Author | Wan Yi Edit | Fan Zhihui
In the continuous wave of layoffs in music companies, in addition to the giants such as the three major records, there are also "new record companies" that have been quite powerful, such as Utopia, Downtown, gamma and so on. Due to their strong capital background and novel gameplay gimmicks, some of them also threatened to become "alternatives to the three major records".
But it's clear that some of these new labels seem to be running out of hold until this day. For example, Utopia, after announcing a 20% layoff, Utopia fell into a series of asset sales and disputes, which is embarrassing.
Now, it may be time to look at these "new record labels". Are they revolutionary waves, or are they just a fleeting splash?
Where are these companies "new"?
In the process of industrial transformation, it often provides opportunities for latecomers to rise. So, where are these new record labels "new"?
The first is the income distribution model. In recent years, with the rise of independent music, the traditional income distribution model has been repeatedly questioned.
According to the practice of traditional record companies, after signing a contract with the company, an artist can exchange a large amount of prepayment and packaging and promotion services from the record company, but the price is to hand over his mastering rights (that is, the recording copyright). Having mastering rights means that any form of recording distribution must be authorized by the master owner, so that the master owner can receive a lot of profits.
The prepayment received by the artist is more like a loan, and this money will be deducted from the musician's already small royalty share, and the artist cannot get the royalty share until the prepayment is paid. In addition, musicians also have to bear many other expenses according to the contract, such as touring, packaging, marketing, etc. During the epidemic, due to the live performance of British and American musicians being cut, streaming media did not get a share, causing many protests, and the three major did not sit idly by, erasing the outstanding arrears of artists to a certain extent.
In this regard, new record companies generally adopt the method of not occupying music copyrights and provide musicians with long-term record company services, including distribution, copyright agency, marketing, etc.
For example, gamma, the company's business takes content creation, content distribution and artist-centric commercial development as the three pillars, and expands the income of musicians by developing music IP and peripherals, so that artists have more control over their works in exchange for long-term cooperation.
Although gamma only officially debuted in March this year, it acquired the distribution company Vydia last year, reached distribution agreements with Snoop Dogg, Usher, Rick Ross and others, and established a joint venture with Snoop Dogg to release the music library of the well-known hip-hop label Death Row Records.
Founded by former global creative director Larry Jackson of Apple Music and former CFO of Interscope Records Ike Youssef, gamma actively explores the development of podcast and movie content for musicians, and builds momentum for the company through creative marketing campaigns, making full use of the founder's creative capabilities as a former global creative director of Apple.
Illustrated by Larry Jackson
If gamma is a record label alternative that is more suitable for musicians above the waist, then United Masters, an independent distribution platform, represents the "public lover" for all musicians.
Because royalties can be managed on just one app, United Masters also calls itself "the record label in your pocket." In addition to convenient royalty management, United Masters also provides users with refined services for different stages of independent musicians' growth, corresponding to different prices and sharing models, but does not own the copyright of the musicians.
Secondly, there are many music technology companies trying to replace traditional record companies with proud technology.
Kobalt CEO Laurent Hubert threatened to be the three "only alternatives" in an interview last year: "We know that the market is very broad, there are big record companies that have established themselves, and there are some excellent independent music companies with some voice. But there really is no one with the scale, the resources and the brand like Kobaalt that can be a real substitute."
Kobalt, 23, is indeed qualified to say this, and as a platform that promotes royalty transparency and real-time payments, Kobalt is quite good in the industry. Kobalt "changed the rules by which the music industry uses data and saved the music industry," according to Wired, and Fast Company listed Kobalt as one of the most innovative.
In the past, the collection of royalties for a song was often very cumbersome, and just digital royalties involved not only streaming platforms, but also Internet radio stations, social media platforms, and different countries and platforms meant different royalty structures and collection methods. Moreover, in the past, the settlement cycle was generally long, and the short period was at least half a year. In order to solve this pain point, Kobalt vigorously developed its own data processing capabilities, launched the first real-time royalty settlement platform, and the commission is only 7.5%, which is much lower than most labels and copyright agents.
Also flaunting transparency is Utopia Music.
In the past two years, Utopia has gone on a buying spree of 15 companies and expanded at an impressive pace. At that time, Utopia also compared himself to Google, "Google makes all web data meaningful, and Utopia makes all music data meaningful."
However, what has made it frequently in the headlines in the past six months is not good news. Following Roberto Neri, an executive recruited from Downtown as COO in 2021, who jumped to Belive 62 days after joining the company, Ulf Zick, an executive who is now recruited as a chief marketing officer from Universal Music, also chose to return to his old club after 6 months.
Mattias Hjelmstedt, founder of Utopia Music
Less than a month after Ulf Zick left, in December, Utopia began to show a series of problems, first announcing a 20% layoff, then selling assets, selling its previously acquired data platform ROSTER back to its founders Mark Williamson and Adam Watson, and selling its copyright agency, Sentric Music Group, to Believe. Recently, Utopia was also sued by SourceAudio, a copyright management platform it previously planned to acquire, for defaulting on payments.
Finally, it is not forgetting the Web3-based music platform, NFT is seen as a new initiative to solve royalty transparency when blockchain is on fire.
"I heard that 20 years ago, in some big record companies, they would arbitrarily modify the income of artist royalties," Lee Parsons, CEO of independent distribution company Ditto Music, said in an interview. ”
Caption: Lee Parsons
To address royalty transparency, Lee Parsons also raised funds to launch Web3 music platform Opulous. Relying on its own music network and investing in people's capital, Outstanding wants to create a platform that connects Web 2.0 and Web 3.0, so that musicians can easily issue NFTs, use blockchain technology to create an open and transparent music player, remove the participation of intermediaries, so that investors and fans can participate in the investment or support of musicians' works, which not only expands the income of musicians, but also creates a closer relationship between musicians and fans.
