Music market shares: independent labels and artists are even bigger than you thought

It has been a long time since the music industry has been in such good shape. So long, in fact, that there are not too many executives left who worked through the pre-crash days. 2021 was the year in which the major label groups capitalised on the momentum, with Universal and Warner going public, and Sony going on a spending spree. This was off the back of a strong 2020, in which the majors collectively generated $15.1 billion, giving them a market share of 66.1%. So far, so normal, but all is not quite as it seems. This market share may be how the world sees the majors’ success, but it significantly underplays the revenue contribution of independents. MIDiA decided to fix that.

At the start of this year MIDiA fielded a large-scale, global survey of independent labels, collecting billions of dollars’ worth of revenue figures. We think that it is the most comprehensive survey of the independent sector done yet. In the survey, we asked labels about a range of factors, which enabled us to paint a complete picture of the state of the independent sector in today’s music business. Crucially, we collected detailed data on distributors, and this is where the under reporting of independents comes into play.

The undoubted benefit of the streaming era is that it presents artists and labels of all sizes with the ability to reach global audiences. But most independent record labels do not have sufficient scale nor resources to license and distribute directly to streaming services, and thus turn to the ever-expanding marketplace of digital distributors. Never shy to an opportunity, the major record labels have established themselves as key players in this space, distributing independent labels either directly or via their distribution arms. The value that they deliver to independents is clear, but the revenue goes via the majors’ accounts, and so major label revenues are boosted by independent revenue, thus inflating the market share of the majors. With the data we tracked in our independent label survey, we were able to unpack this ‘embedded’ distributed independent label revenue from the majors’ total to arrive at the ‘actual’ market share of independents, based on who holds the copyright, not simply on who distributes it.

Measuring market share on this ‘ownership’ basis, independent market share (which includes artists direct) goes from 33.9% (the ‘distribution’ basis) to 43.1%, i.e., an additional 9.2% of share. Or, put another way, an addition of $2.1 billion. The independent share was up from 41.3% in 2018, and in 2020, independent revenue (on an ‘ownership’ basis) grew by 12% compared to a total recorded music market growth of 12%. All of which means that independents (labels and artists) are a) bigger than standard industry measures suggest, and b) growing faster than the total market and are thus increasing market share. Which makes the majors’ strategy even smarter. If they were not so active distributors of independents, they would simply be ceding all of the revenue, instead of, as they are, capturing some it and being able to report the market share as their own.

These findings and much more (including regional market data and data on label operations (e.g., A+R, marketing, catalogue size, years in operation)), are available to MIDiA clients in this full report.

All independent labels that took part in the survey have already received a copy of the report. If you want a copy of next year’s edition, be sure to take part in the next survey when we announce it!

The attention economy after the lockdown boom

The attention economy is the cornerstone of all entertainment businesses. Throughout the 2010s, it just grew and grew, with more and more digital entertainment options filling consumers’ downtime. Staring out of windows and being bored at bus stops was replaced by Netflix, Fortnite, Spotify, Instagram and TikTok. Then, as the decade drew to a close, the attention economy became saturated. Instead of competing for unused hours, everyone was competing with everyone else. Cue Netflix’s cofounder and CEO, Reed Hastings, to claim he was competing more with Fortnite than he was HBO. This binary equation did not have time to really bite before the global pandemic hit, suddenly turning back the attention economy clock. More people stuck at home with more time on their hands and money in their pocket resulted in a 12% boost to the attention economy. But it was clear that as soon as the time came for pre-pandemic routines to return, the temporary boom would fade, sending the attention economy into negative growth. That time has come.

The attention recession is here

When MIDiA first predicted the coming attention recession, it felt like a world away to most entertainment companies because the high tide of lockdown raised all entertainment boats. Most entertainment formats grew. But the thing is, some grew faster than the 12% average, while others grew more slowly. This meant that, in isolation, a given entertainment company might have reflected on record performance, while, in reality, they were losing ground on competitors – both within and beyond their respective industries. This was an esoteric concept when everything was up, but once pre-pandemic routines started to return, those that lost share during the lockdown era were the least well placed to deal with the attention economy contracting once more. Entertainment audiences developed new behaviours that were sustained over such a long period that they became habits – and habits can be hard to shake. 

By the end Q2 2021, 42% of the extra time gained during the pandemic had already gone. Combined average weekly entertainment hours had gone from 53.1 hours in Q4 2020, to 50.7 hours. While this was still up from the Q2 2020 total of 47.4 hours, the first phase of the attention economy’s contraction is clear to see. Crucially, though, the fall back was not evenly distributed. Games, news and audio (podcasts, audio books, radio) all fell by double digit percentages in Q2 2021, while music and video fell by much smaller amounts. Meanwhile, social media and social video actually grew. The arithmetic is brutally simple: if social grew while total time declined, their win was someone else’s loss.

