major labels
Peering over U.S. borders at the rest of the world, the recorded music business looks like the land of opportunity. The U.S. is certainly lucrative, but it’s also hyper-competitive. While the three major labels have locked up most of the States’ recorded music revenues — they distribute many indies, too — they command a far lower share internationally.
A new estimate of independent labels’ market share shows why major labels’ investments and acquisitions in foreign territories are so common. On an ownership basis, independent artists and labels had a 46.7% share of the global recorded music business in 2023, according to a new MIDiA Research report, with independent labels taking a 40.8% share while artist-direct distributors such as Ditto Music and TuneCore having a 5.9% share. (The data, collected through an online survey of independent labels, accounts for 93% of all global revenues.) That leaves 53.3% for the major labels.
The U.S. is considerably more concentrated. Independent labels and distributors had a 35.7% share of the U.S. market in 2023, according to Billboard’s analysis of Luminate data — 11 percentage points less than their global share — with the major labels owning the remaining 64.3%. That means that while independent artists and labels were behind the majority of the well over 100,000 new tracks that were being uploaded to digital service providers daily as of early 2023, they only accounted for a bit more than a third of revenue.
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The U.S. market gets even more concentrated when distribution, not just ownership, is measured. In the U.S., the major labels have an 84.3% distribution share through their ownership of music distributors Ingrooves (Universal Music Group), The Orchard (Sony Music), AWAL (Sony Music) and ADA (Warner Music Group), leaving independent labels and distributors with a 15.7% share. But MIDiA puts the independents’ global distribution share at 34.2% — 18.5 percentage points higher than their U.S. share.
Besides the availability of market share, companies are also investing outside of more familiar, Western countries because they’re chasing high growth rates. The U.S. is slowing and has settled into solid, high-single-digit annual improvements: 7.2% in 2023 and 5% in 2022 after a pandemic-related 41% surge in 2021, according to the IFPI’s data on global trade revenue.
Emerging music markets, on the other hand, are growing like weeds. Strong gains in some heavily populated countries led the U.S.’s share of global revenues to dip from 41.2% in 2021 to 38.6% in 2023. Over that time span, China’s share grew from 3.8% to 5.1% and Brazil’s share rose from 1.8% from 2.0%. In 2023 alone, Mexico grew 18% to $490 million, and India grew 15% to $357 million to overtake Spain as the world’s No. 14 market.
For majors and indies alike, the never-ending pursuit of market share is taking them across the globe. This year, Universal Music Group bought a majority stake in Nigerian record label Mavin Global and Outdustry, a record label and artist services provider that focuses on China, India and other emerging markets. Warner Music Group took a majority stake in Indian digital media and music company Divo. Believe acquired Turkish record label DMC and purchased Indian record label White Hill Music’s catalog and YouTube channel. In 2022, Sony Music acquired Brazilian independent music company Som Livre. A year earlier, Warner Music Group invested in Saudi Arabian independent label Rotana, building a presence in the Middle East-North Africa region where Reservoir Media has a partnership with Abu Dhabi-based PopArabia.
Streaming and social media have allowed independents to blossom around the world, creating a market “more diverse, fragmented, international, and regional than it has ever been,” wrote MIDiA’s Mark Mulligan. “It has resulted in a market that is characterized by both fragmentation and consolidation,” wrote Mulligan. “These opposing forces are shaping today’s market and will do so in the coming years.”
Ricky Montgomery began rehearsing for his tour in late January. The singer/songwriter played shows across America before heading to Europe, Asia and Australia, returning to the U.S. in June. “It had been a long year, and I was also sick,” he says. That’s when he found out his label had dropped him.
“There was a disconnect as far as creative direction,” he explains. “The label didn’t really know what to do with me, and instead of listening to my ideas, they just tried to apply standard pop templates. Ed Sheeran was the one they thought would work.”
