2018 Preview: With Business Booming, New Pressures on Music Industry

BB1 2018 - DO NOT REUSE
Illustration by Pete Ryan
       

At last, the music industry’s long, cold winter is over. After nearly 20 years of decline, the U.S. recorded-music business generated $4 billion in revenue in the first half of 2017, a 17 percent gain over the same period in 2016. Even more stunning, Billboard estimates that the final tally for 2017 could reach $9 billion (based on the current growth rate and historic patterns) -- a level the industry hasn't seen since before the 2008 recession. Optimism abounds, but as one insider puts it: “The pressure’s on.”

Pricier Talent

“Competitiveness on the signing front has gotten very intense,” says RCA executive vp John Fleckenstein. “And with competition, the cost of acquiring talent goes through the roof, which makes doing what we’ve always done more expensive.” Labels are reinvesting in A&R, marketing and promotions departments and better deals for artists. “It’s almost like before Napster; it may not be full recovery mode making money hand over fist with CDs, but it’s a good time,” says Julian Petty, a partner at Nixon Peabody. “It’s not crazy for someone to get a $500,000 in-pocket advance -- and we’re not talking about a star.”

New Publishing Power Dynamic

Outside investment has fueled a major wave of consolidation, helping independents like BMG, Concord and Kobalt (which bought SONGS for approximately $140 million) form a tier of mini-major publishers competing for market share and catalogs. “Just look at SONGS -- there were 14 bidders going after that catalog,” says Rell Lafargue, COO of Reservoir, which purchased the catalogs of Leon Ware and Century Media, and signed Takeoff and Offset of Migos to publishing deals.

More Music, Faster

In a streaming world, everything moves at warp speed. “With more lucrative deals, you get more pressure to put out more product and to monetize,” says Petty. “There isn't that long development period.” Adds Lafargue, “The [revenue] disparity between the No. 1 streamed song and the No. 2 streamed song is significant. There’s a pressure now on our songwriters to really deliver the goods.”

This article originally appeared in the Jan. 13 issue of Billboard.


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