As CDs gave way to digital downloads, and digital downloads continue to give way to online streaming, the role of the record label in today’s music industry is somewhat nebulous. Services such as Distrokid, TuneCore and CD Baby allow independent musicians to release their music on hundreds of platforms for a small fee, seemingly obviating the role of record labels in music distribution. Though the returns are ever-diminishing, it is easier than ever to promote one’s music.
This year, Spotify has dealt another blow to record labels: directly licensing music with independent artists. This method completely bypasses the middle-man role of a record label in negotiating such deals for its artists’ releases. It also means the artist makes a far higher percentage per stream than they would if a label were also taking a cut. Furthermore, the licensing deals Spotify has offered to far are non-exclusive, meaning that the artist still owns the rights to their work and may work with other streaming and distribution services. Given that streaming offers far less revenue per song than CDs or downloads, these exclusive licensing deals and their accompanying bonuses offer independent musicians a chance to earn a better income in today’s industry.
While Spotify CEO Daniel Ek insists that Spotify “[does not] have any interest in becoming a label,” as they do not own the masters to artists’ music, major labels still view this development as a threat to their business. As 87% of the music on Spotify comes from the “big three” main music groups, Universal, Sony and Warner, these companies hold major leverage over Spotify should they choose to challenge its new approach. Ultimately, only artists may be able to determine the future of the industry.