Can Streaming Platforms Succeed In Music Publishing and Licensing?
“Record companies remain dedicated to ensuring full and fair value is returned for music as it is consumed in its many different forms around the world. Crucially, this involves finding a legislative solution to the value gap, the mismatch between the value created by some digital platforms from their use of music and what they pay to those creating and investing in it.” — International Federation of the Phonographic Industry (IFPI) Music Consumer Insight Report.
Streaming platforms have irreversibly changed the music distribution landscape, now accounting for the largest growth segment in the recorded music industry. Spotify, the biggest player in this area, went public this year. There’s certainly no question that streaming is here to stay. However, recent news of the streaming giants’ entry into the world of publishing and licensing may come as a surprise, illustrating yet another revenue source for them to attempt to tackle.
Let’s face the fact: music streaming has proven very successful in a very short time. And while some industry players are still questioning the longevity of this success, the simple truth is that streaming platforms came along at the right time. Possessing the ability to meet the advancing technological requirements, they managed to fulfill the increasingly demanding expectations of modern music lovers to make music streaming a daily activity for a huge part of the worldwide population.
Conversely, many traditional record labels remained caught in a web of fragmented technology from the past, making them unable to keep up with the rapidly-changing music industry ecosystem.
Entering the Lucrative World of Publishing and Licensing
Although no one would doubt Spotify’s impressive growth, the company operated at a loss of $461 million last year. Clearly, Spotify must seek ways to improve its margins and increase revenue, so the company is making moves in new directions.
Before going public, Spotify negotiated new licensing deals with the major labels that account for 85% of its streams. As a result, the company obtained better license rates in exchange for increasing the difficulty for users to get new music without purchasing a paid subscription to its service. Now, Billboard reports that “Spotify has offered advances to a number of managers and indie acts in exchange for licensing their music directly to the streaming service.” This marks a big move on Spotify’s part, with management firms receiving large advances for licensing tracks by independent artists directly to the streaming giant.
Although Spotify allegedly tells the indie acts signing licensing deals with the company not to say they are “signed” to the service, according to Billboard’s sources, this clearly marks an entry into licensing.
Other companies are jumping on board as well.
Apple Music, Spotify’s major competitor, has recently made a step towards artists by setting up an internal music publishing division and launching their own analytics platform for musicians and labels. Although the company claims they’re not going to operate as a traditional music publisher and sign songwriters directly, this move would now look natural.
Should traditional labels be worried?
Many music industry analysts agree that we are witnessing the first signs of music streaming companies aiming for the publishers’ piece of the pie. Realistically, established record labels are better-positioned to manage the licensing and publishing needs of artists, with higher royalty rates for songwriters and historical relationships with the film and TV industries. At the same time, labels are quietly heading towards music distribution. A good example is Level Music, a new digital distribution platform launched not long ago by Warner Music Group.
Obviously, we are in an era of massive changes, and those who can provide the best tech solutions combined with the most innovative capabilities will lead the way in capturing the attention and loyalty of global music fans and the acknowledgement of artists.
What are your thoughts about streaming platforms entering the world of music publishing and licensing? Please share your opinions in the comments below.