That “disconnect” is the subject of Montgomery’s upcoming single, a downcast acoustic ballad out October 24 called “Superfan.” He sings with a deflated quaver: “Team just got the numbers in/Said try it more like Ed Sheeran/But he’s not me, and I’m not him.”
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Being dropped hasn’t hurt Montgomery’s career, though. In fact, he’s now earning more streams — around 2 million streams a day across his catalog — than he was previously. “For better or worse, it’s a social media content game now,” says the 31-year-old singer, who has close to 2 million TikTok followers. “So if you’ve been investing your time into that, the odds are that you’re going to be totally fine if a label decides to drop you.”
Getting dropped is in vogue this year: Two of the biggest breakout artists of 2024, Chappell Roan and Shaboozey, were both cut by major labels before their recent explosive success. And more acts could soon join their ranks, because the major labels have been cutting costs by slashing staff — and dropping artists.
“Each time there have been major staff layoffs across the label systems, concurrently there were artists released from rosters,” says Leon Morabia, a partner at Mark Music & Media Law. “Some artists are really happy about it and relieved, and some artists are very upset. Their reaction ultimately depends on how much they depend on the record company to do what they do.”
Dropped acts lose access to an extended support team; plans for upcoming releases must be jettisoned or heavily reworked; tours can be scrapped. That said, Lulu Pantin, founder of loop legal, is adamant that “being dropped has no bearing on long-term success.” And this is probably more true than ever.
During a recent interview with Bloomberg, Sony Music CEO Rob Stringer pointed out that when he joined the music industry in 1985, labels had a lock on manufacturing, distribution and radio. “We had a lot more power,” he said. Today, in contrast, “the artists have at the very least equal power to us.”
That’s because they can make music cheaply, and promote it internationally, without ever leaving the house. “Artists have to be as good, if not better, at marketing as any professional marketer now,” Montgomery says. “They are, by default, the most experienced person in the room in marketing meetings.”
At the same time, the buttons that labels can push — to get radio play, appearances on award shows and late-night television, and prominent press placements — no longer guarantee real fans. As a result, Montgomery says, “Labels only want to focus on Tiktok or Reels or YouTube Shorts right now. I had three times as many meetings about TikTok strategy as I did about music. There’s no reason you can’t do that stuff on your own.”
Still, getting dropped can be jarring, a corporate version of a breakup. And like a breakup, disentangling takes a while, as it requires additional negotiation between the artist’s team and the label. “It’s not just, someone waves a magic wand and then you’re dropped,” says an A&R who left a major label job earlier this year.
This legal wrangling can be crucial for the next phase of an artist’s career. In a typical record deal, the label enjoys exclusive rights to any songs delivered during the contract period — even if they haven’t come out yet. For artists who are being shown the door, then, “the key point is who gets ownership of the unreleased music,” Pantin says.
Record companies are reluctant to give these rights up, since they helped fund the songs’ creation. To secure the return of unreleased music, artists may have to give the label a concession, either in the form of “an ‘override’ payment or a royalty on sales and streams,” Pantin adds.
If the label refuses to give up the rights to unreleased songs, artists have one other option. “I’ve called labels and asked them to waive the re-recording restriction,” says Tiffany Almy, founder of PKA Law. The re-recording restriction is in place to prevent an artist from putting out a competing version of a song the label already released, a tactic made famous by Taylor Swift with her Taylor’s Version album re-recordings. But the restriction serves no purpose if the label never put out the track in the first place. And if the artist succeeds in convincing the record company to nix that provision, they can then re-cut their music — on their own dime this time — for release.
Another point of negotiation when artists and labels are uncoupling: The act may be able to obtain some additional money, depending on the structure of their contract. “The deal could be worth $500,000, and $150,000 is given to the artist on signing and the rest is for recording,” the former A&R executive explains. “Then when you deliver the album, whatever’s left from the fund is supposed to go into the artist’s pocket.”
