Music Industry is moving from middle-men to ‘disintermediation’

New technology suggests that current music business models should be more artist-centric instead of including unnecessary middlemen.

from ArtistVerified via Medium

Disintermediation is a really long word for a really simple but important concept. Quite simply, it means removing an unnecessary middle party from a transaction. In the music space, this concept has been relevant since the inception of digital music downloading and streaming 25-plus years ago. The first intermediaries to disappear as a result of digital music downloading were the record store and one-stop distribution channel. Since then, record labels have managed to prolong their stranglehold on the funnel of music fans as an intermediary through a series of self-preservational deals with Apple and Spotify. But there is a new movement toward a more meaningful version of disintermediation led by new technology and a move toward artist-centric monetization models.

Collateral Damage

The bad news is that lots of people are losing their jobs at music companies whose antiquated models are being forced to be deconstructed by unhappy investors and stock-holders. Disruption may finally be closing in on the three major powers that have dominated the music industry for years as well as the larger streaming platforms. The people whose jobs are being replaced as a result are going to have a very difficult time staying in an industry that is simply too top-heavy and has too much role-redundancy.

Progress through technology

Platforms that prioritize direct artist-to-fan connection are popping up en masse as a potential solution to the lost revenue opportunity that exists in superfan monetization. Every other industry report in the past 12–18 months has involved the potential incremental revenue that exists if the superfan can be optimized with most estimates being in the $4B range. Two of the three major label conglomerates have announced the intention to create or invest in a superfan platform.

The question for major-label artists

An artist on a major label will now be asked to use that label’s superfan platform which most certainly will involve the label taking its percentage of the superfan ancillary revenue. Further, the labels will require artists to share their fan data with the label and all of its other artists. Essentially, this is a way for labels to actively participate in just about every artist revenue stream (if they aren’t already). Artists signed to or signing to major labels will have to decide if they have a bigger opportunity engaging and monetizing their superfans (and other fans who may be not quite as “super”, but of which there are many many more) independently of the label. Or perhaps selling those rights upfront to the label is the right answer for them. Every artist’s path is unique.

The question for the major labels

Does technology-powered disintermediation mean record labels are going to be disintermediated? So far, the major labels are scrambling to do what they can to remain in relative control of what music becomes popular (thus perpetuating their existence). Surely, the 3 majors will likely always exist. However, we are now seeing independent artists’ percentage share of recorded music as well as touring revenue increasing year-over-year. Spotify recently reported that in 2023, nearly half of the revenue generated on their platform globally was from independent artists. The majors have to stay ahead of the technology curve in order to maintain their importance. If they’re just a bank with high interest rates, many artists will make a business decision to remain independent and in control of their career trajectory.

The streaming scenario

It’s a foregone conclusion that like the major label models of the past, the revenue models of the streaming services are heading for an impending collision with further technological advancement. The revenue and artist payout model that Spotify invented and most competing platforms adopted by necessity devalued recorded music, and artists are starting to explore other options. Whether it’s releasing music through blockchain tokenization or exclusive streaming on more artist-friendly platforms such as Deezer, more options for releasing and monetizing recorded music are emerging.

Moving forward

True disintermediation means a third party is removed from a transaction. It will take time before this can be achieved, if ever. At least reducing the number and layers of intermediaries is an improvement — if what we are seeing now in music is the replacement of multiple platforms with one or two much better platform options for the artist and fan, then we are still making progress.

However, artists understanding the value of owning the relationship with their fans and being able to engage on their terms is imperative. Fans want simple. Fans want direct. Fans want consistent. Fans want authentic and transparent. And fans want to support their favorite artists so they can continue to focus their time and energy on making music. Algorithms, filters, merch clips, label-owned playlists, fan silos, gatekeepers and walled-gardens are all just getting in the way.

Launching later this year, ArtistVerified is a platform which will offer artists and fans the ability to connect at a very basic, yet rewarding and sustainable level without interference from social media filters, ridiculous ads and self-serving algorithms. One app for fans to be engaged consistently and completely by all of their favorite artists.