Ok, so Spotify recently made their stance clear in the music industry. They want all the way in. Meaning they will now be signing direct licensing deals with independent artists. This move will put them in direct confrontation with the labels that they have needed up to this point. This is a bold move from a streaming company who has yet to make a profit, but a necessary one.

 

The company went public early April and were valued at just under $30 Billion dollars. With a valuation like that the world (and Spotify investors) are wondering how the Tech giant would bring in profit. Signing talent will not solve all their problems, but it certainly is a step in the right direction. However, the road to profitability goes through the pockets of the BIG 3. Universal, Sony, and Warner as it stands now, are the controlling powers of the music industry. But the tides have been shifting for some time now. The music industry hadn’t seen a profit in years until streaming saved the day in 2017. Now the very same entities that saved their bottom lines look to completely rip it out from underneath them.

 

Here are some immediate effects the industry can expect to feel as Spotify makes its move.

 

Retaliation against Spotify

Of course, the BIG three will not go down without a fight. Now let’s get this straight, I don’t think the labels will disappear. They have too many resources and too large a catalogs for that. But there hold on the industry will certainly loosen. They will not rule as absolutely as they currently do. But you can bet that they want to keep things how they are. That is why they will surely fight back.

 

Using their current acts as leverage

 

This is the most obvious tactic and will surely come into play early, if not already behind the scenes. The BIG three house the top artists on the planet. Drake, Taylor Swift, Kendrick Lamar, Ed Sheeran, and Adele all fall under one of these three labels, one way or another. For instance, Drake is signed to Cash Money/ Young Money which is part of Universal, while Lamar is under Top Dog and Interscope which is also apart of Universal. As you can imagine these top names account for the majority of the streams Spotify (or any streaming service) receive. With just a word from their labels, these artists music could be removed from the platform.

 

However, as I said before the industry hadn’t seen a profit for some time until streaming delivered them. So taking their artist off the service would hurt their bottom lines. Which brings me to the next logical retaliation for the BIG three.

 

Building their own streaming platforms.

Similar to what we’re seeing with Disney, who are building their own “Netflix” style streaming service to host their visual content. Record labels will begin to build their own platforms for music. In this sense, Tidal was ahead of the curve. Though the service isn’t making a ton of noise right now, Jay-Z saw where things were headed and pulled much of his catalog from the other services. This may have reduced his streams but the overall impact of his music has continued to be earth moving. Nothing is stopping a powerhouse like Universal from doing something similar.

Copycats

When you’re a pioneer organization like Spotify and have seen high levels of success, expect other companies to copy you. We’ve already seen examples of that by the sheer number of streaming services available today. But there is a company who is doing this already.

 

Apple Music

Apple Music is chasing down Spotify as far as paid subscribers go. In May the company launched its own publishing division headed by a former Itunes executive. Apple has always been angling for this type of move. They signed Drake to an exclusive release deal with Views back in 2016 and indie act Chance the Rapper. Universal put a ban on their artist from signing these kinds of deals after the Frank Ocean Endless – Blonde fiasco, but they can’t stop indies.

 

Apple has the resources to fund projects for emerging stars and pay them as well. Maybe more than Spotify at the moment. This will prove to be an exciting time for artists as these companies find all kinds of creative ways to get them to sign on the dotted line.

 

Other hybrid tech/media companies are on the way

 

You better believe there are more coming. I recently conducted an interview with an emerging company with big plans of disrupting the market. But that’s for another article. Original content is ruling. The general public is constantly looking for something new to get hooked on for a couple of months. Tech companies will begin to produce movies, TV shows and start labels as well as being a social platform. The future is very exciting for content creators!

 

More indie acts

Making money without a label will be normal. A surge of independent musicians will appear.  These new acts will have benefits with signing licensing deals with Spotify, like appearing on their popular playlist. Since streaming is set to take over as the primary way music is consumed these acts have the potential to be juggernauts.

 

Tech companies will have talent scouts and hold showcases

 

Spotify and other tech companies will have their own A&R’s, as well as big data, to aid them in finding untapped talent. We will see these companies holding their own small showcases as music industry execs begin to switch sides. This will only provide more opportunities for artists to be discovered

 

Artists will begin to view independence as the better option

 

In the end, when an artist is being approached by labels with 6-7 figure deals more will begin to decline. Artists are getting smarter. They know how to get attention and what sales. Pair that with an artist who actually has talent and you have an individual capable of anything. The world craves stars they don’t care what company they are associated with. It actually makes for a better story for them to remain indie.  

Conclusion

Labels waited too long to adapt with the emerging tech. They wanted to fight the wave and they lost. Now in their wake will emerge a new BIG three. Spotify, Apple, and YouTube will replace them as the new music industry begins to solidify. We’ve seen top execs like Lyor Cohen take his talents to Youtube, I expect more personnel changes are to come when the inevitable becomes obvious.

 

The music industry is in a transitioning phase. Not only is power shifting, but laws that regulated the industry are finally catching up with the times. As the music industry adapts to the new age we will see enormous changes in how it is consumed, how artists are paid, and who is paying them.

 

What do you think? What are some immediate effects the music industry will feel thanks to Spotify and their declaration of war? Leave a comment below.