This article comes from the WeChat public account: Yiyu Observation, author: Hou Ma, and the title picture comes from: Visual China. Perhaps there is no Internet giant more aggrieved than Spotify. As the world's largest streaming music platform, Spotify has not only been unable t

Perhaps there is no Internet giant more aggrieved than Spotify.

As the world's largest streaming music platform, Spotify has not only been unable to make money, but has also been forced to almost completely deviate from its "original intention" when it was founded.

This year, spotify has barely achieved two quarters of profit, and the most important means is to increase membership prices. After two price increases last year, the two-person package increased by 31%, the family package increased by 25%, and the price of some packages increased. Even more than Apple Music. In addition to the United States, Spotify has increased pricing in more than 50 other markets.

But the sustainability of this kind of profit is very questionable... Judging from historical performance, spotify often makes profits for a period of time and then continues to lose money. The bulk of

spotify's costs are content licensing fees. As the rigid expenditure on music copyright continues to grow, its gross profit margin is greatly restricted - content costs are directly linked to its user income, making it difficult to control marginal costs. The reason why

spotify’s content costs have increased year after year is related to its sharing agreement with upstream content providers.

spotify needs to pay 13% of its US revenue to copyright agents, plus 54% to labels, for a total of 67% paid to upstream content providers. In addition, the U.S. Copyright Royalty Board (CRB) ruling in 2018 requires music streaming service providers to increase the proportion of copyright fees paid to music creators based on annual revenue from 10.5% to 15.1% year by year, an increase of 44%. In other words, most of spotify's revenue is used to pay copyright fees.

The story of Spotify’s continuous price increases and losses is a very interesting perspective. What appears to be the profit and loss of a platform actually reflects a difficult proposition that has long plagued the entire market - the interests of record companies and the plight of musicians.

It can almost be said that this is one of the most noteworthy key propositions in the history of the digital music industry.

1. The driving force behind the price increase of music platforms ‍

In fact, high copyright costs are a common feature of the entire music streaming industry. In 2023, YouTube Music, Apple Music, Amazon Music, Deezer, Tidal, etc. have all announced price increases. To cope with the continued rise in copyright costs.

Nearly two-thirds of Spotify's revenue needs to be paid to copyright owners, mainly record companies, and its cost-to-income ratio has remained at a high level of more than 70% for a long time. Spotify paid US$7 billion in copyright fees in 2021, an increase of 40% compared to 2020. At the beginning of 2023, Spotify disclosed that the total amount paid to music copyright holders was close to 40 billion US dollars, accounting for nearly 70% of its music revenue.

In fact, the price increase is not accidental, but has strong support from record companies (or pressure) . More news shows that record companies not only push for price increases behind the scenes, but also intervene in the business strategies of music platforms in the name of safeguarding the interests of musicians, including setting minimum membership prices.

spotify 2024 interim financial report

As early as the end of March this year, days after Spotify and Universal Music Group (umg) announced a support agreement, the rumored price increase came to light. Previously, UMG and other major record companies jointly promoted far-reaching royalty changes. During this period, the world's major music streaming service providers announced price increases:

• YouTube Music: In the United States, the individual monthly fee for YouTube Music Premium increased from US$9.99 to $10.99, with the annual fee rising from $119.99 to $139.99; price adjustments have also been made in countries such as Argentina, Australia, Austria, Chile, Germany, Poland and Turkey.

• tidal: Effective August 1, the monthly fee will increase from $10 to $11, and the monthly fee for the family plan will increase from $15 to $17.

• apple music: In mainland China, the personal version has increased from 10 yuan/month to 11 yuan/month, the family version has increased from 15 yuan/month to 17 yuan/month, and the student discount has increased from 5 yuan/month to 6 yuan/month.

• Amazon Music: The monthly fee for non-Prime users to subscribe to Amazon Music Unlimited Individual has increased from $9.99 to $10.99, and the student discount has increased from $4.99 to $5.99.

