The major labels’ push for superfan monetisation comes amid a shift in power dynamics with streaming platforms. Spotify’s share of revenue retention has grown from just under 25% in 2022 to over 30% in 2024 – a significant change that suggests increasing leverage.
This is evident in how streaming services are growing their revenues faster than labels – 18.7% growth for platforms like Spotify and Deezer in 2024, compared to just 6.2% for labels.
The gap between streaming platform revenue growth and label revenue growth continues to increase, and that widening gap fundamentally alters the label-platform relationship. As digital service providers capture more of the revenue, labels’ bargaining power diminishes, potentially forcing them to accept less favourable terms to maintain platform access.
This shift may already be beginning to impact music companies’ margins, as demonstrated by the streaming revenue slowdown for labels, despite overall market growth.
Long-term this may force labels to rethink their business models – including a focus on super premium and the superfan opportunity – as they face a future where they can no longer rely on streaming platforms to provide passive growth, nor to distribute the same revenue share percentages they once enjoyed.
Mulligan points to specific examples demonstrating this changing balance.
“Look at how last year Spotify turned a legal dispute with music publishers in the US into a basis for deals struck with Universal Music and Warner Music”, he says, referencing Spotify’s widely-criticised ‘audiobooks bundling trick’, in which it said that the addition of audiobooks to its main subscription package meant it could benefit from a bundling discount provision in the compulsory licence which sets the rates for songwriters and publishers in the US.
“The idea of bundles discounting the amount that rightsholders get paid was so controversial that Spotify got sued by rightsholder groups”, says Mulligan, alluding the the lawsuit filed by US collecting society The MLC. And now “suddenly two of the majors signed a deal saying ‘yes this is how the world is now’”.
The TikTok dispute with Universal earlier in the year followed a similar pattern. While Universal presented the resolution of that dispute as a victory, there was surprisingly little detail on that victory – unusual for Universal, known for chest-beating – something that, once again, was interpreted by many in the industry to be a sign that the major had been forced to make significant concessions.
The current relationship between the majors and consumption platforms is shifting. In the early days of adoption, digital platforms – whether music streaming or short form video – desperately needed the major labels’ content in order to be able to make inroads with consumers, and build products that had long term value.
However, today, there is more of a trade off: the major labels need the audiences of digital platforms as much as the digital platforms need their content. As a result, the relationship is less one way, and more based on negotiation and trade-offs. “What Spotify is doing is understanding that there is a benefit to saying ‘Yes, we will help you with your narrative – but in return, give us this break, and the bundles’”, says Mulligan.
As the MIDiA report notes, “streaming platform businesses will continue to diversify beyond music, while label revenues will diversify beyond streaming”, creating a scenario where the interests of streaming platforms and labels may increasingly diverge.
Despite working within rightsholder constraints, “DSPs are learning how to improve margin through a diverse mix of tactics including content mix (eg podcasts, audiobooks), acquiring cheaper music (eg, production libraries, exclusive commissions, generative AI), licensing discounts (eg audiobook bundles) and charging labels for access to audiences (eg Spotify Discovery Mode)”.
The long term implications of this divergence could be significant. As streaming platforms optimise for their own revenue growth – and diversification of content partners – rather than maximising payouts to music rightsholders, the traditional symbiotic relationship begins to fracture.
Labels, and particularly the majors, will increasingly need to focus on the high value superfan opportunities and expanded rights revenues to compensate for plateauing streaming revenue.
Meanwhile, as streaming services begin to prioritise content that generates higher margins – podcasts, audiobooks, educational content and even video content – or which costs less to license, this may reduce prominence within platforms for traditional label content.
This may create a self-reinforcing cycle – as platforms invest less in promoting label content and a diversification of revenue distribution from streaming delivers proportionately less of that revenue to labels, labels may be pushed further toward alternative revenue streams, reducing their reliance on streaming, but also perhaps reducing their leverage in future DSP negotiations.
This is something that may be accelerated or exacerbated by significant long-term shifts in market share, revealed by MIDiA. “Market share shifts in the recorded music business typically occur at a glacial pace, but the long-term trend is clear”, says the report. “Over the course of a decade, non-major market share (ie, non-major labels and artists direct) went from 28.9% in 2015 to 35.1% in 2024”.
This distribution-based measurement actually understates that shift somewhat, since it counts independent label revenue that flows via the majors’ distribution businesses as major label revenue.
“In 2023, non-major market share on an ‘ownership basis’ (ie recognising major-distributed independent revenue) was 46.7%”, the report notes. “Trending forward those proportions for illustrative purposes, ownership basis non-major market share in 2024 would be 48.3%. Which in turn suggests that 2025 could be the year in which major labels become a minority of the global market”.
