How I Learned to Stop Worrying and Love The Algorithm (And You Can Too)

MBW Views is a series of exclusive op/eds from eminent music industry people… with something to say. The following comes from Conrad Withey (pictured), the founder and CEO of Instrumental. UK-headquartered Instrumental offers a suite of data-driven growth tools and services to label partners including distribution, financing, and access to the firm’s proprietary AI-powered talent discovery tools. Instrumental’s own in-house label, FRTYFVE, has signed artists discovered via this AI tool including Rachel Grae (2.9m Spotify monthly listeners) and Micky (2.5m).

Can you feel the fear?

It’s creeping into music business discussions more and more these days – whether that’s via demands for new streaming royalty models, worries over TikTok’s intentions, or panic over the impact AI will have on artists.

Our company meets label executives regularly who are sensing an existential threat – to their business model, to their professional relevance and of course to their jobs – from the rising influence of algorithms on the outcomes of their work. It can sometimes get a bit Last Of Us.

All of this seems strange to a company like Instrumental, which has been built around a data-driven, digital-only model, with the primary goal of maximizing the potential of the streaming age.

Seeing firsthand the amazing potential of machine-learning artist discovery and catalogue performance technology, we’ve learned to embrace, rather than being scared of, the power of the algorithm.

We believe that the fear we’ve seen bubble up in the music biz in recent months has its root cause in discomfort over an ongoing transition into a new era: a move away from the ‘gatekeeper era’ (be that press, radio or DSP editors) and into the ‘age of the algorithm’.

I’ll be bold enough to say that we are waving goodbye to the first 100 years of the music business (from music halls, to radio, MTV and download stores) and racing into what will drive the next 100.

More so than ever, breaking a record or artist today means something different than it did before. Rather than relying on a handful of key media/promotional partners or gatekeepers to do the work for you, now millions of ‘micro moments’ will decide whether or not audiences will discover or care about certain music and artists.

Increasingly, these ‘micro moments’ aren’t being decided by senior executives over fancy dinners: today, TikTok is a more powerful music discovery platform than TV, radio, and film combined. An algorithmic recommendation triggers a reported 80%+ of plays on its platform.

This is all worrying news for certain major record companies. What are they for if it isn’t about their influence on global media?

It’s no surprise we are seeing their market share on services like Spotify statistically diluted: music represented by the majors and Merlin has seen its global market share of annual Spotify streams fall by 12% in just five years.

For independent labels and artists, however, the decline in the power of editorially-driven mass media – and the rise of the algorithmic, hyper-personalized music business – brings a wealth of new opportunities.

You only have to look at Spotify’s recent Stream On event to see evidence of these new opportunities. With its new home feed and AI ‘DJ’, Spotify is inviting more, not less, algorithmic ‘pushes’ towards content than ever. And the expansion of Spotify’s Discovery Mode tool will be welcome news to all of us who have already seen the fruits of smartly spending carefully-targeted dollars on music’s biggest audio platform.

It’s happened: the playing field is finally level. Let’s do this!

Playing by the new rules

For labels to best take advantage of this new algorithm-driven world, the old rules of the music industry have got to go.

Frankly, everything you thought you needed in a record company – and everything a record company previously saw as its reason to exist – can pretty much be thrown out and rethought.

Instrumental is now increasingly working with smart independent label partners, usually born in the streaming age and with a modern attitude to the algorithm. We are encouraging these partners to think about changes in the way that a modern label should work vs. the way things have always been done – and how this can free up their teams and artists from the ‘cookie cutter’ approach.

Here are 9 ideas a modern, data-driven record label founder may want to embrace to free them from the shackles of the past.

This list also doubles up as 9 reasons why the team at Instrumental loves the new world order:

  1. No more expensive music videos. Is there anything more pointless in a modern label’s marketing mix than the ‘blockbuster’ music video? Has anyone recently (under the age of 30) come up to you and said “Did you see that music video for X?”. They are now largely irrelevant to the independent music world. And a waste of money. You can trigger the algorithms that matter with vertical video, shot on an iPhone. And that’s a wonderful thing.
  2. No more risky deals. Remember the old adage that 1 in 10 artist deals made money for a label… and made up for the other 9 that lost money? Forget that. With a data-driven label, every deal can be analyzed and assessed for future income streams and appetite for risk measured against millions of other similar artist performances. Your business is now highly predictable… and as a result, much more investable.
  3. Lower music production costs. At least initially. Every new record can be tested for audience engagement and reaction based on simple, low-cost production. Artists can even commercially release voice memo demos and see how their audience reacts! Obviously, many artists can do this independent of any label; the next generation are incredibly capable. Yet once they achieve a connection to an audience, traditional label A&R skills and investment come into their own – taking a recording to the next level. The difference to the past? There is now solid data to confirm it’s the right investment to make.
  4. No more stressful playlist meetings or New Music Friday-obsession. Spotify’s New Music Friday has meant almost nothing for a long time, but we still hear labels fixating on it. The idea is that an artist project’s success is somehow reliant on an executive in a meeting room saying ‘yes’ to playlist inclusion. Forget all that – it’s the old world talking again. In reality, in 2023, having your track included on a mega-playlist is now a tiny factor. Far later in the process, it can still influence future success… BUT it is not something to even think about day-to-day. Instead, obsess about different outputs you can control.
  5. No more wasted, speculative marketing spend. Why would you spend ANY money on marketing until the algorithmic-driven momentum is underway? It is just not worth it. And it won’t make a difference. But once there is momentum you can absolutely jump on an opportunity to drive scale.
  6. No expensive office space. Today, you can have a global business without needing offices everywhere. One of the benefits of being independent is you don’t have a big, expensive infrastructure. Releasing music is a global business from day one, and international success can happen without needing offices. Save the money. Instead, build out a Rolodex of contacts around the world. Connect with them through technology and regular travel.
  7. No more A&R scouts on your payroll. Some people miss going to 4-5 gigs a night. I get it. Having scouts on a label’s payroll – whether employed or as consultants – was once the norm, and one of the great power bases of the major labels. Today, data leads the way: one data scientist can create a more powerful scouting capability within a label than a hundred, even a thousand scouts. Lean into algorithmic scouting tools and lean back on the costs.
  8. Don’t worry about reviews. No one pays attention anymore. It’s so refreshing to have a world where millions of people make their minds up on what they do or don’t like and then share it with their networks. Even critics’ prizes mean absolutely nothing – at least commercially. Save the effort and just forget all about it.
  9. You don’t need to offer an artist tour support – and they certainly don’t need to sign a 360 deal. There was a time when 360 deals were the way. The record business was in the doldrums and sharing in other income was the approach taken to mitigate the risk in investment. Forget that. Now, running a streaming-led label is about focus: you are a RECORD business. Leave live to the experts. Doing so is better for the talent, too: they don’t have inexperienced people involved in their wider career.

We have proof that unburdening indie labels with some or all of the above ideas is a recipe for success.

Instrumental’s in-house label, FRTYFVE, exceeded 200 million streams in a single month in January by following an algorithm-led growth strategy. (You can read more about the strategy that led FRTYFVE to this level of success through here.)

FRTYFVE’s team has never worked in a traditional label – they are digital natives. They are being led by data and leaning into algorithmic marketing and growth tools to inform a methodology that can power any ambitious new (or old) label willing to change with the times.

Isn’t it time you embraced the new world order?

#shifthappensMusic Business Worldwide

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