Attorneys try to prepare for these situations long before the label is even thinking about trimming rosters by including what’s known as “a pay-or-play provision” in the artist’s initial contract. (The initial deal negotiation period is when lawyers push for other protections as well: “I always try to build in caveats that the re-recording restriction doesn’t apply if the track doesn’t get released within a certain period of time,” Almy says.)
The pay-or-play clause ensures that, “If you get dropped in the middle of the contract period, you will be entitled to at least a portion of the remainder of the fund,” explains Oren Agman, an entertainment attorney. “Labels are now capping that, so they’ll give you maybe 30% or 40% of the balance. [But] if you have no pay-or-play provision, then you’re not getting anything other than the advance.” Jodie Shihadeh, a music lawyer, calls this provision “one of the last key points” when negotiating a record deal.
While the lawyers for both sides go back and forth after an act is dropped, the artist may be stuck twiddling their thumbs. “I’ve seen labels delay responses for months, extending the process and keeping artists in limbo,” Pantin says.
That limbo period matters because an artist technically can’t sign a new deal before getting out of the old agreement. Some do so anyway, figuring a label that dropped them isn’t likely to spend money suing them for breach of contract. “It can be a game of chicken,” the former A&R notes.
For an artist’s collaborators, it may be more than that — they don’t have the potential cushion of a pay-or-play clause. Many labels give a producer half their fee for a track up front, and fork over the rest only when that track comes out, Almy says. A dropped artist may mean a shelved track; for a producer, a shelved track represents lost income. “I’ve called the A&R at the label that dropped the artist and asked them to consider paying the producer for the work that they already did,” Almy says. Mixers are often in the same predicament.
Artists have it easier, because they can just start recording and releasing as they see fit. “I’ve seen some artists where it really helped that they got dropped, even though they didn’t want to be,” Shihadeh says.
Another recent post-drop success story is Gigi Perez, who parted ways with Interscope earlier this year. “I was stuck inside of a machine that didn’t work or make sense for me and I was unhappy,” she wrote in a lengthy message on Instagram on March 8. “I think a ton of artists were/are in this position as this new model of the music industry changes.”
She ended her post on an upbeat note: “Let’s go, bitches.” And in July, she released “Sailor Song,” a muscular folk track that works as well in an arena as it does around a campfire. It proved to be effective on TikTok as well: Users were soon soundtracking tens of thousands of videos with at least three different snippets of the single.
Streams of “Sailor Song” shot up. And on October 8th, Perez announced a new label home: Island Records.
Major labels and distribution companies were once distinct entities with different ways of doing business. In today’s music industry, however, “distributors are starting to look like labels, and labels are starting to look like distributors,” says entertainment attorney David Fritz.
Each of the major label groups has its own distribution arm: Sony relies on The Orchard, Universal leans on Virgin, Warner has ADA. Confusingly, at varying points in the last five years, many of the frontline labels have launched distribution offerings too, whether that’s Republic (Imperial), 300 (Sparta), Alamo (which is affiliated with both Santa Anna and another distribution company, Foundation), or Interscope. Sony also has AWAL, which focuses more on nurturing individual artists, whereas The Orchard usually looks to sign and support labels. These companies are all in competition with each other — and often with the various frontline labels as well.
For Kirk Harding, a veteran artist manager and co-owner of the Bad Habit label, the meaning of all this activity is clear. “Everyone knows what the future is,” he says. “The major labels are going to be distribution companies with really big catalogs.”
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This would have been hard to fathom just five years ago. “It’s a fundamental change in how we’re operating,” acknowledges one major label A&R executive.
Frontline major label deals typically come with budgets — for recording, marketing and more — along with access to teams of people who can theoretically help artists find new songwriting partners, polish their TikTok clips and find money to support a tour. Since the label invests resources and services in the artists, it takes a significant chunk of the money that they earn, as well as rights to the songs they make.
Distribution deals are often the polar opposite. They typically come with far less money up front, few, if any, services, and significantly shorter terms. Since the company offering the deal doesn’t commit much, it doesn’t take much.