Major record labels remain dissatisfied with current streaming prices, and they have not hesitated to express their desire to increase prices further. Lucian Grainge, chairman of

umg, praised the music industry's series of price increase strategies in a conversation with Wall Street analysts, but he also stated that the current price increases are not enough. Robert Kyncl, CEO of Warner Music Group, called for repeated price increases. Music streaming media should learn from Netflix’s experience and systematically increase prices.

Netflix has raised its price seven times since 2011 - from $7.99 to $15.49, an increase of nearly 94% in more than ten years.

It can be seen that record companies are still the main driving force behind the general price increase of global music apps.

On the one hand, they require online music platforms to continue to increase prices on the grounds of artists' rights and interests; on the other hand, they invest less and less in independent music and reduce musicians' revenue sharing by hiding agreements.

In 2022, Universal Music required the streaming platform Pandora to change the 50% industry standard rate previously paid to artists through SoundExchange and instead adopt a contract streaming rate, which is even lower than the 45% industry standard for standard streaming services. .

complete music update (cmu) reported that the policy took effect without any communication, triggering criticism from many industry insiders. Many artists signed to Universal Music also didn't know they would make less after changes to how Pandora calculated their earnings.

Another issue is cost deduction.

Record companies can deduct royalties paid to artists from their advances or other advance payments; royalties paid directly to soundexchange and other collective management organizations will not be deducted. CMU said: "Universal Music Group will still pay Pandora royalties for two years to artists who have not fully offset their costs." This means that after two years, many artists will completely lose this source of income.

This seemingly contradictory behavior actually reflects the record company’s attempt to maintain its dominant position in the music industry chain.

2. The "bargaining power" of record companies: share more of the pie and invest less in music.

Record companies continue to demand price increases. The reason why this works is simple: bargaining power. The upstream copyright owner of

music has an obvious head start and has strong bargaining power. According to statistics, the three major record giants in the music industry collectively occupy 83% of the global market share.

Although record companies have repeatedly pushed for price increases on the grounds of "protecting the rights of musicians," facts show that they often adopt completely opposite strategies in actual operations. In order to share more royalties, the three major labels continue to suppress independent musicians. As the influence of independent musicians weakens, the bargaining power of record giants will undoubtedly be consolidated, forming a cycle. Wang Hao, founder of

Xiami Music, once pointedly pointed out: The three major records are just music trading companies that purchase music and sell copyrights at high prices, and are no longer involved in music production.

Revenue composition of the three major record companies in 2023

In recent years, Universal Music, Sony Music and Warner Music have gradually reduced their investment in independent music, focusing more resources on already-famous major artists and popular projects.

has previously reported that the three major record companies are lobbying streaming media platforms, hoping to reduce the royalty rate of DIY artists (independent musicians) - to increase their own profit margins. In addition, Sony Music Chairman Rob Stringer once told investors that the large number of DIY songs uploaded to music streaming platforms every day are diluting the market share of the three major records and questioned the quality of these DIY music. Tim Eingham, founder of

mbw, once predicted that major record companies will put pressure on Spotify to pay higher royalties to top artists to compete with self-publishing service platforms and independent musicians.The latest royalty sharing strategies such as spotify and tidal have shown that streaming companies, driven by major record companies, are weakening their share of independent musicians.

In 2023, Spotify announced that it would stop paying recording royalties to music tracks that are played less than 1,000 times a year. In addition, Spotify will no longer pay royalties for non-musical noise content such as white noise and pink noise that are less than 2 minutes in length. The

royalty threshold is highly controversial among emerging artists—under the new policy, a large portion of independent musicians’ repertoire income will be close to zero.

nmpa (National Music Publishers Association) strongly condemned Spotify’s price increases and bundled packages, believing that these actions not only failed to bring additional income to music creators, but instead restricted consumers’ choices. Industry insiders pointed out, "If 40 million U.S. dollars per year never reach the 1,000 playback share threshold and are transferred to other tracks. Calculated based on the share on Spotify, the major record companies will earn at least 26 million U.S. dollars more every year."

