December 1, 2016:Labels are ‘investing in music’… but so are streaming services

The IFPI and WIN have released their latest ‘Investing in Music’ report, which as in previous years quantifies the A&R and marketing investment made by major and independent labels.

As before, its goal is partly to fend off the now-familiar ‘do artists need labels?’ debate by hammering home their role as the financial backers for the recording and marketing of music.

The headline figures this time round: the IFPI and WIN say that labels spent $4.5bn on A&R and marketing in 2015 – 27% of their revenues – which breaks down into $2.8bn of annual A&R spend and $1.7bn on marketing.

How does this compare to the last Investing in Music report, which covered 2013? That year, the report claimed A&R spending of $2.5bn and marketing spending of $1.8bn – so rises of 12% and 6% respectively since then.

“The investment from the record industry has also been essential in driving music’s digital transition,” wrote IFPI boss Frances Moore and WIN boss Alison Wenham in the report’s introduction. “Record companies build out the systems and infrastructure that enable the licensing of some 360 digital music services with more than 40 million tracks.”

Which is true, but another announcement on the day the report was published served as a reminder that some of those digital services are now also becoming investors in music. The announcement came from Spotify, which is launching an initiative called ‘Spotify Singles’

It involves getting famous artists to record two-track ‘singles’ – one of their songs and one cover – in Spotify’s New York recording studio, then putting them out with original artwork as part of Spotify playlists. John Legend, Tove Lo and Juanes are among the artists taking part, with more than 100 singles planned for the next year.

While the rights will remain with their labels, this sits alongside other original-music initiatives from Spotify, from the tracks it commissioned for its mobile app’s ‘Running’ mode to Music Business Worldwide’s report in August claiming that Spotify had been commissioning instrumental tracks from producers to slot into some of its in-house chillout playlists.

This, in a year when Amazon has commissioned original compilations, and Apple has funded videos and (in a sense) taken the label role for Frank Ocean’s first post-Universal album.

We’re a long way from the investment in ‘originals’ that video services like Netflix and Amazon are making, and the scattering of own-music initiatives with established artists by audio streaming services certainly isn’t disrupting the labels’ investment in new talent.

That said, if anyone is doing the latter, it might be a combination of publishers and managers, who are increasingly taking a bigger role (and investing more money) in developing new artists before they seek a label deal.

The IFPI’s report is a timely reminder as ever of labels’ role in the music ecosystem, but as we go into 2017, it’s becoming clear that from managers and publishers at the emerging end of the artist spectrum to DSPs and brands further up, alternative sources of investment are growing slowly, but surely. Crowdfunding shouldn’t be discounted either.

When the IFPI and WIN’s next report comes out in 2018, we’d love to see them have a crack at quantifying the scale of non-label investment in music too – an investment that labels are often willing partners for rather than unwilling competitors, as Spotify’s Singles show.

Stuart Dredge
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