Major labels, audiences and the consolidation of incentives
Are record labels media companies?
That question ends up being a kind of Rorschach test not just for how you define “media,” but also for what value you think labels bring to artists and to the music industry at large. In fact, my answer to this question today is quite different from what it would have been one year ago.
Major-label executives have long referred to their employers in the press as “media companies,” even if their bottom lines don’t necessarily reflect it. For instance, in October 2019, Universal Music Group’s EVP of content strategy and operations, Barak Moffitt, told AdAge that the label was looking to “evolve from [a] product-driven music company to a music-based media company” through increased investments in podcasting, paid television and other non-music formats. The term “media company” itself is just the right combination of vague enough not to reveal too many secrets, and buzz-worthy enough to suggest a diversified range of skill sets related to communicating ideas and building audiences on the Internet — two capabilities that almost any modern brand is looking to cultivate.
The reality, however, is that major labels still make most of their money not as media companies, but as “exploiters” of vast catalogs of millions of recorded-music copyrights. They are one degree separated from what people would call a proper “media company,” because they do not create media so much as license their intellectual property to media platforms and producers. With this approach, most labels treat “media” not as a direct source of revenue, but rather as a marketing driver to increase the value of their licensing deals and the number of streams and royalties generated from their catalog.
It’s not until quite recently that this calculus has started to change, and that major labels have started to look much more like proper media companies — in the sense of creating and monetizing their own media directly, rather than just licensing recordings or treating media as a marketing expense. To be sure, this has already been the norm for years in certain markets like India where the music industry relies heavily on the film industry for most of its revenue, but the practice is quickly seeing parallel trends on a global level.
A quick rundown: In the past year alone, Sony Music Entertainment has built both a major internal podcast division — with more than 100 original programs in development, many of which are journalistic or investigative in nature and have nothing to do with music — and a separate internal team dedicated to immersive media, the outcome of which will likely include games and other interactive experiences.
Warner Music is taking a notably different approach: Instead of building internal expertise, they’re buying external brands. And they’re not buying podcast studios or gaming companies (yet) — instead, they’re buying music blogs like UPROXX and HipHopDX and meme-friendly social-media brands like IMGN Media.
More than Sony and Warner, Universal Music Group seems to be focused on film and documentary projects around its artist roster, having relaunched its film and television division Polygram Entertainment in 2017. (Outside of their owned-and-operated films, UMG also owns and/or distributes the soundtracks for almost the all major music biopics from recent years, including Bohemian Rhapsody and Rocketman.)
The consolidation of incentives
In one way or another, every major label is trying to have a direct stake not only in culture, but also in how that culture is discussed and disseminated. The transformation of record labels into proper media companies, and the media consolidation that results, is largely a lagging indicator of what I call a consolidation of incentives.
Let’s break down some of the key elements behind this shift:
- Artists themselves are increasingly diversifying into becoming de facto media brands and creative brands. Due to the low-margin economics of streaming, the concept of the full-time “recording artist” is becoming increasingly unrealistic, while artists are diversifying into brand partnerships, merchandise, visual art and other creative outlets earlier and earlier in their careers, alongside a (historically) heavy reliance on touring. In an online attention economy, the line among artists, “content creators” and social-media influencers continues to blur.
- This means that artists will have increasingly overlapping audiences and growth goals as media brands, personalities and influencers — and that, due to the fickle nature of mainstream music tastes, the size and long-term loyalty of an artist’s audience over time may become a stronger moat for their brand than the commercial performance of any one specific song or album.
- In turn, artists will want to partner with the companies that are best equipped to serve this new reality and maximize the value and longevity of their brands, beyond the confines of any given song or album. A significant part of this partnership equation is which company is the most effective at building audiences, not just exploiting copyrights.
- The companies that will best service this reality will compete with each other for internal talent, and will have overlapping skill sets. On the artist development side, we’re already seen this competition in the vast swaths of bloggers who end up becoming record-label A&Rs, or in the label execs and journalists who end up taking jobs at streaming services, or in the outsourcing of many label marketing campaigns to third-party agencies. Also, artist development and audience development are complementary but vastly different skills. Labels have mastered the former, while media companies in general are much better at the latter — hence why all major labels are either building or buying media companies to help serve their artists’ audience-development needs.
- Last but not least, as online music media companies and news publishers seek to diversify their revenue streams beyond the pennies they get from advertising, several of them are collaborating more directly with brands and embracing more integrated marketing roles in artists’ release campaigns.
