The music industry played in 2014, unable to transition to the digital age, but eleven years later it has returned to record income. The model has gone from a physical sale -cd, vinyl, cassettes- to the call streaming of the platforms. A new playing field that has changed the rules to make money.
Shortly after touching their income roof in 2001, the record companies embarked on a crusade against piracy and downloads without offering legal alternatives to consumers. The companies clinging to a business model of another millennium bleed. The consolidation was brutal after six major players – universal, Sony and Warner – that in turn swallowed dozens of small stamps along the way. This trio, known as majors, It produces almost two thirds of income from recorded music in the world.
The arrival of Spotify was the revulsive to jump to the digital age. The Swedish company designed a model that conjugated listening to the music online accessible and legally through agreements with records that take a percentage of advertising income.
If in 2011 400 million dollars were generated in this way, in 2024 there were more than 20.4 billion according to IFPI, the world -class employer.
Not all markets have grown the same. Spain is still not recovered, weighed by the low subscriptions premium that make remuneration lower than that of other countries.
“Spotify democratized music,” acknowledges a high international executive of one of the three majors. But also, says the source, made it more difficult to live from recorded music. “Now people are more likely to be heard, but also to continue distributing pizzas the next day,” says Asturian artist Víctor Manuel, very critical of the industry.
More money among many more artists
Spotify defends itself in its annual report Loud and Clear of 2024, in which he points to a record in the payment to the industry of 10,000 million euros. “Ten years ago, the most popular artist in Spotify generated just over five million dollars. Today, there are more than 200 artists who have overcome that threshold,” says the company. There are 12 million artists who have uploaded their music to Spotify (in front of the tens of thousands that placed a CD on a shelf).
Another source on the record side, in this case Spanish, outlines the business distribution model in streaming: The platform stays with 25-30%, the author receives 15% and after paying VAT the record company stays between 50% and 55%. The analog model, he says, had a broader margin for the seal.
Of every ten pre-streamingone became successful and endured the losses of the other nine. But now the difficulty in monetizing a single launch closely the risk of risk that a company can support, which tend to invest less in the development and artistic part of the novel artists.
The remuneration system is different on each platform, and there are at least 300. In Spotify, the dominant player, remuneration depends on membership. “Revenue in the free model can be a tenth of what the same number of listening is,” says an executive of one of the major. Be a median star in a market premiumlike the United Kingdom, it is more profitable than being a famous artist in Mexico, where most of the streams YouTube takes them with its free model that remunerates worse.
Dallographic sources criticize that the high users have prioritized, a ratio that rewards the bag, on the quality of memberships, which is the one that has an impact on the earnings of the artists. He Financial Times He published in August that Spotify plans to raise prices in some markets.
The Swedish platform premiered five years ago the “way discovery”, Which through agreements to lower the price of royalties gives more affection of the algorithm to the artists. The functionality was compared to the ‘Payolas’, those bribes that the stamps paid to the DJs of the radios. Bloomberg ensures that the manager They advise their artists to reach agreements only with the stamps they pay for being in this way.
The three major They have created their own distributors that upload music to the platforms. Many artists have decided to do without the guardianship of a stamp and use these subsidiaries under short license agreements. The distributors charge around 15% of the profits but in front of the platforms known as Do it yourself -With flat rate- they have more negotiation capacity to get better agreements (such as the button discovery) and better position the issues.
“Before they sent the labels and now the consumer sends,” says a third executive of one of these distributors linked to a major. “The pretext that the algorithm dominates is used by some to justify their lack of success. But there have never been so many information and so much information for an artist to find his fans and dedicate himself to them.”
Old rockers never die
The catalog of artists of great hits past known as legacy that have the major It has become a stable, recurring and abundant income. In the case of Sony and Universal some sources point out that they can suppose up to 70% of their income from streaming. Los legacy They provide many listening in various parts of the world in any membership and do not demand maintenance or investment by the record company.
Therefore, the sale of catalogs is the star of operations in the sector with astronomical and investor figures such as Blackstone have bought complete repertoires. The Founder and CEO of Duetti, a music investment society indieLior Tibon, explains that access to data has opened music doors to financial investment. The indicators almost ten years seen allow to calculate the future income of a catalog or a subject. A hit past is the type of asset looking for conservatives, such as investing in an infrastructure with a recurring toll. The expected return is 200 points above the performance of the American bonus, which can yield an average profitability of around 7%.
To Carlos Galán, founder of the mythical label indie Subterfuge, they offered a million dollars for The end of the worldfrom the La Love You Group. At first the idea was tempting but in the end they declined the sale. “It is dismembered the catalog, letting go of ballast when we have no need,” says Galán.
The labels have decided to reinvest in the catalogs, which provide them with stability and a mattress to take risks and continue with the business. Sony has paid for the rights of Queen the record of 1,270 million dollars. This same week Morrisey, former vocalist of The Smiths, announced the sale of the rights of the British band catalog that belongs to him. Although he argued personal reasons, the sale arrives at a time of rage for this type of classic assets that will make his heartbreak very lucrative.
Catalog sales agreements are mostly confidential and are not known in Spain. Tibor attributes it partly to the low subscription premiumthat makes these less competitive investments. But the case of the love you show how investors are tracking successes that are futures legacy But they are still at a good price.
Young artists, such as Taylor Swift, with the race ahead, have few incentives to sell their catalog. Unlike figures such as Bruce Springsteen or Bob Dylan, who are close to withdrawing and with the sale of their repertoires have brought the income from the future to the present.
There are also lucky blows. Like Kate Bush’s published in 1985 the album Hounds of Love. In his face B was the theme Running up of the Hill that popularized the series Stranger Thingsmaking song number one, 37 years after publication. Bush was the owner of the rights so he packed millions of dollars.
Safe active
Uncertainty will make the sale of catalogs continue to rise, since the investment in music is unfortunate of the progress of the economy. In a recent report, Goldman Sachs anticipates that the global music market will reach 200.00 billion dollars in 2035, pushed by emerging markets and also for the desire of the industry to monetize by new media.
In addition to the recorded music business, the labels have diversified their service portfolio launching into management Or even the promotion of live concerts, a very risky business in which in the twentieth century they were not interested in being part. This business line is one of the most growing and best prognosis, according to Goldman Sachs, and is the one that allows many artists to live.
In addition, physical sale still gives money to the industry. In Japan and Korea the discs remain an important source of income, until the 5,000 million global income level is exceeded in 2023. The sale of merchandising He has also taken strength, explains Manuel López, of the consultant Sympathy for the Lawyer, especially in figures with great influence, such as Aitana and Nathy Peluso, who collaborate with fashion marks.
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