Some analysts believe that Spotify will be worth more than $ 300 billion by 2030.
But what percentage of the tracks on Daniel Ek’s platform will be music signed and / or owned by major record labels at this point?
Perhaps less than you think, according to the latest figures from Spotify itself.
Spotify’s latest annual financial report revealed the following information: Of the total volume of global music streams on Spotify in 2020, recordings controlled by the three major record companies and Merlin were jointly claimed by 78%.
These are streams of music; Spotify makes the definition clear to exempt podcasts from this calculation.
(Merlin is a collection of the world’s top performing independent labels and distributors for those in need of definition, and was previously referred to as a “major” by Spotify itself.)
Obviously, 78% is a vast majority of the games on Spotify, but just look at how it compares to the same number in previous years (as reported in Spotify’s previous annual reviews):
As you can see, over the past three years almost 10% of Spotify’s annual volume market share has moved from the big labels and Merlin to independent artists and labels outside of these structures.
The annual pace of this decline is accelerating: in 2018 the Majors and Merlin lost 2% year over year; In 2019 they lost 3%; and in 2020 they lost 4%.
If that rate is around -3% / -4% per year by 2030, the Majors and Merlin will have less than 50% of all annual games on Spotify – a crucial turning point when it comes to the leverage these games run during their businesses biannual talks about the renewal of licenses with Spotify talks.
Merlin himself currently claims that his membership “represents[s] 15% of the world market share ”for services like Spotify.
Strictly speaking, this claim seems to relate to the money generated by Spotify rather than the volume of games on the platform. (Which is not the same as a game on Spotify’s free tier is worth far less than a premium tier game, and Merlin labels / artists traditionally have a higher representation of games among premium subscribers than free users.)
Regardless, this suggests that Spotify’s true recorded music market share between the majors – Universal Music Group, Sony Music Group and Warner Music Group – might be closer to 63% today (i.e. 78% minus 15%).
The relevant line from Spotify’s annual 20-F SEC report for 2020
Where is this market share going – and what is causing such a reduction in great label power?
One obvious point to consider here is the dilution of listening on Spotify caused by the now 60,000 tracks per day uploaded to the service.
Another important statistic, as quoted by Justin Kalifowitz, boss of Downtown Music Holdings, in his new statement for MBW: According to Will Page, ex-chief economist of Spotify, in 2020, music by volume was eight times more by DIY artists Spotify uploaded as was released by the three major record labels.
In short, an avalanche of indie music is flooding major label music on Spotify, and this is increasingly reflected in the proportion of total games (and total royalties) on the platform.
Midia Research’s Mark Mulligan took a deeper look today (March 1st) into the changing shape of global market share at Spotify.
Research by Midia suggests that in 2020, the three major record labels had a 68.9% share of all games on Spotify worldwide (by volume), while Merlin members had a 9.1% share.
Independent, non-Merlin music firms suggest that Midia – which also includes the labels distributed / maintained by Paris-based Believe – claimed 15.7% of all tracks on Spotify last year.
And Artists Direct – also known as DIY self-uploading artists – claimed a 6.3% Spotify volume market share.
Mulligan points out that these numbers show a decline in Majors plus Merlin’s market share in recent years that is “nothing short of tectonic”.
“The direction of travel is clear: streaming paves the way for a new generation of independents.”
Mark Mulligan, Midia Research
Mulligan also tries to estimate the sales growth each of these industry segments (major music companies; Merlin; non-Merlin indies; DIY / artist direct) has seen Spotify over the past year.
He suggests that the “non-Merlin independents” increased their earnings at Spotify by a whopping 49% in 2020, followed by “Artists Direct” who increased their earnings by 28%.
The major record labels saw sales grow 14%, according to Mulligan, with Merlin-affiliated indies showing flat year-over-year sales.
All of this resulted in an inevitable shift in sales market share towards non-major and non-Merlin independents, as well as DIY artists, Mulligan writes.
“Despite all reservations,” says the Midia boss, “the direction of travel is clear: streaming paves the way for a new generation of independents who are gaining share at the expense of both majors and traditional independents.”
It is worth remembering that this also does not take into account listening to podcasts on Spotify – something that threatens to further undermine the market share of major record companies in consumer behavior on the platform.
According to Spotify, the company had 2.2 million podcasts on its platform as of the end of the fourth quarter of 2020, up 300.00 from the 1.9 million it hosted at the end of the previous quarter.
Total podcast usage hours on Spotify nearly doubled in the year between Q4 2019 and Q4 2020, the company said.
In the last three months of last year, around 86.25 million Spotify users (25% of the total of 345 million MAUs worldwide) interacted with podcast content.Music business worldwide