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Report examines music investment by labels (and how hard it would be to replace)

ifpi-labels-report-2016The IFPI and WIN (Worldwide Independent Network) released a report on the investments music labels make into the industry. It’s an interesting data set about how this portion of the music machine operates, especially when it comes to artists seeking new ways to distribute their work in a digital economy.

According to this analysis, music companies invest $4.5 billion annual in discovering, cultivating, and promoting artists. A&R receives about $2.8 million, up from $2.5 billion in 2013. That leaves $1.7 billion going to marketing and promotion. As streaming becomes more popular, the focus of marketing might also change, with the report noting that campaigns need to run for longer to continue ongoing listens to an artists’ work. “On streaming services, where revenue is generated by the number of times a track is listened to, it can take about a third longer, compared to physical and download formats, for a company to recoup its investment in an artist,” the authors said.

Over the years, there have been occasional whispers about streaming companies acting as labels. Tidal is most often the subject of these, as the boutique service’s artist-ownership model has allowed it to foster more unique deals in how it presents new releases. But Apple Music was also very directly involved with the release of Frank Ocean’s Blonde, and even Spotify is putting a new focus on exclusive live performances. A better understanding of just how much money changes hands under the existing structures, and where it has been going, is necessary for any parties that do want to disrupt the status quo.

Also, labels have pre-existing structures for dealing with licensing and royalties. Given the ongoing debates and legal cases about when and how those fees should be paid, finding efficient ways to untangle those knots would also be critical in making any changes to the current music label business model.

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