The frontline major labels were historically opposed to offering distribution agreements precisely because they tend to be short-term deals where the majority of the money made goes to the artist. That severely limits the upside for the record companies, which through the decades built their multi-billion-dollar valuations via long-term agreements — often five albums or more — in which they obtained artists’ recordings in perpetuity. Each major label group maintained a distribution arm for acts that insisted on a different arrangement, or for independent labels that needed help to get to market, but the frontline labels almost always signed the stars, and were thus seen as the real engines of growth.
Now, thanks to streaming, social media and advances in music production technology, artists can record songs, distribute them and amass fans on their own, meaning they have the luxury of turning down unappealing deals. And it turns out that, given the choice, many artists want to maintain flexibility — and make the majority of the money from their art. “Every artist we talk to is asking for a distro situation,” the A&R says.
This puts major labels in a bind. The long duration of traditional recording agreements allowed them to build up massive catalogs. This in turn ensured they had leverage in negotiations with streaming platforms — and protected them as catalog listening grew in the streaming era. The rise of short-term distribution deals, then, seems likely to erode the size of their catalogs over time even quicker than 35-year termination rights, meaning major labels are effectively mortgaging their future for short-term gains.
But like politicians looking to win re-election, they may feel they have no other choice. Even executives who believe distribution deals don’t make sense for them say they’re now feeling pressured to offer them anyway. “Majors have had to adapt and start offering different types of agreements just to even be in the ring on some of these potential signings,” says Gandhar Savur, a music lawyer.
Not only that, but the major labels have been losing market share to an array of new digital distributors that undercut them by allowing artists to upload songs to streaming platforms for a negligible fee or small percentage of royalties. This forces the majors to play defense. “They see some indie artists that come out of distribution systems and think, ‘I want that too,’” says Joie Manda, a former major label executive who launched Encore Recordings in 2021.
Offering distribution deals isn’t just about playing defense, though. They can help the majors limit risk by signing artists earlier, when they have smaller fan bases, which makes deals cheaper. Artists who do well and need additional support can later be “upstreamed” to a more traditional frontline arrangement. (And if the majors want to sign a viral act that lucked into one big song but has little other music of promise, a distribution deal may be the best way to do that.)
For artists, all the major label forays into distribution mean they potentially have a lot of different options at their disposal. “Artists want choices; they want the option for high service or low service, long term or short term,” says Mike Caren, founder of Artist Partner Group. “The choices are out there, and some companies want to provide all the choices under a single banner.”
Making the right choice remains a challenge, however.
A distribution deal “is not a label deal,” Harding emphasizes — even if it’s with a label. “All you can expect them to do is distribute. If you want them to do more, you have to pay more.”
Young artists in particular may not understand these distinctions, or know which option is better for them. Caren cautions that distribution agreements “can become traps where confusing pitches lead to false promises of short term with high service,” he says, adding, “This can be an unsustainable and dangerous territory that may lead to a lot of frustrated artists.”
Distribution offers will often come with one advance to cover all of an artist’s needs, according to Matt Buser, a music lawyer. “It forces artists to budget out all these different buckets of money,” he explains. “It gives them a lot of autonomy. But if you don’t know what you’re doing, and you blow all the money, and you have to ask for more, the record company gets more rights, or a longer deal, or something in exchange.”
It’s not uncommon for artists to be messaged distribution agreements via Instagram the moment they start to show growth — some companies don’t even pretend to want to meet the acts they sign. There are distributors who “play moneyball where they send very low-risk, low-effort offers to kids at scale,” says Eric Parker, who manages the rising U.K. act Myles Smith, among others. “I’ve seen one distributor send the exact same agreement to over 10 different kids.”
Parker calls this approach “race to the bottom A&R-ing in the age of data analytics.” It’s like using artists as lottery tickets — buy as many as possible as cheaply as possible, and pray one gets lucky.
