April 12, 2024

Major record companies’ Spotify market share declines by 12% in last 5 years – But it’s too soon to celebrate

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The market share of the four major record companies on Spotify continued to decline in 2022, due to the increasing number of independent tracks being added to the platform. The three major companies, Universal Music, Sony Music, and Warner Music, as well as the independent collective Merlin, have collectively lost 12% of their market share on Spotify in the past five years. According to Spotify’s annual investor report, 75% of music tracks played on the platform last year were distributed by the major companies or Merlin members, with the remaining 25% being unaffiliated with either. These unaffiliated companies include TuneCore, Believe, UnitedMasters, and several other independent artist distribution platforms.

Merlin represents indie labels and distributors, including Beggars Group, Cinq Music Group, [PIAS], Mushroom, and DistroKid, and claims to represent around 15% of the global music market. The market share of the major companies plus Merlin was as high as 87% in 2017, as per previous Spotify fiscal reports. However, this figure has been gradually declining since then.

The increase in the number of releases on streaming services, with over 100,000 new tracks being uploaded to Spotify every 24 hours, has contributed to the dilution of market share for major record companies. This trend has impacted their share of revenue earned from the service, as Spotify and other streaming platforms have adopted the dominant “pro-rata” model of royalty payouts. The majors are aware of this trend and are eager to reverse its impact on their business.

Low quality ‘functional’ music

In 2022, Sony Music Group’s Chairman, Rob Stringer, discussed his company’s strategy to reduce the dilution of its distribution market share caused by the sheer volume of tracks released every day via DIY distribution companies. Stringer talked about Sony’s plan to bring a larger volume of independent music into its system via indie-facing operations like The Orchard and AWAL. He also criticised the low-quality “functional” music and 31-second tracks designed to game the pro-rata royalty model on Spotify and other services.

Similarly, Universal Music Group’s CEO and Chairman, Sir Lucian Grainge, announced last month that Universal had concluded that the current royalty model on services like Spotify was not providing equitable value to premium-level artists. Grainge noted that UMG was working on new royalty models on services like Spotify as a matter of global priority, objecting to streaming services promoting “lower-quality functional content” that, in some cases, “can barely pass for ‘music'”. Grainge specifically called out playlists on streaming services that are filled with 31-second tracks of ‘functional music’ whose brevity is deliberately designed to trigger a streaming royalty payment as many times in a row as possible.

author avatar
Bernard - Side-Line Staff Chief editor
Bernard Van Isacker is the Chief Editor of Side-Line Magazine. With a career spanning more than two decades, Van Isacker has established himself as a respected figure in the darkwave scene.

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