Who owns the stage? A look at music industry monopolies
Hello and welcome to the latest edition of The Counterbalance. This week, we’re kickstarting a three-part series look into monopoly power and the music industry.
Several recent editions of The Counterbalance took an in depth look at the role of private equity in creating — and maintaining — monopoly power. Starting this week, the next three editions of this newsletter will analyse how monopoly forces have controlled, twisted, and harmed the music sector.
The global music industry is worth billions, yet a handful of corporate giants control who gets heard, who gets paid, and who gets left behind. Powerhouses like Ticketmaster maintain a stranglehold on the live events industry, and as the digital shift has turned music consumption into a streaming-dominated ecosystem, power has increasingly consolidated into the hands of a few record labels and tech platforms.
This edition of The Counterbalance takes stock of where things stand, and how monopoly power is distorting creativity, equity and innovation in the music world.
Three record labels — Universal Music Group, Sony Music Entertainment, and Warner Music Group — control almost three quarters of the global recorded music market. Analogously, Spotify, Apple and YouTube combine to form a trifecta of control over the music streaming world.
These titans hold a tight grip on how music is consumed but they also sit at the epicentre of one of the sector’s most long-standing problems of gross revenue inequities.
Spotify pays out about 70% of its revenue to rights holders, which might seem fair at first sight, until you realise that most of that value goes to the major labels and not the artists themselves. This means that independent musicians are often left with just a fraction of the fruit from the labour, while labels rake in massive profits.
As revealed in this Guardian article from last year, the modern streaming industry pays out approximately $0.00173 per stream to the entity that holds the rights holder — usually a record label. The rights holder then splits this income with the artists themselves, typically to the tune of 15% to 50%.
These absurd numbers are a perfect indicator of the true nature of monopoly power and big capital — a system which runs on extracting wealth at the direct expense of artists trying to make a living from their craft.
Efforts to push back against the system have come with little results beyond the symbolic. Irish-English artist Maverick Sabre re-recorded an album independently in protest over deals that overwhelmingly favour record companies.
Regulatory scrutiny has also been patchy over the years. In the UK, the Competition and Markets Authority launched a study into music streaming which ended in 2022.
The competition watchdog concluded — remarkably — that despite over 60% of streams were of music recording being by the top 0.4% of artists, concerns raised by artists were not being driven by concentration in the recording market.
In the US, much of the focus has been on the negative impact of AI on content-driven sectors despite the overly concentrated nature of the industry. Earlier this month, tech and music industry representatives testified in Congress about the dangers of “deepfake” technology and urged lawmakers to pass laws that would protect artists’ likenesses from being replicated without their consent.
In keeping with big capital’s ability to pick the next big thing, the major music labels and tech giants are positioning themselves to also dominate the new terrain of artificial intelligence.
Spotify for example, has expanded its partnership with Google Cloud to incorporate advanced AI capabilities onto its platform. The partnership was struck to help Spotify’s content discovery tools, provide “safe listening” to users and personalise recommendations.
Just this week, a Wall Street Journal article revealed that Universal Music Group, Warner Music Group and Sony Music Group are negotiating licensing deals with AI startups which could “set a new precedent” for how songs are used — and how artists are compensated — for AI-remixed content of songs.
It is clear that the highly concentrated nature of the music sector has given rise to a series of harmful consequences, including unequal equity, unchecked use of artificial intelligence and a broad smothering of innovation.
But perhaps the most disturbing consequence is the slow erosion of innovative and original output. As we have discussed in a previous edition of The Counterbalance, changes to copyright law and the consistent stranglehold of Big Tech companies have led to the “enshittification” of creative industries.
Algorithm-driven platforms increasingly prioritise material that fits the tried and tested commercial molds of short, catchy and familiar content. This risks a narrowing of musical expression that can harm genres rooted in niche local identities or underrepresented cultures.
As the major players consolidate control over platforms and content, music itself risks becoming less of a cultural melting pot and more of a tightly fenced-off expression of unchecked corporate power.
In our next edition, we will shift the focus to the artists and small creators navigating this landscape.
We will explore how independent musicians are being locked out of the mainstream, and how monopoly power is warping not just industry economics, but creative freedom itself.
Weekly highlights:
The European Commission is set to unveil its digital and tech strategy today. A reminder that a previous edition of The Counterbalance covered early leaks of Europe’s anticipated plan, which — at least in April — was being labelled as a move that would turn the EU into an “artificial intelligence continent”.
Per an MLEX story this week, Amazon and the US Federal Trade Commission have sought guidance from a Washington federal judge regarding whether the trial for the watchdog’s case against the tech giant should be delayed. The FTC argued the extension — of roughly four months — is necessary “due to Amazon’s extensive efforts to obstruct and delay discovery.”
Two subsidiaries of waste management firm Huber have been fined by Austria’s competition authority. According to the country’s competition watchdog the firm engaged in price-fixing, market sharing, as well as the exchange of competition-sensitive material for almost two decades between 2003 and 2021.
Soundbite of the week: Frustrated voices on Microsoft
Microsoft announced on Monday that it would make changes to its Windows offering in order to comply with Europe’s marquee Digital Markets Act.
Notably, these changes will stop Microsoft from repeatedly prompting users to choose Microsoft Edge as their default browser, giving competitors a better shot at, well…competing. However, the changes don’t go far enough for some.
The Browser Choice Alliance shared a statement with POLITICO which blasted Microsoft’s changes as an “incomplete list,” while a spokesperson added that “Microsoft is doing the bare minimum.”
A spokesperson for Opera also told POLITICO that Microsoft has a “long way” to go.
Data mining: Private equity, sports, and the S&P 500
Sports franchises have long been an attractive asset to investors and private capital due to a host of reasons, including the important fact they are predominantly uncorrelated to the public markets.
They also have a high ceiling for growth, as evidenced by the below PitchBook chart showing how the average team value in major sports leagues including the NFL, MLB, NBA and NHL franchises has outpaced the S&P 500.
Many professional sports leagues have introduced ownership regulations that enable the entry of private equity capital, but this raises major competition concerns.
“An increased infusion of PE capital into sports may lead to greater industry commercialization, higher ticket prices, and diminished investment in grassroots sports,” reads a PitchBook analyst note. “Moreover, PE firms may prioritise short-term profits over the long-term sustainability of the teams or leagues they invest in.”
The Counterbalance is published every Thursday. Please send any thoughts and feedback to scott@balancedeconomy.org.