Indie Music

3 Factors Shaping The Music Industry In 2018

Screenshot 2018-01-15 16.56.26With 2017 already having been a busy and reformative year for the music industry, 2018 looks to be headed in a similar direction. Here we visit three important factors which will have a major effect on the industry in the coming year.


Guest post from the Royalty Exchange blog

Last year was a transformative one for both Royalty Exchange and the music business at large. We’re not big on milestone-type posts, but allow us to share a few internal numbers for the sake of illuminating what we think are some broader, macro-industry trends we all should be following in the year ahead.

In 2017, Royalty Exchange saw quantum leaps forward in virtually every performance metric we track. We saw a nearly 100% increase in the number of auctions held (144) and an 84% increase in average auctions per month (12). In total, we helped artists using our platform raise over $8.8 million dollars, nearly 110% more than the year prior.

That’s new money coming into the music industry being reinvested into creative community. After more than a decade of digital/hardware companies pulling money out of the music community, that’s got to be a refreshing change of pace.

But we can’t take all the credit for these results, as much as we’d like to. The fact is that these results are just as much a factor of broader industry trends just now starting to align. 

Here are the main ones we think play the biggest role…

New Industry. New Rules.

The music industry has changed. Nearly every rule has been broken or reinvented. Fans consume music differently, and as a result artists get paid differently.

But if the way fans pay for music has changed, it only stands to reason that the rules dictating how songwriters make a living should change as well.

First, that means properly recognizing songwriters for their contributions to the music we all love. Songwriting credits shouldn't be a secret. Over 70% of songwriters' income is regulated in some fashion by a government entity. The better these regulators understand the crucial role songwriters play, the better informed their rulings will be. 

Second is the need to end any artificial restrictions on how songwriters choose to earn a living. The Music Modernization Act is a great first step to address the regulatory challenges. Equally important is to update the conventional wisdom around “acceptable” ways to finance a career.

Twenty years ago it was considered “selling out” for artists to license their music for a TV commercial. Now it’s not only an accepted revenue-generating move, but it’s considered a smart marketing/discovery move.

The same is becoming true to the concept of selling royalties. The old adage of “never sell royalties” is a rule for a different age… when selling royalties meant giving up all your rights and all control.

Today’s deals are more flexible, allowing artists to sell only a portion of their royalty income, while retaining all their copyrights, all their control, and all the future income from what they don’t sell. This gives songwriters the options they need using a strategy that public companies have used for decades.

Catalog Demand

Music industry trade “bible” Billboard said it best: “The songwriter catalog market is booming.”

While large publishing catalogs sell for multi-million dollar deals, that demand is expanding into the market for individual songwriters. Although the Billboard story focuses on music publishers doing the buying, Royalty Exchange has seen a similar increase of interest from private investors.

It’s a seller’s market, which affects the closing multiple (or how much a catalog sells for compared to its last 12 months earnings). On Royalty Exchange, we saw the average closing multiple increase about 20% over the course of last year.

To understand why there’s this increased demand for music royalties, you need to understand the situation in the broader investment landscape. Bonds yield remains at an all-time low, and in some cases returning negative yield (meaning investors get back LESS than what they paid). And while the stock market is soaring, that just means buying stocks today is ridiculously expensive.

Music royalties meanwhile deliver consistent returns, are relatively stable, and can offer far better returns (depending on the price paid).

Music Bull Market

1After over a decade of getting pummeled through piracy and a clunky transition to digital, the music business is finally rebounding.

It’s too early in the year to report industry-wide financial numbers. but consumption patterns are in, and they’re encouraging. According to Nielsen, in the US alone:

  • Total music consumption increased 12.5%

  • Audio/Video On Demand Streaming increased 43%

  • Audio-only On Demand Streams increased 58.7%

The most recent financial performance reported by the major labels is also very positive. Sony Music reported an 8.2% increase in recorded music revenues, driven by a 37.3% increase in streaming revenues, over the same timeframe of 2016.

Warner Music Group had similar results, with recorded music revenues increasing over 10%, with streaming revenues increasing 48%. Universal Music Group recorded music revenues jumped over 11%, with streaming up over 23%.

Financial analysts forecast strong growth going forward as well. Goldman Sachs famously predicted streaming revenues will jump 500% by 2030. Meanwhile financial analysts at Raymond James points to a fivefold increase in paid subscription accounts by 2023.

Add to all this the progress being made in licensing music for massive platforms like Facebook, Spotify’s impending IPO, and all the great new music to be released in the months ahead, and 2018 is shaping up to be a pretty transformative year for the music business as a whole.

Whether you’re an artist, rightsholder, investor, or a company or organization that support any of the above… we look forward to working with you in the new year.

Share on:


  1. Bigtime…All The Way From 5th Ward,Texas…This Is Breaking News To Read! Thanks For The Post. -art SMITH

Comments are closed.