Spotify new package

In addition, a survey of hundreds of independent musicians showed that more than half were unwilling to sign with a major record label. It is understandable why major record companies continue to promote streaming media sharing policies that actually harm independent musicians. The new strategy of

ensures the maximization of short-term profits for major record companies, but reduces the income of independent musicians, thereby affecting their creation and development, and seriously suppressing the development of emerging music and local music culture.

In addition, record companies have cleverly reduced musicians' revenue sharing through a series of hidden agreements, keeping most of the profits in their own hands. Some independent musicians and small music labels found that after signing a contract, the actual share they received was far lower than expected, and even not much different from the income from releasing music directly on platforms such as Spotify.

Traditional record companies capture most of the profits by controlling major music resources, and streaming media is only the "pipeline" for control. This further compresses the living space for independent musicians and niche music. The era of digital music, which should have allowed a hundred flowers to flourish, has become increasingly monopolized and commercialized due to the monopolistic behavior of record companies.

3. A flood of record companies and music platforms that “deviated from their original intentions”

At this point, record companies and streaming media platforms have embarked on completely different paths. The former's financial statements continue to shine, but the latter either disappears or goes further and further away from its original intention - the idealist's streaming music business is gone forever. The

streaming media platform has contributed more than half of the revenue to the three major records in recent years, and has been rising year after year. Taking UMG as an example, in the first quarter of 2024, UMG's total revenue reached 2.594 billion euros, a year-on-year increase of 5.8%, of which recorded music revenue was 1.989 billion euros, and streaming media revenue increased by 8.9% year-on-year, based on fixed exchange rates. 10.3%, accounting for 73.71% of recorded music.

In the second quarter of 2024, umg's total revenue was 2.932 billion euros, a year-on-year increase of 8.7%. Recorded music revenue was 2.2 billion euros, with streaming revenue down 4.2% year-on-year, accounting for 67.27% of recorded music. The decline was mainly due to the slowdown in the growth of advertising-based platform partners and certain platform and deal renewals. The time-related shortcomings are caused by UMG’s disputes with TikTok and Meta over the contract renewal agreement this year. The latter was dissatisfied with UMG’s conditions for more sharing.

Streaming media platforms have been dissatisfied with record companies for a long time, and the entire industry has paid a heavy price.

Former "good products" such as Xiami and Duomi in China have withdrawn from the stage of history due to the failure of cooperation with leading record companies; the disputes between ByteDance and record companies such as Universal are well known to the world, and the sky-high price of copyrights The pressure has also caused soda music to remain in the status of "half a music app" for a long time, making it difficult to truly compete in the game.

Back to Spotify, it has been using the slogan "Always Free" since its launch in 2008, aiming to provide users with free music services through an advertising model, and share advertising revenue with musicians.The original intention of the business model of

is to allow more users to have free access to high-quality music. Spotify founder Daniel Ek believes that through Spotify's platform, artists can increase CD sales and concert ticket sales, thereby promoting the development of the entire music industry.

However, in 2011, Spotify was forced to sign more stringent copyright agreements with record companies, resulting in the free model being gradually marginalized, and paid subscriptions becoming the main means of platform profitability. As the copyright holder,

record company holds the distribution rights of most of the music on the platform, so Spotify has to compromise with them on price and share ratio.

Today’s spotify has to frequently raise prices, passing the burden on to consumers and musicians. This change not only fundamentally changes its profit model, but also makes the relationship between the platform and musicians increasingly tense, while record companies hide behind the scenes and take away tens of billions of dollars in annual profits from the streaming media industry.

In fact, Spotify is also trying to reduce copyright costs through various methods, such as directly reaching licensing agreements with musicians to reduce copyright costs through traditional channels, but the three major powers are still unavoidable.

Dolphin Investment Research’s research report shows: Due to the extremely high market share and the industry environment where competition is not small (less exclusive content advantage) , if Spotify’s valuation wants to reach a higher level, it will have to wield its knife towards copyright. Square is the key. When will

's long-standing indestructible share ratio permanently decrease, its Spotify valuation will have considerable room for growth.

