Exclusivity and Its Limits

No Comments 27 December 2016

Exclusivity and Its Limits

By Ashley Cook

Major labels are pushing for the end of exclusive deals with streaming services as they are quickly realizing such a practice hinders the potential profit of their artists’ biggest albums and creates incentive for brand name artists to no longer renew their contracts.

A New Economy

Since their launch last year, streaming services Tidal and Apple Music have been paying record labels for the exclusive rights of their music to entice new subscribers. Apple Music pays artists such as Drake, Pharrell Williams, and Future large amounts of upfront money while Tidal gives an ownership cut to artists like Kanye West, Beyonce, and Rihanna - all in exchange for promotion of their platform to compete in a Spotify - dominated industry.

It has proven to be a successful marketing strategy for both companies, with Apple Music and Tidal generating a combined total of about 20 million new subscribers just in the past year.

Artists always utilized their labels for distribution and, indeed, were bound by an exclusivity clause in their recording contract. As streaming services have taken over the distribution of music, they have reached out to big name artists. Such artists have enough power to sway their labels and cut their own deals. It is leading to a shift in power in the industry, determining a turf war on how music will be released and heard and leading to more cavalier attitude by top artists towards the labels.

Label Distribution

2016’ s biggest three albums illustrate the waning influence of the labels in distribution. Earlier this year, Drake signed a $19 million dollar deal with Apple Music to promote their streaming service by offering his new album Views exclusively on their site for a one week period. During this week, Views was streamed more than 250 million times by users and sold over 1 million copies on iTunes. The album then continued to grow as it became available on multiple platforms such as Spotify and Tidal.

In August, Frank Ocean released his album Blonde exclusively on Apple Music and iTunes and grossed 276,000 equivalent sales while debuting at No.1 on Billboard’s 200 chart. It was later expanded to multiple streaming platforms as well. In April, Beyonce released Lemonade, which grossed 653,000 album sales while also earning a No.1 spot on Billboard’s 200 chart. The album was later available via Apple Music as paid digital download only.

While major labels benefit from the sales of these albums, they don’t partake in the artists’ initial upfront fee from the streaming platform. This is true even when they are listed as the distributors, like Drake’s Views (distributed by Cash Money Records, owned by the Universal Music Group) and Beyonce’s Lemonade (distributed by Sony’s Columbia Records). But Frank Ocean’s Blonde was distributed through his own independent label, much to the chagrin of Universal Music: immediately after this exclusive release Lucian Grainge, Universal’s CEO, sent out an email to all branch executives of the company demanding the end of exclusive deals with streaming services. UMG, the world’s biggest music company, is the first major label to ban such deals, viewing the practice of restricting an album’s accessibility during its launch as detrimental to its bottom line. Drake, Taylor Swift, Kanye West, Coldplay are UMG artists as well.

Artists

It is easy to see that the conflict over first releases has the potential to unravel decades of standard music industry practice. UMG’s top artists, for instance, will have to decide what to do, and this is not an obvious choice.


Read More/Original Source: http://www.thembj.org/2016/12/exclusivity-and-its-limits/


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