It's all about the data.

The major labels blew the internet. If they didn't have their catalogs, they'd be moribund enterprises, akin to other titans of the last century like MTV and terrestrial radio stations. The labels were so invested in the old model that they couldn't adapt to the new. And when they finally woke up to the end of the physical world, the streaming takeover, they relied on their catalogs to hold up distribution outlets to get paid the most dollars.

Meanwhile, they keep inventing new verticals of monetization, which is why you should be wary of selling your publishing and recording royalties, and you never know when a band might cover one of your old hits and turn it into a juggernaut, raining down cash, like Weezer did with Toto's "Africa." The key is to have a stake in the game.

And the major labels were losing their stake.

It's great to own a catalog, but the business of recordings relies on new acts and new material. The game was to get your act on the radio, jam print and then with television appearances you'd find out if you had something or you didn't. Most times you didn't, but the hits covered the stiffs and royalty rates continued to be low, after all, where could the hit acts otherwise go, they needed major distribution and marketing.

But not anymore.

How do you break a record today?

Via TikTok.

How do you do that? Good question. Turns out elbow grease is oftentimes more important than talent. Are you willing to post multiple times a day, can you create content that engenders virality? The majors know how this works but they can't game the system, and this frustrates them.

Furthermore, majors no longer want bunts or singles, just like the movie business they're dependent upon blockbusters, so they invest heavily in ever fewer products and...

The movie studios have the streamers to save them. But there is no one who is saving the majors. A stiff is ultimately worth nothing. There is no secondary market. So...

You could seed the marketplace with a zillion different acts and tracks and see what gains traction and then blow it up.

That's what this Downtown/Universal deal is all about.

Rob Stringer admitted it. You buy the independents to not only feed your distribution arm, but to gain insight into what is gaining traction and then you blow it up (or imitate it).

Imagine this. It would be like Russia getting a peek into Ukraine's armaments, how many they are and where they're deployed. And if you see a movement, you put troops there to counteract it.

Yes, the majors are going to build their businesses for the future on the backs of independent acts. Only took them twenty five years to figure out this was the proper model. I told Roger Ames to do this during the height of the P2P wars and wrote about it too and I don't need a victory lap, but I will say if you're looking for forward thinking, you don't find it at record companies.

But you do find it in distribution. Which is why Spotify is now worth more than any major label, by far, nearly three times as much as Universal.

Once upon a time, back in the seventies, the predecessor of Sony Music, CBS Records, owned a chain of record stores, Discount Records. But ultimately they axed it, there weren't enough profits to make it worth the company's while.

Meanwhile, the majors controlled distribution. Which is what the creation of WEA was about. And you needed a distributor, to get all that physical product into stores, and to get paid. And indie labels had a hard time getting paid, which is why major distribution ruled.

But traditional distribution is irrelevant in the digital world. You make a deal with the streamer and send your files, you don't need a slew of sales people to achieve this.

Meanwhile, the costs at Spotify, et al, are de minimis compared to the retailers of yore. There's no rent, few employees, it's a digital business just like Apple or Microsoft or Meta. When done right, it scales.

That used to be the paradigm in the record industry. Let's just get lucky and sell ten million copies of an album, the expenses are already amortized, it doesn't cost much to sell more records once the album is adopted by the public and becomes a juggernaut.

But now very few albums become juggernauts. And the economics of the album are in the toilet, it's mostly a singles business and...

It's the heyday of the indie.

Sure, there are a few acts streaming tonnage, but the independent sector is growing and growing and will own the future.

It's just like the rest of the world. Tons of niches. Acts can sell out Madison Square Garden and most people have never heard of them.

But this is not the way it used to be.

So now the majors have pivoted and acquired the independent companies. Distributors indie acts need to get their music on streamers, you can't do a direct deal by yourself, you must go through an intermediary.

And everything is built to sell. So these indie companies keep growing and keep getting sold, like the Orchard and Kobalt's label services arm and now Downtown.