However, recent developments like the ‘artist centric’ minimum earnings thresholds – initiatives very much driven by the majors – have slowed this trend. “The slowdown in artists direct revenue growth – with the major-label-endorsed minimum earnings thresholds a key factor – is putting speed bumps in this ongoing trend”, the report acknowledges.
That slowdown in artist direct growth is also closely tied to heightened efforts to combat streaming fraud. “There was a disproportionately large impact from a small number of artists on lots of the platforms”, Mulligan explains, describing how fraudsters were “uploading other people’s tracks, speeding up, slowing down, key shifting” to game the system.
This presented a significant challenge because many of “the distributors themselves didn’t have the technology solutions to deal with it properly”, while streaming platforms did. The response – once implemented – has been swift and financially beneficial to DSPs. “The fines are levied at the point of distribution of royalties”, notes Mulligan. “What does that do? That helps Spotify’s margins as well because they get to keep all of the fined royalties”.
The complexity of this fraud extends beyond amateur uploaders, to more sophisticated global networks. Mulligan cites a case where a YouTube creator who also makes music “had one of his YouTube videos demonetised, from a monetisation claim in the US from Distrokid on behalf of Tencent Music”, because “one of Tencent Music’s self-releasing artists was actually a fraudster” and was uploading the YouTube creator’s music on Tencent.
“Tencent distributes in Europe via Distrokid under a Merlin licence”, says Mulligan, “so it’s not as straightforward as ‘there’s a bunch of kids in America uploading music and carrying out streaming fraud’. There’s a global web”. With barriers to entry becoming ever lower, and an increase in fraud originating from China, Mulligan sees an emerging risk. “Not to get all geopolitical about it”, he says, “but this could be weaponised too”.
At the end of MIDiA’s analysis is a foreboding statement. “The long awaited streaming slowdown is just act one of a longer-term shift in the business; bifurcation will be act two”.
That bifurcation, says Mulligan, will result in two distinct music business models.
“Medium to long term, if everything carries on in the trajectories that they’re carrying on at the moment, then we will have the streaming business being much more about passive catalogue consumption and scalable monetisation for really big rightsholders”.
“The non-DSP lane, whatever that may end up looking like, is going to be much more fragmented. There won’t be a single dominant model. It will be much more fan-centred. It will be about niches and scenes, direct fan relationships, and an absolute smorgasbord of monetisation and fandom tools”.
This fragmentation could further reshape the power dynamics in the industry. When asked whether the superfan opportunity might lead to less concentrated revenue than the majors anticipate, Mulligan agrees. “The short answer is yes”, he says, pointing out that the nature of the superfan economy is inherently more distributed. “The longer answer is that the majors are probably going to try to harvest too much of value too quickly”.
The proliferation of superfan services creates its own challenge, with a developing environment where the majors, despite their resources, may not hold the same dominant position they’ve established in streaming. The complexity of managing a diversity of consumer touchpoints presents challenges that could present opportunities for specialised service offerings.
The current ecosystem is “all very fragmented and quite labour intensive and quite difficult to do”, says Mulligan. “If somebody can get their act together, streamlining those workflows, then there’s definitely a lot of upside. I think there’s a huge opportunity for people to start essentially commoditising or productising that service proposition”.
Ultimately, “the increasing divergence between artist growth and revenue growth” will “act as a further catalyst for the bifurcation of the music business”, says MIDiA. “Already concerned with a lack of ability to build fan relationships on DSPs and buckling under the pressure of the constant demand for new music, progressively more long tail artists will turn to non-DSPs alternatives”.
While this might initially benefit major labels by reducing competition for attention, Mulligan warns of long-term consequences. “In the near term this will be a win for bigger labels as it will reduce competition for both attention and royalties. But in the longer term, if there is a wholesale shift of effort to non-DSP, these artists – many of whom represent the future of music – will take culture, fandom and eventually monetisation with them”.
As noted in part one of our interview with Mulligan, foror the superfan strategy to succeed, labels will need to secure more expanded rights from artists, balance fandom-building with monetisation, create offerings that allow fans to express their identity, and prepare for a bifurcated future where streaming and direct fan relationships operate on different models.
The question remains whether major labels can adapt quickly enough to this new reality. As the global recorded music business continues its transformation, the winners may be those who understand that fandom isn’t just about consumption – it’s about identity and community.
“Both the Korean and Japanese labels still stand out as the models of best practice, not just because they have managed to do it so well, but because they put as much work into building fandom as they do harvesting it”, Mulligan emphasises.
As the industry enters its next chapter, understanding this balance will be crucial for long-term success in an increasingly bifurcated music ecosystem.