Also admitted was Utopia Music. In 2020, Utopia Music's legally independent music data blockchain platform Utopia Genesis Foundation (UGF) formed a consortium to issue the cryptocurrency token UOP in December 2020, raising $2 million in 48 hours.
According to officials, these tokens can be used by users to buy part of the rights to music, for musicians to use to buy music consumption data from leading industries, or for royalty collection companies to pay artists as royalties. However, with the cryptocurrency market cooling, these tokens are now worthless. UGF's website has been shut down and its Twitter account has not been updated since January 2022.
In addition, Snoop Dogg also threatened to make his acquired hip-hop label Death Row the "No. 1 record label in the metaverse", but now there is no movement.
In this way, these new record companies have indeed solved some of the pain points of the music industry in terms of revenue distribution and royalty collection, but there are also speculators who have become pigs blown up on the wind, and when the macro environment is not good, many problems are exposed.
Can they really challenge the three major records?
Looking back at the new types of record companies that have emerged in recent years, the biggest feature is that they do not own the copyright of artists. This is also the river between old and new record labels.
Many of them also have strong capital backgrounds. Gamma, for example, has received investments from Apple, Hollywood upstart A24 and Eldridge (a Billboard shareholder), and according to Bloomberg, its gamma has $1 billion available capital.
Before its transformation, Downtown Music was one of the most successful independent rights agencies in the world, representing copyrights such as Beyoncé's "Halo", Maroon 5's "Moves Like Jagger", Sam Smith's "Stay With Me" and more. Before selling its library in 2021, it is expected to reach annual revenue of $600 million. However, since the interview in 2021, Downtown Music has not disclosed its annual revenue.
As for Utopia, which can complete 15 acquisitions in two years, of course, it is also full of gold. Utopia Music successfully raised more than €100 million in funding in its five years of existence, and conducted a Series C round in the second half of 2022, bringing the company's valuation to €2.5 billion, MBW reported.
With the support of capital, the new record companies are not only more attractive to musicians in terms of income distribution, but also have a lot of money, and it seems that it is really possible to compete with the three major competitors.
But from the analysis of ideals and reality, can they really challenge the three majors?
In the short term, the two sides may form competition, such as Kobalt, whose annual net income exceeded $600 million in the second year of positive earnings; Or last year's annual revenue exceeded 800 million US dollars, maintaining a growth of more than 30%, and has become the top three agencies in the French and German markets in terms of local song share.
They seem promising, but it cannot be ignored that the new record companies that promise not to own the copyright are equivalent to giving up the biggest weapon of traditional record companies.
All three major records have a strong repertoire as a moat, which makes the gap between the two still huge and difficult to bridge. Even Warner Music, the third of the three, will have revenue of $5.9 billion in 2022, more than six times that of Belive. Not to mention the boss Universal Music, which generated more than $1 billion in streaming subscription revenue last year alone, and the total revenue has approached $11 billion, and it is still maintaining double-digit growth.
In terms of money and technology, the three major records are also not at a disadvantage. For example, the problem of too long a royalty settlement cycle seems to be a stubborn disease, but in 2019, when British and American musicians protested seriously, Sony Music launched a real-time settlement platform quite quickly, initially only for some artists in British and American countries.
It can be seen that some problems are not unsolvable, but they just do not feel necessary.
In terms of income distribution model, if necessary, the three major records can also learn from the new model. In fact, the Big Three are already doing this. For example, Sony Music acquired AWAL and took the lead in conditionally erasing the prepaid deduction; Universal Music, Tidal and Deezer explore new revenue distribution models for streaming media platforms, and explore more cooperative models with artists through its Interscope; Warner Music and SoundCloud are also exploring a musician-centric revenue distribution model.
Among them, Warner Music may be the most interested in the new trend of independent music among the three major. Warner Music has also said in recent years that it has made strategic adjustments and paid more attention to the A&R and operation of mid-waist artists.
As a result, the threat posed by emerging record labels seems modest in the long run. However, regardless of whether these new record companies succeed in shaking the status of the three major companies, they do form a more conducive to the benign development of independent music, and even to some extent, this atmosphere is now taking shape. Claiming to be an independent musician looks cooler than a record company artist, so much so that the big labels have to disguise themselves as independent labels.
Ditto Music CEO Lee Parsons cited some artists in the Philippines who feel embarrassed to work for a record label. So, when the record company released the song, they had to release it under a fake label name because they didn't want people to know that it was actually a big company.
Another example is Warner Music, "Warner Music has ADA (Alternative Distribution Alliance, independent music distribution department)", although it looks like an independent label, but it is actually Warner Music. Warner signed the artist under the ADA, and the artist can say that he is an independent musician. Warner Music is not for the good of the artist, but has to do it. ”
From the perspective of general trends, this has also prompted the three major labels to gradually adopt and explore more friendly cooperation methods for musicians.
epilogue
For creators, the diversification of recording services inevitably provides more options.
Tail musicians can complete the digital listing of their music works through independent distribution platforms, and if they have accumulated a certain number of fans, they can sign contracts with independent distribution companies for deeper cooperation. While enjoying more professional services, you can also retain your copyright and control over your works, and if you really need to develop international influence, it is not too late to consider international mainstream record companies.
Although it seems that any of these Houlang Music companies is not enough to shake the status of the three major companies, if they are viewed as a whole, it does provide a more favorable choice for independent musicians, and it also prompts the three to move closer to the new trend.
As Peter Ferdinand Drucker, a well-known management consultant, puts it, "The greatest danger in turbulent times is not the turmoil itself, but the logic of yesterday." The new record companies that have emerged one after another, at least partially, reveal new trends in the future music industry, which deserve the industry's thinking and attention.
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