4. The price of traditional order: emerging markets and local culture are suppressed

Over the years, major record companies have not only exerted pressure on emerging platforms such as Spotify through negotiations and copyright licensing agreements, but also maintained their control in the industry chain in various ways. Power:

• Copyright control: Strictly manage the distribution channels and usage methods of music copyright, and limit the availability of different platforms to ensure the dominant position of record companies.

• Income distribution model: Traditional record companies sign contracts with musicians. Record companies often receive a larger proportion of the share, while musicians receive relatively less.

• Hoarding top copyrights at high prices: Record companies spend heavily to purchase the copyrights of top artists to ensure control over the most popular music and artists on the market, thereby maintaining their influence and profitability in the music industry.

• Lobbying supervision to implement policies that are beneficial to itself: By lobbying regulatory agencies, we will promote the implementation of laws and regulations that are more beneficial to major record companies.

In these ways, record companies try to maintain their traditional order and market position in the rapidly changing music industry.

However, with the rise of digital music platforms and musicians' demand for fairer income distribution, the cost of this traditional order has gradually emerged - the suppression of emerging markets and local culture, including China, not only limits cultural diversity Sex has also affected the healthy development of the global music market.

In the digital age, music should be a carrier of multicultural integration, but the monopoly and resource concentration strategies of record companies have made the market become increasingly single and commercial.

In the global music market, it is increasingly difficult for music from non-English-speaking countries and local music culture to enter major markets.

Even on streaming platforms, the exposure of these music is much lower than that of major English music. This is not unrelated to the control of resource allocation by record companies. Record companies tend to promote commercialized and standardized music products rather than local music with regional characteristics and cultural value.

A well-known singer manager once pointed out, "In the past, record companies could create a singer by releasing videos and achieve star-making from 0 to 1; now more and more services are provided to artists who are already well-known, and they can customize the artist's music exclusively. Service. "

People always say that this is the worst era for Chinese music, and the record giants are certainly not to blame. The "prosperity" of

on paper seems to be continuing. The "Global Music Report" released by the International Association of the Phonographic Industry (ifpi) in 2024 pointed out that global recorded music revenue increased by 10.2% in 2023, with total revenue reaching US$28.6 billion, achieving growth for the ninth consecutive year. Among them, the Chinese market has the largest growth rate among the top ten markets in the world. The Chinese market growth rate will be 25.9% in 2023, and it has grown into the fifth largest music market in the world.

However, emerging markets such as China have not gained much return from the substantial growth of the industry. On the one hand, the content costs of streaming media companies are still very high and have been rising year by year. On the other hand, the music income of local music practitioners such as original musicians has been at a long-term Very low level, unable to obtain sufficient returns.

The high price of copyright is the crux of the problem. Record companies have taken away the majority of streaming media revenue - On the one hand, there are historical issues such as exclusive copyrights and sky-high guarantee fees. On the other hand, record companies are still pushing for high prices. Hoarding of copyrights is also the direct cause of rising copyright prices.

According to estimates by the Brainy Insights, the global music copyright market is valued at US$7 billion in 2023 and is expected to reach US$9.4 billion by 2033. For example, Universal Music acquired all the song copyrights of Bob Dylan (bob dylan) for an estimated cost of about US$300 million to US$500 million; Warner Music acquired 300 Entertainment for US$400 million; Sony acquired Queen for US$1.27 billion. The band's recordings, merchandise and other business opportunities became the largest acquisition ever.

As copyright prices continue to rise, some investors are beginning to question the sustainability of the current frothy music copyright trading market. These content costs may eventually be passed directly to consumers, as evidenced by the rise in global music streaming subscription fees in recent years.

By 2030, the revenue of the global music market is expected to reach US$163.7 billion.

In addition, some critics point out that large record companies hoarding copyrights at high prices may suppress emerging markets and local culture, affecting the diversity of the music industry. and innovation. Small artists and emerging music genres may find it difficult to develop due to a lack of adequate promotion opportunities, and it is especially difficult for independent musicians and emerging artists to obtain a reasonable distribution of royalties.

In fact, in recent years, emerging music and local music culture have also used short video platforms and independent distribution methods to bypass the walls set by record giants. Since this year, the disputes between Universal Music and TikTok and Meta over licensing terms are also due to the impact of emerging platforms.

