Why the creator tools and services market is bigger than you think (and it is not AI)

One of the biggest stories of the past few years is the rise of self-releasing artists, who number 6.4 million in 2022, a 16.8% growth from 2021. Everyone wants a piece of that growth, which is part of the reason why distributors like Stem and TuneCore increasingly offer much more than distribution, major record labels are opening (or acquiring) their own label service operations, and there is a growing roster of what Music Business Worldwide has termed “inside-out majors”, like the recently-launched Gamma.

But the 6.4 million artists in this segment — which MIDiA refers to as “artists direct” — are far from a unified group, and the music industry still does not know enough about their varied aspirations, challenges, and needs. The assumption is often that most of these creators are aspiring to be career musicians. In reality, this is far from true. But as explored in MIDiA’s new report, ‘Artists direct | Focus on passion, not professionalism’, that might actually be a good thing for certain parts of the industry.

A third of artists direct do not expect a music career

According to MIDiA’s 2023 Creator Survey, the two biggest subsegments of the artists direct sector are nearly equal in size: 38% are aspiring for a full-time music career, while 36% are passionate about music, but not expecting to go full time. The latter is not the target for record labels, which are looking to support career artists. But although they may not expect to go full time, these “passionate enthusiasts” still want to continue making music and being heard. 

Enthusiasts spend more than career aspirants

There is a big difference between willingness and ability to spend. Both passionate enthusiasts and career aspirants have the willingness to spend on music making and promotion tools. But because they do not rely on music for income, passionate enthusiasts have more of an ability to spend than career aspirants. So, despite earning much less, these creators spend 8% more annually on music-making tools, like sound content, music production plugins, and hardware / instruments. Because they still want to be heard, the majority also use marketing and promotion tools. The takeaway is that passionate enthusiasts are a more powerful revenue generator for certain parts of the creator tools industry than career seekers — or at least, the two groups are relatively on par.

Focus on spending, not earnings

To assess the addressable opportunity of each segment, MIDiA estimated the amount of streaming income generated by each and then the willingness and ability to allocate a portion of this revenue on growth tools, similar to Spotify’s Discover Weekly. Under the model, the passionate enthusiasts segment could generate $88 million annually, while career seekers could generate $96 million.

With the barrier to entry for making and releasing music nearly on the floor (okay, this is where AI comes in), the former opportunity may still grow. Many more consumers will be empowered to pursue music as a passion — something that is more than a hobby, but less than a career. The traditional view of the artists direct segment solely as a funnel for recorded music is becoming outdated. Instead, their strongest revenue potential is becoming what they will spend rather than what they will earn. This is an opportunity that majors, indies and distribution platforms alike will need to get their head around, because the creator tools marketplace is already doing so.

MIDiA's new report, ‘Artists direct | Focus on passion, not professionalism’, is available for clients here. If you are not yet a MIDiA client and would like to find out how to access this report, please email stephen@midiaresearch.com.