large amounts of A&R resources; as the majors effectively distribute this music to streaming services through Virgin or AWAL, Ingroooves or ADA, they can detect signals that the music is gaining momentum and can take greater ownership positions in those tracks. There’s a widespread trend in industries that have a high risk-to-reward ratio in product development, away from the large corporations that used to do that development down to independent companies who develop new ideas, formats or products. It’s present in industries from pharmaceuticals to television. The change of emphasis and investment towards artist services companies is an expression of the same trend within recorded music.
With majors outsourcing risk to artists who self-release, those artists can ask for different types of deals. They can retain their copyrights and can get more favourable royalties than the 20% rates typical to traditional recording contracts. The firms don’t own as much intellectual property; this means a smaller asset base for financing and exposure to risk of the landscape changing. This risk has manifested now the foundations of streaming remuneration are shifting (Spotify’s lower limit of 1000 streams a year being required to generate a royalty means those DIY services have less leverage in negotiation and alters the “dilution” problem Rob Stringer talked about). Yet the majors continue to own popular catalogues so the risk is counter-balanced, and while this diversification into distribution is a tactic to ensure they still control the hits landscape, ownership of copyrights is their business so I assume they’ll use their vantage-point to acquire the best of this new music as it appears.
So Raye’s BRIT triumph isn’t a poke in the eye for the majors, but evidence of their adaptability to new conditions. Where a year ago the narrative that followed the Raye album release was of an evil music business caging an artist in a contract, by the time we got to this year’s BRITs ceremony it was about an industry that has empowered an artist, freed to create her own success.
Storytelling at its best.