Revolving around the game of market interests, the entanglement between independent music, local music culture and international record companies will continue.

Perhaps there is no Internet giant more aggrieved than Spotify.

As the world's largest streaming music platform, Spotify has not only been unable to make money, but has also been forced to almost completely deviate from its "original intention" when it was founded.

This year, spotify has barely achieved two quarters of profit, and the most important means is to increase membership prices. After two price increases last year, the two-person package increased by 31%, the family package increased by 25%, and the price of some packages increased. Even more than Apple Music. In addition to the United States, Spotify has increased pricing in more than 50 other markets.

But the sustainability of this kind of profit is very questionable... Judging from historical performance, spotify often makes profits for a period of time and then continues to lose money. The bulk of

spotify's costs are content licensing fees. As the rigid expenditure on music copyright continues to grow, its gross profit margin is greatly restricted - content costs are directly linked to its user income, making it difficult to control marginal costs. The reason why

spotify’s content costs have increased year after year is related to its sharing agreement with upstream content providers.

spotify needs to pay 13% of its US revenue to copyright agents, plus 54% to labels, for a total of 67% paid to upstream content providers. In addition, the U.S. Copyright Royalty Board (CRB) ruling in 2018 requires music streaming service providers to increase the proportion of copyright fees paid to music creators based on annual revenue from 10.5% to 15.1% year by year, an increase of 44%. In other words, most of spotify's revenue is used to pay copyright fees.

The story of Spotify’s continuous price increases and losses is a very interesting perspective. What appears to be the profit and loss of a platform actually reflects a difficult proposition that has long plagued the entire market - the interests of record companies and the plight of musicians.

It can almost be said that this is one of the most noteworthy key propositions in the history of the digital music industry.

1. The driving force behind the price increase of music platforms ‍

In fact, high copyright costs are a common feature of the entire music streaming industry. In 2023, YouTube Music, Apple Music, Amazon Music, Deezer, Tidal, etc. have all announced price increases. To cope with the continued rise in copyright costs.

Nearly two-thirds of Spotify's revenue needs to be paid to copyright owners, mainly record companies, and its cost-to-income ratio has remained at a high level of more than 70% for a long time. Spotify paid US$7 billion in copyright fees in 2021, an increase of 40% compared to 2020. At the beginning of 2023, Spotify disclosed that the total amount paid to music copyright holders was close to 40 billion US dollars, accounting for nearly 70% of its music revenue.

In fact, the price increase is not accidental, but has strong support from record companies (or pressure) . More news shows that record companies not only push for price increases behind the scenes, but also intervene in the business strategies of music platforms in the name of safeguarding the interests of musicians, including setting minimum membership prices.

spotify 2024 interim financial report

As early as the end of March this year, days after Spotify and Universal Music Group (umg) announced a support agreement, the rumored price increase came to light. Previously, UMG and other major record companies jointly promoted far-reaching royalty changes. During this period, the world's major music streaming service providers announced price increases:

• YouTube Music: In the United States, the individual monthly fee for YouTube Music Premium increased from US$9.99 to $10.99, with the annual fee rising from $119.99 to $139.99; price adjustments have also been made in countries such as Argentina, Australia, Austria, Chile, Germany, Poland and Turkey.

• tidal: Effective August 1, the monthly fee will increase from $10 to $11, and the monthly fee for the family plan will increase from $15 to $17.

• apple music: In mainland China, the personal version has increased from 10 yuan/month to 11 yuan/month, the family version has increased from 15 yuan/month to 17 yuan/month, and the student discount has increased from 5 yuan/month to 6 yuan/month.

• Amazon Music: The monthly fee for non-Prime users to subscribe to Amazon Music Unlimited Individual has increased from $9.99 to $10.99, and the student discount has increased from $4.99 to $5.99.

Major record labels remain dissatisfied with current streaming prices, and they have not hesitated to express their desire to increase prices further. Lucian Grainge, chairman of

umg, praised the music industry's series of price increase strategies in a conversation with Wall Street analysts, but he also stated that the current price increases are not enough. Robert Kyncl, CEO of Warner Music Group, called for repeated price increases. Music streaming media should learn from Netflix’s experience and systematically increase prices.

