Skipping Records: The Evolving Role of Music Streaming for Content Creation, Distribution, and Promotion

Abstract

Digital streaming platforms (DSPs) have established themselves as intermediaries in the music industry alongside record labels. Record labels can be divided into two segments: multinational conglomerates known as majors and smaller niche indie labels. Major labels hold considerable power in the industry because they are involved in many market segments and because they hold the copyrights to most historical and current popular songs. These roles allow them primacy in determining the percent of revenues that streaming services must pay out in royalties, limiting streaming service profit margin growth. Confronted with this profit limitation, DSPs can choose to cater their promotion to major label releases to appease them and consumers, or they can take the riskier move of promoting unsigned artists – artists not on a record label – hoping to grow their profit margins by increasing their bargaining power with majors in the long term. This paper explores the history, organization, and profit structures of record labels and streaming services. It examines the rise of unsigned artists as viable content creators in the post-Internet age and analyzes the theoretical benefits to DSPs from selectively promoting by label affiliation. Available inter-platform Available chart and playlist data is used to explore current popularity differences by label affiliation and whether promotional differences between label affiliation exist. This paper finds significant evidence of promotional favoritism towards major releases but no significant difference in platform promotion between unsigned artists and indie labels. This indicates that streaming platforms have chosen the safe route of promoting majors in the hopes of growing streaming volume and encouraging greater user subscription. This impacts the equality of revenue distribution in the industry and the incentives in place for artists to create new content. Finally, this paper explores how recent changes to the industry can impact the equality of revenue distribution and how streaming services are branching out into new markets and new revenue models to grow profit margins and increase future equality for artists.