The contraction still has much distance to run

With Covid infection rates rising, and lockdown measures returning in some markets, there is a reasonable chance that the contraction may lessen, or even pause, in affected markets in Q4 2021. But the underlying trend has an inevitability to it. Whether it is now or next year, the attention recession is going to bite – and it is going to bite hard.

In such a fiercely contested environment, every form of entertainment, from music, to video, to games, is going to need to give its audience reasons, not just ways to spend attention. Every minute of attention is going to be hard earned2022 and beyond will be shaped by fierce competition from entertainment companies that are trying to hold onto as much of their recently gained time as possible, which, in the finite attention economy, will mean others will not only lose time, but end up lower than pre-pandemic levels. Matters will be complicated further by consumers multitasking more than ever in order to try to squeeze in as much entertainment as their waking hours will permit. While this will tick the hours-spent box, it will devalue that time spent, to the extent that attention may not even be attention at all.

The findings in this post come from MIDiA’s latest report Attention economy: After the lockdown boomThe report contains detailed data and analysis of just how media consumption has changed across 15 different forms of entertainment. If you are not yet a MIDiA client and would like to learn how to get access to this insight, email [email protected].

Tribes are the future of fandom (and that may or may not be a good thing)

At MIDiA, we spend a lot of time exploring the fan economy and how new forms of fandom are redefining media businesses. The most significant underlying dynamic is the fragmentation of fandom: the dynamic whereby we move ever further from mass-reach media, where everyone is exposed to the same content, to a world where entertainment exists in a complex mesh of filter bubbles. Niche becomes the new mainstream. Whereas, as Asian entertainment companies have become adept at industrialising fandom in this new paradigm, Western companies are less so. In music, big record labels still have a mindset of wanting to create mainstream, global hits. But the fandom playbook is changing. Global success now depends less on how wide your message can reach, and more on how deep it can go. Mass reach is becoming superseded by conversion, and mainstream is become replaced by tribes.

What do Donald Trump and tribal fanbases have in common?

Tribalism is, for better or for worse, central to how humanity functions, and, of course, underpins millennia of armed conflict. How tribalism can manifest among strident fanbases is simply a lighter shade of the same dynamic that can send countries to war, part of the same sliding scale on which Trump operated. In fact, the tactics of the Trump movement often bore more resemblance to those used by K-pop acts than those used by political opponents.

Just like a contemporary, always-on artist, Trump fed his audience with an immense amount of content, access and engagement, and even did a live national tour. Like some of the most tribal of music fanbases, Trump nurtured a sense of otherness among his supporters – it is them against the world and the system is rigged against them. There is perhaps no better way of strengthening a tribe’s sense of oneness than strengthening its sense of otherness.

Tribalism and the role of us-vs-them

Fandom trades on basic human instincts and psychology, particularly two of the ‘deficiency needs’ in Maslow’s hierarchy of human needsbelonging and esteem (political fandom also trades on a third need: safety). Any kind of fandom depends on people feeling like they are a part of something, and how that something plays a role in identifying who they are. Tribal fandom takes this one step further, distilling this shared identity to an ‘us-vs-them’ mentality. Fans become focused on identifying, not just what makes them, well, them, but also what makes the rest of the world…not them. At its worst, that can be used by politicians, like Trump, to stoke fear against immigrants, liberals, people of colour, or basically anyone that is not part of their tribe. In less severe forms, it can manifest as artist fanbases mobilising en masse on social platforms against something they do not like. The sense of oneness, defined against the otherness of the rest, enables them to feel like the establishment is against them, even when they become the establishment, whether that be becoming the political party in power or the band that sets YouTube streaming records.

This flavour of tribal fandom has been made possible by social media and the broader way in which it facilitates online conversation. Often, social media facilitates a hyper-defensive style of discourse, with the loudest voices winning out, even if they are not the majority. Indeed, the fragmentation of fandom means that the whole concept of ‘majorities’ are becoming a thing of the past. In a political and business environment, now defined by the claims of the Facebook whistle blower, Frances Haugen, there is a growing understanding that a recalibration of social media is required, and ideally before Facebook Meta simply migrates social into the metaverse, warts and all. 