Netflix has raised its price seven times since 2011 - from $7.99 to $15.49, an increase of nearly 94% in more than ten years.

It can be seen that record companies are still the main driving force behind the general price increase of global music apps.

On the one hand, they require online music platforms to continue to increase prices on the grounds of artists' rights and interests; on the other hand, they invest less and less in independent music and reduce musicians' revenue sharing by hiding agreements.

In 2022, Universal Music required the streaming platform Pandora to change the 50% industry standard rate previously paid to artists through SoundExchange and instead adopt a contract streaming rate, which is even lower than the 45% industry standard for standard streaming services. .

complete music update (cmu) reported that the policy took effect without any communication, triggering criticism from many industry insiders. Many artists signed to Universal Music also didn't know they would make less after changes to how Pandora calculated their earnings.

Another issue is cost deduction.

Record companies can deduct royalties paid to artists from their advances or other advance payments; royalties paid directly to soundexchange and other collective management organizations will not be deducted. CMU said: "Universal Music Group will still pay Pandora royalties for two years to artists who have not fully offset their costs." This means that after two years, many artists will completely lose this source of income.

This seemingly contradictory behavior actually reflects the record company’s attempt to maintain its dominant position in the music industry chain.

2. The "bargaining power" of record companies: share more of the pie and invest less in music.

Record companies continue to demand price increases. The reason why this works is simple: bargaining power. The upstream copyright owner of

music has an obvious head start and has strong bargaining power. According to statistics, the three major record giants in the music industry collectively occupy 83% of the global market share.

Although record companies have repeatedly pushed for price increases on the grounds of "protecting the rights of musicians," facts show that they often adopt completely opposite strategies in actual operations. In order to share more royalties, the three major labels continue to suppress independent musicians. As the influence of independent musicians weakens, the bargaining power of record giants will undoubtedly be consolidated, forming a cycle. Wang Hao, founder of

Xiami Music, once pointedly pointed out: The three major records are just music trading companies that purchase music and sell copyrights at high prices, and are no longer involved in music production.

Revenue composition of the three major record companies in 2023

In recent years, Universal Music, Sony Music and Warner Music have gradually reduced their investment in independent music, focusing more resources on already-famous major artists and popular projects.

has previously reported that the three major record companies are lobbying streaming media platforms, hoping to reduce the royalty rate of DIY artists (independent musicians) - to increase their own profit margins. In addition, Sony Music Chairman Rob Stringer once told investors that the large number of DIY songs uploaded to music streaming platforms every day are diluting the market share of the three major records and questioned the quality of these DIY music. Tim Eingham, founder of

mbw, once predicted that major record companies will put pressure on Spotify to pay higher royalties to top artists to compete with self-publishing service platforms and independent musicians.The latest royalty sharing strategies such as spotify and tidal have shown that streaming companies, driven by major record companies, are weakening their share of independent musicians.

In 2023, Spotify announced that it would stop paying recording royalties to music tracks that are played less than 1,000 times a year. In addition, Spotify will no longer pay royalties for non-musical noise content such as white noise and pink noise that are less than 2 minutes in length. The

royalty threshold is highly controversial among emerging artists—under the new policy, a large portion of independent musicians’ repertoire income will be close to zero.

nmpa (National Music Publishers Association) strongly condemned Spotify’s price increases and bundled packages, believing that these actions not only failed to bring additional income to music creators, but instead restricted consumers’ choices. Industry insiders pointed out, "If 40 million U.S. dollars per year never reach the 1,000 playback share threshold and are transferred to other tracks. Calculated based on the share on Spotify, the major record companies will earn at least 26 million U.S. dollars more every year."

Spotify new package

In addition, a survey of hundreds of independent musicians showed that more than half were unwilling to sign with a major record label. It is understandable why major record companies continue to promote streaming media sharing policies that actually harm independent musicians. The new strategy of

ensures the maximization of short-term profits for major record companies, but reduces the income of independent musicians, thereby affecting their creation and development, and seriously suppressing the development of emerging music and local music culture.

