After years of decline, the music industry is experiencing the “good old days” again, thanks to the streaming services that are fueling it. But such growth comes at a cost: supply chain complexity and massive volumes of data. How can labels bring simplicity back without missing a beat?
Even after achieving more than five years of growth for the music industry, record labels and streaming services – like Spotify and Apple Music – have added a level of new complexity to the business. Offsetting this trend is rising demand for music consumption and licensing, combined with growth in adjacent revenue streams such as concerts and merchandising.
As the saying goes, “there’s no such thing as a free lunch.” Now more than ever, record labels are facing complex interactions with streaming platforms, and are at risk of being cut out of the revenue chain as their ecosystem of talent looks to connect with music lovers all over the world through direct-to-consumer (D2C) platforms.
This growth of original content creation is already happening with long-form entertainment D2C providers such as Netflix and Apple, and it’s only a matter of time before the trend spreads to music with these disrupters creating their own “labels” and disintermediating traditional ones. This strategic challenge will not go away as quickly as a band with a one-hit wonder, but instead signals a new imperative for leading-edge rights and royalty management technology.
Finding an edge in an era of growth and optimism wrapped in complexity
Right now, many record executives are more focused on, for example, what’s hot on TikTok or rising in Spotify’s daily playlists and weekly charts, versus seeking out new artists with something to say and supporting them. Unfortunately, such narrow goals are luxuries that today’s labels can ill afford.
Record labels need to modernize their supply chain structures while developing new business models. Executives need to be ready to evolve the business in ways that anticipate their audience’s preference for something new, different, and meaningful. At the same time, they need to prepare for the battle over the opportunities, as streaming services continue to fuel growth.
With the support of leading-edge technology, record labels can address these challenges across their supply chain from a position of strength, control, and confidence. Take, for example, a rights and royalty management solution that manages and processes massive volumes of data exchanged between the label and streaming services, while generating the insights necessary to survive in today’s cut-throat environment.
From contracts to metadata and licensing terms, all rights and royalty activities must be captured as a single source of truth. This intelligence can be leveraged not only to automate the management of multiple terms for rights and royalties, but also to generate real-time analytics and reporting for more informed and profitable decision-making.
Managing large numbers of micro-payments created by streaming transactions and aggregating them into meaningful royalty payments are activities that many legacy labels – and the music companies that own them – find challenging. Unfortunately, their legacy technology architectures are unable to perform at the same processing speed and capacity available with the latest large-scale digital distribution platforms.
Creating a partnership of competitiveness, not competition
The future is full of fantastic growth opportunities for the music industry. But while record labels benefit from the power of streaming, they are also walking a fine line between maintaining a continuous pipeline of cutting-edge talent and squeezing as much value as they can from streaming services.
Leapfrogging these constraints and embracing these growth enablers requires a back-office infrastructure for core processes such as rights and royalties management. With the right technology, record executives can strike the right balance as they turn an adversarial history of limited insights and suspect payouts into a future of partnership and growth.
Find out how SAP S4/HANA for rights and royalty management by Vistex can help your business optimize your relationship with streaming services while creating experiences that wow music lovers every time.