Manda also believes some artists “are not getting the right guidance” when they’re evaluating different offers from labels and distributors. “Artists need to spend time with, and talk with, the people they might partner with,” he says.
He has a dim view of the major labels’ decision to throw themselves headlong into distribution. The majors “need to lean more into their superpower, which is signing, developing and breaking superstars over the long term,” Manda says. It’s notable that, even as the majors expand their distribution webs, most of the recent breakout artists this year — Sabrina Carpenter, Chappell Roan, Benson Boone, Teddy Swims — have come via traditional label deals.
Despite this, the major label scramble to get artists into distribution deals continues. “Everyone is competing now in the space of, ‘It’s no longer wait and see what this becomes — stick it into distribution,’” says one senior executive. “Every artist has two or three distro offers after one video.”
The three major label groups have been in talks with the big music streaming services to find a way to get them to remove recordings with AI-generated vocals created to sound like popular artists, Billboard has learned. The idea under discussion with Spotify, Apple Music and Amazon Music would operate much like the one laid out by the Digital Millennium Copyright Act but would cite violations of rights of publicity, rather than copyright, according to sources at all three majors. Unlike the DMCA, however, this arrangement appears to be voluntary.
The 1998 DMCA gives online services that use, store or transmit copyrighted works a “safe harbor” from secondary liability for copyright infringement as long as they abide by a notice-and-takedown system that allows rightsholders to ask them to remove copyrighted content. That law would not apply to most AI-generated soundalike tracks because they do not infringe protected elements of copyrighted recordings or compositions but rather a trademark or a right of publicity, the protection celebrities may be able to receive to protect their names and likenesses from unauthorized commercial exploitation.
Songs that imitate the voices of big-name talent have become a trend over the past month, reaching widespread attention in mid-April when the track “Heart on My Sleeve,” which apparently used AI to mimic the style and tone of vocals by Drake and The Weeknd, was uploaded to streaming services and then swiftly removed. (The song did not credit those artists, although they were referred to in social media posts about it.)
Citing rights of publicity can be more complicated than copyright, because they are matters of state law in the U.S., backed by limited legal precedent. Rights vary by state, protections for deceased artists vary even more widely, and the use of soundalike vocals for creative purposes may in some cases be protected as free speech. Further complicating matters, these rights almost always belong to artists, not labels, which would presumably file notices on their behalf with authorization. Right now, however, this is the most obvious legal argument with which to keep AI-generated soundalikes off major streaming platforms.
In an April 26 earnings call, UMG CEO and chairman Lucian Grainge seemed to signal this approach to investors. “The recent explosive development in generative AI will… create rights issues with respect to existing copyright law, in the US and other countries, as well as laws governing trademark, name and likeness, voice impersonation, and right of publicity,” he said. “Further, we have provisions in our commercial contracts that provide additional protections.” It is not clear if takedowns issued by the majors would rely on these provisions, state law, goodwill, or some combination.
Some executives have raised concerns that AI soundalikes that imitate the voices of popular artists could result in consumer confusion. Still, a few artists like Grimes and Holly Herndon have embraced the technology, training their own AI voice models and making them available to the public.
Meanwhile, companies like Uberduck, Supertone, Lingyin Engine, and Covers.ai are marketing models with which to replicate voices. Covers.ai, which launched last week, has said that it received over 100,000 sign-ups in anticipation. Tencent Music Entertainment executives announced in November that with the company’s Lingyin Engine they had created and released over 1,000 songs containing synthetic AI voices already, one of which amassed 100 million streams.
This stance taken by the leading streaming services counters a recent announcement from the blockchain-based music platform Audius, which announced that artists can now “opt-in” to allow AI-generated works on their artist page. To organize this new music and avoid confusion, Audius would create a separate tab on the artists’ page especially for user-generated content.
Representatives for Universal, Sony, Warner, Spotify, Apple Music and Amazon Music did not respond to requests for comment.
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