Are the major record companies trying to pressure music streaming services to pay DIY artists lower royalty rates than those received by established superstars?
He claims that certain majors are pushing for this change because “they’ve been consistently losing market share for the past five years” due to the volume of releases coming out via DIY platforms.
We asked the French exec what he made of the argument that DIY artist-uploaded songs should receive a lower royalty rate on streaming services than tracks from well-known global stars.
His response was edifying.
“I know major record labels are pushing for lower rates for [DIY] artists, and I just don’t think it’s right; I think it’s wrong.”
Denis Ladegaillerie, Believe
“I know major record labels are pushing for lower rates for [DIY] artists, and I just don’t think it’s right; I think it’s wrong,” he told us.
Ladegaillerie added: “The reason major record labels are pushing for this is that they’ve been consistently losing market share for the past five years [due to the volume of releases coming out via DIY platforms].
“They’re trying to find ways of regaining that lost market share through higher value, but I don’t think it’s the right way to do it.”
Ladegaillerie’s accusations didn’t occur in a vacuum.
They followed a suggestion recently hypothesized by Music Business Worldwide on our ‘Talking Trends’ podcast.
On that podcast last month, MBW founder, Tim Ingham, suggested that some or all of the majors may soon pressure Spotify to pay out higher royalties for ‘quality’ or ‘premium’ artists – especially those superstars who attract subscribers to the service.
If that happened, he suggested, the obvious losers would be DIY distributors and their artists.
The reason for that hypothetical scenario, he explained, is that the majors are facing an uphill battle for market share against the “oceans” of releases being uploaded to streaming services by independent artists each day.
Ingham said on the podcast: “For the major record companies, their dominance of streaming market share isn’t just important in terms of their revenues. Crucially, it also affects their leverage when they’re renegotiating licensing agreements with Spotify or Apple or Amazon and other music streaming platforms or owners.
“The smaller the majors’ cumulative market share as they go into these licensing negotiations every few years, the less power they have. And the continued gradual erosion of the majors’ market share in the future looks inevitable when you digest the data.”
To add some statistical context to that point, just one of several prominent DIY distributors operating in the market today, DistroKid, claims that it is responsible for the distribution of between 30% and 40% of all new music today.
The majors are limited in their ability to compete with this volume.
Rob Stringer, Chairman of Sony Music Group, told an analyst on a Sony financial presentation last month how the company’s combined strategy with AWAL and The Orchard is helping it compete with this scale.
“If there are 80,000 tracks a day being uploaded on major DSPs, then [major label] market share is going to be diluted by default,” said Stringer.
He added: “The reason we have a strong strategy in The Orchard and [via] our recent acquisition of AWAL is to take a proportion of that 80,000 – [to] have a bigger proportion of the net that’s being cast for content.
“Because otherwise, literally, market share will be diluted by default of the sheer volume of tracks [being released] – even, quite frankly, if [some of that music] is literally like flotsam and jetsam, and it’s just stuff that’s taking up some of the market share because of scale.”
“If you’re an artist at the top of the industry, you are already getting more value out of the services than if you’re an emerging artist with fewer followers and streams.”
Denis Ladegaillerie, Believe
Elsewhere in MBW’s interview with Ladegaillerie, the Believe CEO said: “I heard the expression that Rob Stringer used the other week, ‘flotsam and jetsam’. I had to look up the meaning [laughs]! It was interesting to see that comment, and then at the same time see Universal announcing that it was reducing Spinnup. [ Universal Music Group‘s Spinnup shuttered its DIY distribution in May and now is now invite-only.]
“In my view, there is a lesson here: Lauren Spencer-Smith signed to TuneCore, went to No.4 in the UK charts and was No.1 in four countries; LANDY in France was a TuneCore artist a year-and-a-half ago and was No.1 Billboard charted six months ago. There are many more examples.
“My view is these emerging artists should get exactly the same [royalty] rate as any other artist on streaming platforms. If you’re a big artist, the argument is: ‘I am contributing subscribers and users to the services.’ Absolutely right.
“But as an artist you are already extracting value out of that relationship, because often [when the] DSPs are using your image and popularity, they are buying billboards, buying digital marketing campaigns, significantly contributing to your own marketing as an artist.
“That lowers your own marketing costs and, at the end of the day, increases your royalties. So if you’re an artist at the top of the industry, you are already getting more value out of the services than if you’re an emerging artist with fewer followers and streams.
“When I talk to a lot of the DSPs, I ask them, ‘Do we have more fake streams through TuneCore on your platform than the major record labels?’ I get a no. ‘Do we have copyright infringement at higher rates than the major labels?’ Also a no.
“So are there operational costs [to the services] that justify a different royalty treatment for [DIY] artists? No.”
Lauren Spencer-Smith’s career exploded when she uploaded her hit Fingers Crossed via TuneCore earlier this year.
She has since signed a big-money deal with Universal’s Island Records.Music Business Worldwide