Fandom’s industrial revolution

But there is also vast positive opportunity within tribal fandom. As Chartmetric identifies, what sets K-pop artists from big Western artists is that they convert the vast majority of their audience into fans. There is little wastage. By contrast, big Western artists often have bigger total audiences, but a much smaller share that are ‘fans’, e.g., artist follower and active listener counts. This is simply taking Kevin Kelly’s 1,000 true fans conceptand recreating it on an industrial scale. In fact, you could argue that we are entering fandom’s industrial revolution phase. As this epoch plays out, the most effective marketing and monetisation across all forms of entertainment will be that which focuses on tightly defined tribes, rather than mass market reach. The shift from cultural moments to cultural movements is only just beginning. Politics (e.g., Trump and the Brexit campaign) have learned the tricks well, as has a select group of entertainment companies (e.g., Netflix and Big Hit Music). The coming years will be shaped by everyone else playing catch up.

Facebook is about to disrupt itself out of existence…again

Facebook’s rebranding to Meta can be interpreted in many ways. It can be seen as: following Google / Alphabet’s lead in communicating a new chapter in its business; putting distance between the company and its most well-known app, ahead of it beginning to decline; shifting the story away from whistleblower and ethics narratives; signalling a major strategic reboot. It is, of course, a combination of all of the above. In fact, Facebook is perhaps the most successful example of a global tech company that is embracing Clayton Christensen’s disruption innovation theory. Namely, that in order to compete in a new market, you have to radically change what you do, how you do it, and, crucially, your values. Facebook already went through this entire cycle when it pivoted towards messaging apps, and now it is about to do it all over again.

Strategy repeating itself?

Facebook’s Meta shift has a neat symmetry with its messaging app strategy – coming nearly ten years to the day after the app store launch of Facebook Messenger. When Facebook launched in 2004, the social media world was dominated by highly linear, desktop experiences, like MySpace and GeoCities. Facebook moved the needle, but it was a product of its time and generation. By the turn of the following decade, the world was changing, and with it cane a new generation of mobile-centric consumers – an opportunity that Evan Spiegel and Co seized, with the launch of Snapchat in 2011. As the dominant social platform, Facebook could easily have played it safe, developing a series of ‘good enough’, sustaining innovations to try to keep one step ahead of the noisy, but comparatively tiny, mobile-centric competition. Instead, it did something that big established companies rarely do – it decided to compete head on with it itself. Facebook decided to disrupt itself before the competition did.

Textbook Christensen

Facebook’s messaging app strategy was textbook Christensen. To really drive transformative change, you need to change your entire company and values, which is almost always best achieved by either acquiring companies or launching new divisions, so that you can learn to think and behave differently. After all, as a company, you have to respond to dramatic change in a dramatic fashion, because, up until now, your established way of doing things has resulted in you falling behind. So, in 2012, Facebook acquired Instagram for $1 billion (to initially be run as a separate entity), and then WhatsApp in 2014 for $19.3 billion. Facebook is now the biggest messaging app company on the planet, though the world has changed so much, these apps are often not even called messaging apps anymore. They are simply social apps. That is the scale of the transformation that Facebook achieved, and the metaverse is next.

Ramifications

If Facebook Meta follows a similar path for its metaverse strategy as it did for messaging apps, then a couple of major acquisitions will follow. It would be the wise move to do so, and hopefully Meta’s commitment to spending $10 billion on the metaverse does not reflect the hubris of a company that now thinks it is so good that it can do everything itself. If it is, then the odds are that Meta will not be the key metaverse player. But, if Meta does follow the Christensen playbook and become the central force of the metaverse, then there some major permutations, and even responsibilities, for Meta:

  • If the metaverse becomes the future of social then, unless there is some kind of cultural reset, all of the negative, dark sides of social will simply migrate over and become magnified. Imagine how psychologically damaging getting trolled and abused in virtual reality could be, especially for impressionable, younger people
  • The filter bubbles formed in two-dimensional social media already enable false narratives, like QAnon, to feel entirely real. Imagine just how much more real false narratives could feel in immersive environments

The immersive web

Societal risks and responsibilities aside, the shift to the metaverse represents a broader paradigm shift in digital entertainment and connectivity. MIDiA terms this as the Immersive Web, and, in fact, Facebook’s Meta announcement is a neat validation of the title of our 2021 Predictions report: ‘The Year of the Immersive Web’. Whether lightening can strike twice for Meta remains to be seen, but if it follows its 2011-2014 blueprint, then it has to be in with a shout of being the dominant metaverse player. Metaverses, though, are still heavily rooted in games, and while Meta is making a big bet on their future existing outside of games, there is no doubt that some gaming dynamics and experiences will still be part of what the future of metaverses are. The question is whether that means that the addressable audience is going to be narrower than it was for messaging apps, at least within a meaningful time frame (e.g., 5-10 years)? If not, then the risk is that Meta could end up winning the wrong war and building the future of games, instead of the future of social.

