State of the independent music economy: Fragmentation AND consolidation

MIDiA is excited to announce our latest report “State of the independent music economy: Fragmentation AND consolidation”. It represents the most extensive piece of research we have ever done. Through a combination of our annual Independent Label and Distributor Survey and an exhaustive (and exhausting) programme of desk research, MIDiA collected company level revenue data totalling $10.6 billion of recorded music revenue. When combined with major label financials and data collected from artist distribution platforms, this means that MIDiA’s total recorded music market dataset has 93% of all global revenues accounted for, at company level. We are confident there has never been such comprehensive research done of the sector, until now!

The full report is immediately available to MIDiA clients and has also been sent to all labels and distributors that took part in our survey. Here are some highlights:

Non-major labels are firmly streaming-first, with it accounting for the majority of their income and Spotify being more than half of it. However, they also feel streaming has its challenges - 87% of non-major labels feel it is becoming more difficult to get artists to cut through and 78% find it difficult to retain fan interest. Little wonder then that non-major labels spent $1.5 billion on marketing in 2023, with smaller labels (<1m revenue) generating the largest share of the spending.

Meanwhile, most feel that even when a release cuts through, it is becoming more difficult than ever to retain fan interest. Critically short attention spans are not unique to streaming, but its current configuration intensifies this dynamic. Little wonder then that the majority of non-major labels and distributors are spending more on marketing than they were two years prior. The sad reality is that marketing alone is not enough. In fact, if everyone is doing it, then it simply exacerbates the problem. To quote Syndrome from The Incredibles “ when everyone’s super ,  no-one will be”.

All of which points to why non-majors are looking for a new lane in which they can operate. Price increases, super-premium (and perhaps even lower-priced tiers and bundles) will help squeeze some additional value out of the market. But, when coupled with the laundry list of streaming’s shortcomings (fractionalised royalties, long-tail challenges, rise of AI and fraud, royalty thresholds, the fandom void, etc.) the case for a new, complementary model is clear. Nearly three quarters of non-majors think it is time for a new model. They are not simply ready for bifurcation, they actively want it to happen.

Despite all of the challenges they face, non-majors (labels and artists direct i.e., self-releasing artists) are growing their share of the total market, on both an ownership and a distribution basis. Non-majors, on a distribution basis, represented 34.2% of the total recorded music market in 2023, but on an ownership basis this jumped to 46.7%, with revenues of $14.3 billion. Non-major revenue distributed by the majors was $3.8 billion in 2023. The major labels are major players (pun intended) in the non-major market. They have successfully learned how to turn growing non-major share to their advantage.

While the global figures are compelling in their own right, things get really interesting at a regional level, with non-major share particularly high in Asia Pacific and Rest of World (MENA, sub-Saharan Africa, etc). In these regions, streaming has helped unlock vast new audiences and the largest non-major labels there often consider themselves local majors rather than independents. Hence our use of the term ‘non-majors’. 

Many will be familiar with some of these labels (e.g., HYBE, JYP, Avex) yet there is a long list of big labels that rarely register on Western radars but are bigger than most Western indies. Examples include Starship Entertainment (South Korea), GMM Grammy (Thailand), EE-Media (China), and Star Music (the Philippines). 

The rise of the Global South will reshape the global music industry for the remainder of the decade and with their low market share in these regions, it is no surprise that bigger labels are busy acquiring or buying into the biggest labels they can e.g., SMG - Som Livre (Brazil), WMG - Rotana (Saudi Arabia), UMG - Mavin Global (Nigeria), and Believe Doğan Music Company (Turkey).

One of the most encouraging features of the non-major label sector is the evenly distributed nature of revenue across labels of different sizes. Just as in the wider music business, a superstar economy operates in the non-label sector, with less than half a percent of the nearly 13,000 labels representing a third of revenues. But the big difference is the health of the long tail. In streaming, the long tail of artists account for less than five percent of revenues. But non-major labels with <$1 million annual revenue account for a similar share of revenue as the biggest labels.

Fragmentation AND consolidation

The global recorded music market is more diverse, fragmented, international, and regional than it has ever been. Streaming and social media have broken down many traditional barriers, but arguably the most important change was access. Access to audiences and access to global markets specifically. Nearly thirteen thousand labels and seven million artists can now reach listeners at scale in any country in the world – in theory at least. This has underpinned the growth of thriving independent ecosystems of labels, distributors, artists and vendors. As much as company owners and executives may fret, and rightly so, about streaming’s unintended consequences, these are better problems to face than not being able to get your music to market. 

It has resulted in a market that is characterised by both fragmentation AND consolidation. These opposing forces are shaping today’s market and will do so in the coming years. Streaming will continue to fragment audiences while bigger record labels and distributors will continue to acquire smaller ones. The well-balanced spread of revenues between the very biggest and very smallest labels indicates that these two forces have arrived at some form of equilibrium.