Dive Brief:

• Paid streaming services Spotify and Apple Music are helping to revive music sales after 20 years of declines, and independent record labels are some of the biggest beneficiaries, according to Bloomberg News. Merlin, an organization that represents some of the top indie labels and more than 20,000 total labels in 51 countries, has distributed $353 million to members in the past year, a 52% annual jump.
• "The Big Three" record labels — Vivendi’s Universal Music Group, Sony Music Entertainment and Warner Music Group — have complained about the paltry revenue from streaming, but total industry sales have grown for two consecutive years, which hasn’t happened since 1998-99, Bloomberg states.
• Spotify and Apple Music’s power comes from international distribution among networks that carry music in digital formats, eliminating the costly need for small labels to package CDs and mail them abroad. The companies have helped to revive music sales in Mexico and China, two countries beset by copyright infringement and poor revenue, by more than 20% last year.

Dive Insight:

Music streaming services would likely not be as widely adopted without the near-saturation of the smartphone market in industrialized countries and expansion into lesser developed regions. High-broadband mobile platforms are a powerful way to distribute musical entertainment, which listeners can enjoy while on the go commuting or working. It’s encouraging that Spotify and Apple Music are giving small record labels a platform to reach a wider audience of paying consumers more affordably.

Whether the resurgence of independent labels is a short-term fad or a long-term trend remains to be seen, it’s still hard to argue with 52% revenue gains in just one year. Those sales are unevenly distributed among thousands of labels that still struggle to cover expenses, but that’s the nature of the hit-driven music industry. Merlin’s members collectively make up 12% of the global music market, putting them in fourth place behind Universal, Sony and Warner, which control more than three quarters of the market.

The key technology to watch in the streaming industry is artificial intelligence (AI), which companies like Spotify are developing to help music fans discover other artists they might like. Spotify clearly wants to develop expertise in AI, having acquired companies like Niland, MightyTV and Sonalytic that use machine learning to personalize music recommendations. The technology may help independent labels to promote their artists among a wider group of listeners without having to depend on radio play or other third-party forms of publicity.