In 2017 The Music Industry Generated $43 Billion But The Artist Only Accounted For 12% Of That Amount

According to a Citigroup report in the U.S., the music industry generated $43 billion in revenue in 2017, matching the prior peak in 2006. While business-to-business (B2B) revenues (Music Publishing and Licensing) and music ads (AM/FM, YouTube) are flattish, consumer outlays (Concerts, Subscriptions) are at all-time highs.

While consumer spending habits are undergoing profound changes, the current industry structure has remained relatively static. That is, record labels are still record labels. Music distributors — Apple, Pandora, Sirius, and Spotify — are just music distributors. And, concert promoters — like Live Nation and AEG — are still concert promoters.

Artists’ share of music revenues is small. In 2017, artists captured just 12% of music revenue with most of the value leakage driven by the costs of running a myriad of distribution platforms — AM/FM radio, satellite radio, Internet distributors — augmented by the costs (and profits) of the record labels.

The proportion captured by artists is, however, on the rise (it was just 7% of industry revenues in 2000). The bulk of the improvement is not driven by the growth in music subscription services. Rather, it’s driven by the strength in the concert business. Music labels act as intermediaries for subscription services (Apple, Spotify) but are largely excluded from the economics of the concert business. As such, growth in concert revenue is particularly helpful to artists.

With this backdrop, we think there are three ways the industry’s structure could evolve. First, we could see vertical integration. For example, concert promoters could merge with an existing distribution platform. Second, we could see horizontal integration. For example, existing distribution firms could consolidate. Third, we could see organic forms of vertical integration. That is, existing web-based distribution firms could organically morph into music labels (by targeting younger, less established artists). This would allow artists to capture more of music’s value while allowing Internet-based music distributors to capture profit pools currently earned by the music labels.

Here’s what Lupe Fiasco had to say about this; “Spotify is not your friend. They are just a necessary evil. Fight a little harder when your manager or lawyer tries to peer pressure you into accepting shit that feels wrong in your soul. 9 Times out of 10 your right AND they don’t have to sign their soul away to that shit, YOU DO! You are worth more than what they say you are. Also if they have a reputation for being dirty in the past THEY WILL BE DIRTY IN THE FUTURE! These dirty motherfuckers won’t change the behavior that got them where they are. They fuck with you now because you are on trend and fashionable once that #WAVEdies and the new hot young blood comes through the door your ass will be forgotten about and marginalized ESPECIALLY if you had little to nothing to do with the music you make! Work smarter & harder! 👍🏾 just a little advice…but you can do whatever the fuck you wanna do tho 🤷🏾‍♂️… IF YOU “UNITE YOUR EYES” THINGS WILL LOOK MUCH DIFFERENT!!! #LoveMusicButHateTheMusicBusiness

Spotify is not your friend. They are just a necessary evil. Fight a little harder when your manager or lawyer tries to peer pressure you into accepting shit that feels wrong in your soul. 9 Times out of 10 your right AND they don’t have to sign their soul away to that shit, YOU DO! You are worth more than what they say you are. Also if they have a reputation for being dirty in the past THEY WILL BE DIRTY IN THE FUTURE! These dirty motherfuckers won’t change the behavior that got them where they are. They fuck with you now because you are on trend and fashionable once that #WAVE dies and the new hot young blood comes through the door your ass will be forgotten about and marginalized ESPECIALLY if you had little to nothing to do with the music you make! Work smarter & harder! 👍🏾 just a little advice…but you can do whatever the fuck you wanna do tho 🤷🏾‍♂️… IF YOU “UNITE YOUR EYES” THINGS WILL LOOK MUCH DIFFERENT!!! #LoveMusicButHateTheMusicBusiness

A post shared by Lupe Fiasco (@lupefiasco) on