So in short, due to a consolidation of incentives that revolves around artists as brands, all kinds of companies — record labels, streaming services, creative agencies, music publications, social-media brands — are now competing for internal musical talent, internal skill sets and external audiences. This is a rough conceptual visualization:
Note that record labels and creative agencies are at the core of this diagram: They’re the only kinds of companies that every other company wants to be. Globally, streaming companies like JioSaavn, Tencent Music and TikTok are running their own labels; others like Audiomack have recently launched their own internal media properties as well. As I covered late last year, over 15 corporate non-music brands across travel, fashion and food & drink — with a collective annual revenue of over $350 billion — have also tried to run their own labels, mostly as content marketing arms. Ad agencies like Havas, Hungry Boys and Boxing Clever have launched their own labels in the past, although most of them have been short-lived.
That’s an important point to drive home in this conversation about music media consolidation: All these other kinds of companies want to compete with labels, but the majors have a massive catalog of valuable IP that is near impossible for new entrants to compete with. Hence, with IP already in tow, it’s arguably easier and more effective long-term for bigger labels to morph into media companies than the other way around.
The record label perspective
Aside from this wider consolidation of incentives around brand and audience, what are the specific motivations for a record label to build, buy and become a media company? Diving deeper into the label perspective, I think there are four main reasons for this shift:
1. A&R research and audience data
This is the same reason why major labels have significant interests in independent distribution (e.g. WMG with Level, UMG with Caroline and Spinnup, Sony with The Orchard): Media publications can provide data on which up-and-coming artists draw the biggest and most engaged fanbases and readership.
In the specific case of WMG buying HipHopDX, UPROXX and IMGN Media, the value and volume of advertising data for the label cannot be ignored. According to Blacklight, a new tool from the data-driven investigative news publication The Markup, HipHopDX has 41 ad trackers and 80 third-party cookies on its site; Uproxx has 19 ad trackers and 62 third-party cookies; and IMGN Media has 14 ad trackers and 37 third-party cookies.
In fact, a recent job posting for the Head of Business Development at WMX, Warner’s internal creative agency, mentions UPROXX as one pillar of the label’s internal media sales strategy for brand partnerships. This implies that Warner’s media acquisitions will serve at least partially as a direct vessel for the label’s own IP and creative content — which brings us to the next reason:
2. Brand control and vertical marketing integration
By owning the media used to distribute and promote their IP, labels can exert more control over all steps of the marketing process in a more streamlined way. In the specific context of music media, this is also the source of a common fear that outside onlookers share, with respect to the willingness of music organizations to sacrifice an “objective” ecosystem in favor of long-term financial sustainability and more integrated cultural influence. Such fear is especially present from the perspective of analysis and criticism: How can media companies be authoritatively critical of their own bosses?
That said, if you look at the respective websites of UPROXX and HipHopDX today, they’re still publishing several news articles and live sessions featuring artists who are not signed to Warner Music, so their acquisition has not immediately made them a major-label puppet on the front end; back-end data access is a separate question.
3. Competition from distribution
Labels are diversifying into media companies right alongside music streaming services. Discouraged by the difficulty of turning a profit in the pure-play music streaming business, the likes of Spotify, Apple and Amazon are all investing in original podcasts to build a stronger moat in audio at large, and to reduce their reliance on third-party licensing deals to keep their content engines running. In my mind, this potentially makes these platforms the major labels of the podcast world, with the significant added benefit of owning distribution.
The best that major record labels can do in this situation is catch up with non-music content investment, or diversify and invest in their own direct audiences to reduce reliance on these platforms for revenue and exposure. In the specific case of podcasts, they’ll have to make the case to artists that signing to their internal podcast division is a better deal than signing to Spotify.
The two most important parts of a media company may be corrupted
You can’t talk about a given media company or news publication without talking about two components of its strategy: The voice, and the audience.
For instance, Billboard and Rolling Stone might share a similar audience in their music-industry coverage, but they have subtly different voices in their editorial style; as Chris Molanphy recently argued, Billboard is more of a seemingly objective “bible of the music business” while Rolling Stone has more of “a political side and a pop culture side.” And those two publications together have a vastly different voice and target audience from those of more fan-centric publications like Stereogum or Pitchfork.
The consolidation of organizations and incentives among labels, media companies and other players in the music ecosystem means that our understanding of voice and audience in media may be somewhat corrupted. In short, the worst-case scenario is that the audience is just a means to an end, and that there will always be some outside motive that is not related to the content and that does not put the reader or viewer first. Your click on an UPROXX article or on an IMGN Media post on Instagram will directly help Warner Music sign, evaluate and market its next artist. Your free podcast stream on Spotify will likely trigger a marketing campaign from the service to convert you to a paid subscription.
Of course, advertising partnerships between brands and media companies are nothing new, and news publications like the New York Times and Vox rely a lot on their own creative agencies for revenue. But the above situation is on another level: The “voice” of a media company that is owned by a business it is otherwise supposed to cover and critique is as much underhanded business development as it is commentary. And this wider age of consolidation is compelling media companies to abandon the cultural and commercial case for publishing compelling, informative media about music purely for its own sake.