The music industry faces a major competition probe, but investors can still enjoy the party
Once upon a time the ambition of many a teenager wasn’t to become an Insta-influencer, but to start a band and make it big. I was one of them, although lacking any real musical talent my preferred option was to buy a sampler and hopefully become the next Prodigy. Music-making equipment was expensive back then, though, and let’s just say that the rudimentary tracks I cobbled together on an old Akai S950 found in Loot, a cheap Boss drum machine and a distortion pedal didn’t really pass muster
Years of practice and huge improvements in music-making technology means I’ve got a lot more proficient since then, and I still hanker to put some music out one day. Actually, I have done if giving something away on Soundcloud counts, but making a living from my hobby is still a very distant prospect; far more talented musicians than I have tried and so far failed to launch a paying career in music.
One constant complaint I’ve heard from them is how little they get from having their music played on streaming platforms like Spotify and Amazon Music. Spotify has in fact acknowledged this dissatisfaction, launching its “Loud and Clear” initiative to help its artists better understand the complicated economics of the streaming market. But reading between the lines, that says to me that it won’t be changing the way it pays artists any time soon.
It may be that the matter is ultimately taken out of its hands. The UK’s Competition and Markets Authority today announced that it’s planning a long-overdue probe into the streaming market, which now accounts for 80% of music played in the UK. The CMA’s probe has been prompted by Sony’s purchase of alternative distribution platform AWAL earlier this year, which it believes could reduce competition that would otherwise helped artists earn more from their music, but the government is also concerned that artists aren’t getting their fair share of streaming royalties. A recent report from the Department of Digital, Culture, Media and Sport found artists receive just 16% of streaming royalties, and it’s calling for a 50:50 split with labels in a “complete reset” of the industry.
Perhaps labels deserve some slack, though – the government did little to help when peer-to-peer sharing services Napster emerged and presented them with an existential crisis via the challenges of enforcing copyright whilst managing the transition to digital music. Thanks to their painful efforts in those difficult years the music market is arguably now in great health – and even if you’re one of those artists that doesn’t think they’re being paid enough, the reality is that it’s never been easier to release music and less expensive to listen to it.
Indeed, ad funding means you don’t have to pay a penny to listen to the Quality Tunes in this email, and even a monthly subscription to almost every noteworthy song in the world only costs me around £10 a month – far less than I used to spend on vinyl and CDs. And according to Spotify, creators and rights holders are getting paid more than ever; it says that the number of artists generating more than $100k a year from its platform has risen from 4,200 in 2017 to 7,800 today. Last year, over 1.2m artists had more than 1000 listeners.
The reality of being a successful artist is, in fact, largely the same as it always was – you can have all the talent in the world, but the secret to success is hard work, good networking and a little bit of luck, not just sticking a few tunes on Spotify (or pressing up a few 12-inches as was once the case). And you don’t need any of those things to make money out of music these days, thanks to a festival of investment options from companies like Focusrite and Gear4Music making and selling musicians their kit, to investment trusts like Hipgnosis and Round Hill Music buying up rights catalogues, and of course labels and streaming services. The industry may indeed change again if the government gets its way – but for investors there’s still a lot to sing about.