In addition, record companies have cleverly reduced musicians' revenue sharing through a series of hidden agreements, keeping most of the profits in their own hands. Some independent musicians and small music labels found that after signing a contract, the actual share they received was far lower than expected, and even not much different from the income from releasing music directly on platforms such as Spotify.

Traditional record companies capture most of the profits by controlling major music resources, and streaming media is only the "pipeline" for control. This further compresses the living space for independent musicians and niche music. The era of digital music, which should have allowed a hundred flowers to flourish, has become increasingly monopolized and commercialized due to the monopolistic behavior of record companies.

3. A flood of record companies and music platforms that “deviated from their original intentions”

At this point, record companies and streaming media platforms have embarked on completely different paths. The former's financial statements continue to shine, but the latter either disappears or goes further and further away from its original intention - the idealist's streaming music business is gone forever. The

streaming media platform has contributed more than half of the revenue to the three major records in recent years, and has been rising year after year. Taking UMG as an example, in the first quarter of 2024, UMG's total revenue reached 2.594 billion euros, a year-on-year increase of 5.8%, of which recorded music revenue was 1.989 billion euros, and streaming media revenue increased by 8.9% year-on-year, based on fixed exchange rates. 10.3%, accounting for 73.71% of recorded music.

In the second quarter of 2024, umg's total revenue was 2.932 billion euros, a year-on-year increase of 8.7%. Recorded music revenue was 2.2 billion euros, with streaming revenue down 4.2% year-on-year, accounting for 67.27% of recorded music. The decline was mainly due to the slowdown in the growth of advertising-based platform partners and certain platform and deal renewals. The time-related shortcomings are caused by UMG’s disputes with TikTok and Meta over the contract renewal agreement this year. The latter was dissatisfied with UMG’s conditions for more sharing.

Streaming media platforms have been dissatisfied with record companies for a long time, and the entire industry has paid a heavy price.

Former "good products" such as Xiami and Duomi in China have withdrawn from the stage of history due to the failure of cooperation with leading record companies; the disputes between ByteDance and record companies such as Universal are well known to the world, and the sky-high price of copyrights The pressure has also caused soda music to remain in the status of "half a music app" for a long time, making it difficult to truly compete in the game.

Back to Spotify, it has been using the slogan "Always Free" since its launch in 2008, aiming to provide users with free music services through an advertising model, and share advertising revenue with musicians.The original intention of the business model of

is to allow more users to have free access to high-quality music. Spotify founder Daniel Ek believes that through Spotify's platform, artists can increase CD sales and concert ticket sales, thereby promoting the development of the entire music industry.

However, in 2011, Spotify was forced to sign more stringent copyright agreements with record companies, resulting in the free model being gradually marginalized, and paid subscriptions becoming the main means of platform profitability. As the copyright holder,

record company holds the distribution rights of most of the music on the platform, so Spotify has to compromise with them on price and share ratio.

Today’s spotify has to frequently raise prices, passing the burden on to consumers and musicians. This change not only fundamentally changes its profit model, but also makes the relationship between the platform and musicians increasingly tense, while record companies hide behind the scenes and take away tens of billions of dollars in annual profits from the streaming media industry.

In fact, Spotify is also trying to reduce copyright costs through various methods, such as directly reaching licensing agreements with musicians to reduce copyright costs through traditional channels, but the three major powers are still unavoidable.

Dolphin Investment Research’s research report shows: Due to the extremely high market share and the industry environment where competition is not small (less exclusive content advantage) , if Spotify’s valuation wants to reach a higher level, it will have to wield its knife towards copyright. Square is the key. When will

's long-standing indestructible share ratio permanently decrease, its Spotify valuation will have considerable room for growth.

4. The price of traditional order: emerging markets and local culture are suppressed

Over the years, major record companies have not only exerted pressure on emerging platforms such as Spotify through negotiations and copyright licensing agreements, but also maintained their control in the industry chain in various ways. Power:

• Copyright control: Strictly manage the distribution channels and usage methods of music copyright, and limit the availability of different platforms to ensure the dominant position of record companies.