Adele is Bond and BTS is Squid Game

When Spotify announced that Adele had broken the record for the most streams in one day, with 19.8 million streams, the caveat was that this was true as long as you do not include all of the streams BTS had accumulated in 24 hours for ‘Butter’ in May. ‘Butter’ racked up 20.9 million streams, but 10 million were wiped from the record for ineligibility, thus only counting the first 10 plays per user in any given 24-hour period. While the caveat makes sense from the perspective of countering chart manipulation, it also raises fundamental questions about just how we measure success and whether, what are fundamentally subjective definitions, discriminate, intentionally or otherwise, against certain types of fans and music.

Fandom is fragmenting

We are living in the age of fragmented fandom where niche can feel mainstream, and mainstream can feel niche. Central to this is the shift from cultural moments to cultural movements. In the old, mass media world, most people experienced the same TV shows, movies and songs, with mainstream media promoting a relatively narrow selection of titles to the majority of the population. Now, audiences are fragmented and marketing is more targeted. So, it is possible for something to feel entirely mainstream to the target audience, even though it may not even register for the majority of the population. Whereas big, old-school releases resulted in water cooler, cultural moments. Successful niches become cultural movements, driving sustained engagement and cultural capital among their respective audiences. 

Bond vs Squid Game

Nowhere is this seen better than in the successes of Squid Game and James Bond’s No Time to Die*Bondwas the cultural moment, with wall-to-wall mainstream media support and is close to crossing $500 million in box office receipts. Squid game is Netflix’s most successful show to date with 132 million viewers, but was only watched by a minority of the total population in most countries. Nonetheless, it has become a cultural movement, seeping across popular culture via memes, social posts, fan content and so forth. Bond’s box office receipts translate into about 25-35 million viewers, while Squid Game is estimated to be worth around $900 million to Netflix. Bond was the global cultural moment, but was actually smaller on all counts than the less ‘traditional’ mainstream Squid Game.

A similar dynamic is at play when comparing BTS’ Butter with Adele’s Easy on MeEasy on Me was the cultural moment, with the massive initial wave of listening soon dropping off, while Butter was a cultural movement, which sustained throughout the first 6 days of release at pretty much the same level. Adele was Bond, while BTS was Squid Game – perhaps no coincidence that their nationalities match too. 

Adele was still the bigger success, but only if measured by the way the music industry wants it to be measured, i.e., discounting all those extra BTS Army plays. But what if a 13-year-old BTS fan simply wants to listen to the track 20 times in a day because they love it so much, while an older Adele fan listens to her tune a couple of times in the evening after work? The way we measure success inherently suggests the former behaviour is invalid, while the latter is more valid. The system favours casual listening over super-engaged listening. Listen, I am fully aware that the BTS Army is renowned for caning BTS tracks 24-hours a day in their thousands. But the risk is that the baby is getting thrown out with the bathwater.

Converting success metrics

So, why does this all matter to music? Quite simply because, just as in the TV and film industry, traditional metrics are still used to measure success – even if the old units of measurement have progressively less relevance. Music charts especially so. Since the advent of music downloads, the music industry has continually revised its definitions for ‘sales’ in order to try to make the old ‘cultural event’ measures work for a world that is increasingly shaped by cultural movements. The industry and media both like being able to talk about ‘sales’ and platinum releases – it is convenient short hand. But, if a platinum certification from 2021 is not equivalent to one from 1991 then does it really serve any purpose?

All of this would be a minor inconvenience if it were simply a ‘currency exchange’ issue, e.g., understanding what a million sales in 2021 was versus 2020. But it is not just that. The current measurement frameworks are biased towards artists that fit better in the traditional artist model than the new, emerging one. Including all BTS Army plays is probably as wrong an answer as discounting half of them. But a solution does need to be found, one that better captures the impact of a song on its fans. Perhaps a blend of measures that incorporate number of listeners, number of listens per listener, and total number of listens. (Also, there is a strong case for treating lean-back plays differently than lean-in plays – both in terms of charts and royalties). Each measure would be useful in its own right, which implies there may not be a single measure anymore. But, given the fragmentation of fandom and the growing diversity of fan behaviour, that is probably not a bad thing. The days of trying to measure every artist and every release by the same metrics will eventually become a thing of the past, however inconvenient that may be.

*Why did James Bond go grey? No time to dye…