On one hand you can't criticize Downtown, it built a business out of thin air based on the new world, and the owners want a return on their investment. But where does it leave all the acts the company distributes?

We've heard bitching about Spotify payments for fifteen years now, has there been any change? OF COURSE NOT! Because there's only a hundred cents in a dollar, to believe otherwise is to evidence your ignorance. But Spotify is nothing without music, and it lives on the backs of indie artists who don't realize this. They don't realize their value and who the enemy is. And in this case the enemy is Universal Music.

Virgin, the company under whose umbrella Downtown will sit, says it will not look at the data. Yeah, right. And when that girl or guy is naked in the bathroom and leaves the door open you're going to cover your eyes. And you're not going to look at your girl or boyfriend's bank account. And while you're at it, you're not going to check out the streams of your competitors. OF COURSE YOU ARE!

So now the majors will be able to see exactly what is happening in the world of music and be able to capitalize on it, profit on the backs of indies. Meanwhile, the indie acts are too busy complaining they're not getting paid enough.

It's about to get worse if this deal is approved.

But there's very little blowback in the U.S. Because it's every person for themselves here and the acts are not organized and antitrust is the devil.

Sure, a new independent company could come along and compete, but could they really? It's kind of like the fifties and sixties into the seventies. The independent record companies which ruled the business were all purchased, there was no longer any there there. They didn't have the money to compete...

It's kind of like competing with Amazon or Google... They own their spheres. Every once in a while there's a change that flips the script, like AI, but in music...it's always going to be about the music, and it's always going to be about copyright.

Music is not a traditional manufacturing business, it's all about rights. And copyright extends beyond the life of the creator and...you can leverage those rights.

And the more rights you have the more leverage you've got.

And the more rights you control the harder it is for an indie to compete.

Music is now an independent business. The majors can't break an act. You break it and then they license it and do their best to blow it up, assuming they're interested at all. Traditionally they're only looking for blockbusters, and if you're not one, they don't care, but now that they will control EVERY record, they do care.

It's like the government. It has access to everybody's tax returns, but the individual does not.

Amazon knows what sells and at what price, never mind having economies of scale, anyone who goes into competition with them...they underprice and put out of business or purchase.

This is the game the majors are now in.

These are not benevolent enterprises. All three companies are public and they've got to deliver returns for stockholders, they're not about music but finance. Which is one reason Robert Kyncl is downsizing at Warner. To make the numbers work, not to make better, more successful music. BECAUSE HE DOESN'T KNOW HOW TO DO THIS!

No one does anymore.

Furthermore, music is about as cottage industry as it was back in the caveman days. You start it yourself in your own market, if you're looking for a deep pocket to take you there, you've been listening to that Staples Singers song too much.

And on one hand, this is a good thing, everybody's starting from the same line. But the majors want to eliminate this, game the system via their control of indie distribution.

This is happening in plain sight, but it's not sexy enough to rile up independent creators. They'll only feel the loss after the fact, when it's too late.

The game always triumphs, and he or she with the most information has a leg up, which is what Universal's purchase of Downtown is all about.

The rewards go to the visionaries, which is why Daniel Ek is a billionaire and Lucian Grainge is not. And there's not enough money in the music business to attract the best and the brightest, but it has been a bastion of entrepreneurs who don't fit in elsewhere.

The goal here is to control the entrepreneurs or squeeze them out of the system.

No independent movie studio has survived without a catalog and without a catalog, an independent music company is screwed.

But music is much cheaper to make and distribute than film/visual productions. Which means the individual act can triumph.

Distribution is king. The majors want to control it. They want to take a toll from every act out there.

Do you build a new hightway?

Just look at the revenue from your toll.

Should you build EVs or only SUVs...are sedans coming back?

The toll will tell you.

A driver has no option. Sure, they could take the backroads, but it would take forever. They've got no choice.

And soon independent acts won't have any choice either.


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