• Income distribution model: Traditional record companies sign contracts with musicians. Record companies often receive a larger proportion of the share, while musicians receive relatively less.

• Hoarding top copyrights at high prices: Record companies spend heavily to purchase the copyrights of top artists to ensure control over the most popular music and artists on the market, thereby maintaining their influence and profitability in the music industry.

• Lobbying supervision to implement policies that are beneficial to itself: By lobbying regulatory agencies, we will promote the implementation of laws and regulations that are more beneficial to major record companies.

In these ways, record companies try to maintain their traditional order and market position in the rapidly changing music industry.

However, with the rise of digital music platforms and musicians' demand for fairer income distribution, the cost of this traditional order has gradually emerged - the suppression of emerging markets and local culture, including China, not only limits cultural diversity Sex has also affected the healthy development of the global music market.

In the digital age, music should be a carrier of multicultural integration, but the monopoly and resource concentration strategies of record companies have made the market become increasingly single and commercial.

In the global music market, it is increasingly difficult for music from non-English-speaking countries and local music culture to enter major markets.

Even on streaming platforms, the exposure of these music is much lower than that of major English music. This is not unrelated to the control of resource allocation by record companies. Record companies tend to promote commercialized and standardized music products rather than local music with regional characteristics and cultural value.

A well-known singer manager once pointed out, "In the past, record companies could create a singer by releasing videos and achieve star-making from 0 to 1; now more and more services are provided to artists who are already well-known, and they can customize the artist's music exclusively. Service. "

People always say that this is the worst era for Chinese music, and the record giants are certainly not to blame. The "prosperity" of

on paper seems to be continuing. The "Global Music Report" released by the International Association of the Phonographic Industry (ifpi) in 2024 pointed out that global recorded music revenue increased by 10.2% in 2023, with total revenue reaching US$28.6 billion, achieving growth for the ninth consecutive year. Among them, the Chinese market has the largest growth rate among the top ten markets in the world. The Chinese market growth rate will be 25.9% in 2023, and it has grown into the fifth largest music market in the world.

However, emerging markets such as China have not gained much return from the substantial growth of the industry. On the one hand, the content costs of streaming media companies are still very high and have been rising year by year. On the other hand, the music income of local music practitioners such as original musicians has been at a long-term Very low level, unable to obtain sufficient returns.

The high price of copyright is the crux of the problem. Record companies have taken away the majority of streaming media revenue - On the one hand, there are historical issues such as exclusive copyrights and sky-high guarantee fees. On the other hand, record companies are still pushing for high prices. Hoarding of copyrights is also the direct cause of rising copyright prices.

According to estimates by the Brainy Insights, the global music copyright market is valued at US$7 billion in 2023 and is expected to reach US$9.4 billion by 2033. For example, Universal Music acquired all the song copyrights of Bob Dylan (bob dylan) for an estimated cost of about US$300 million to US$500 million; Warner Music acquired 300 Entertainment for US$400 million; Sony acquired Queen for US$1.27 billion. The band's recordings, merchandise and other business opportunities became the largest acquisition ever.

As copyright prices continue to rise, some investors are beginning to question the sustainability of the current frothy music copyright trading market. These content costs may eventually be passed directly to consumers, as evidenced by the rise in global music streaming subscription fees in recent years.

By 2030, the revenue of the global music market is expected to reach US$163.7 billion.

In addition, some critics point out that large record companies hoarding copyrights at high prices may suppress emerging markets and local culture, affecting the diversity of the music industry. and innovation. Small artists and emerging music genres may find it difficult to develop due to a lack of adequate promotion opportunities, and it is especially difficult for independent musicians and emerging artists to obtain a reasonable distribution of royalties.

In fact, in recent years, emerging music and local music culture have also used short video platforms and independent distribution methods to bypass the walls set by record giants. Since this year, the disputes between Universal Music and TikTok and Meta over licensing terms are also due to the impact of emerging platforms.

Revolving around the game of market interests, the entanglement between independent music, local music culture and international record companies will continue.