As the showdown continues between Universal Music Group (UMG) and TikTok after the world’s biggest record company pulled content by its artists and songwriters from the video-hosting social media site, it seems as though the ban has created a window of opportunity for independent music acts.

A look at the upper echelon of Billboard‘s TikTok Top 50 chart shows that most of the top 20 entries on the chart are independent recordings, including Dasha’s breakthrough “Austin,” Mitski’s “My Love Mine All Mine,” Djo (a.k.a. actor/musician Joe Keery)’s “End of Beginning,” and even Bobby Caldwell’s 1979 song “What You Won’t Do For Love.” Prior to UMG’s TikTok ban, independent artists, music from independent artists already made up a significant portion of the TikTok 50 chart, which debuted in September 2023, but without UMG artists’ or songwriters’ works on the platform — which by Billboard‘s recent estimates affects more than 60% of the most popular songs in the United States — the pathway to success seems more clear than ever.

However, top independent music executives have a message for artists in the sector: “Not so fast.”

As UMG’s ban drags on, independent music executives are advising artists to look at the bigger picture — and also to use this as an opportunity to look at what rights they do and don’t control. 

“I truly hope we don’t do what we so often do in the music industry, which is say, ‘Oh, this is an opportunity for me to get a bit of an advantage,’ and then take the advantage, but ultimately damage the ecosystem,” says Richard James Burgess, president/CEO of the American Association of Independent Music (A2IM). “I think we are sort of at a critically bad state, in terms of the amount of money that’s being paid through [to artists]. That works out fine if you’re an aggregator, distributor or label, and you’ve got enough copyrights. But it’s extremely difficult for the artist to generate enough copyrights to make a living from if someone’s not a household name.”

Burgess continues, “TikTok is an extremely bad actor in terms of the types of deals they do and the structure of their deals. It’s almost like trying to play the lottery — if you get a viral TikTok, it can have an impact on your sales, but how much money does TikTok make from us trying to get that sort of viral spike? They should be paying for the use of music and they’re effectively not paying. I think Universal did a great thing here, and my membership, my board, supports that position.” (A rep for TikTok has declined to comment for this story).

In a 2022 Billboard story, one executive from an independent label noted that artists on his roster earned approximately $150 from TikTok from around 100,000 videos that were made with their music. Meanwhile, in the same report, a marketer who spearheaded a campaign for a music single that was used in approximately half a million TikTok videos noted that his artist earned less than $5,000 from TikTok, though views rose into the billions.

While there are opportunities for increasing numbers of independent artists to gain greater traction on TikTok during the platform’s impasse with UMG, “it’s important for artists to use the opportunity to focus on their own art instead of chasing trending sounds or being the one-millionth person to cover a hit song,” says Jody Whelan of independent record label Oh Boy Records, which was founded in 1981 by the late singer-songwriter John Prine and which now represents music from Prine, Kelsey Waldon and Arlo McKinley, among others. “If you’re lucky enough to go viral on TikTok, you want folks to stick around to hear what you have to say.”

For many contemporary acts, TikTok is a key component of their marketing plans, with labels and managers urging artists to create content in hopes of driving listeners to streaming platforms. A 2023 report, commissioned by TikTok and facilitated by Luminate, noted that 62% of U.S. TikTok users pay for a music streaming service, compared to 43% of all consumers.“TikTok user engagement metrics are strongly associated with streaming volumes,” in the United States, the report stated. “In other words, higher TikTok engagement — whether that’s likes, views or shares — corresponds with elevated streaming volumes.” The report also noted that TikTok users are more engaged with other areas of music-related consumption, claiming that in the United States, 45% of TikTok users purchased music-related merch over a year-long span, compared with 35% of overall music listeners, while 38% of TikTok users attended a live music event during the year, compared to 33% of overall music listeners.

Even with stats like these, Whelan says the TikTok/UMG battle should serve as a cautionary tale to realize how even so-called independent artists can get caught in the ban’s web because of an affiliation with UMG or UMPG. “This should also serve as a reminder to the independent community: You can’t rely on someone else’s platform to reach your audience,” Whelan says. “This month it’s UMG, next month it could be your distributor. The algorithms and priorities of social media companies and the streamers continuously shift. You have to be able to control the means in which you communicate directly with your audience, whether that’s by email or by text (we also still send out postcards to our fans!).”

Stem CEO Milana Lewis agrees, seeing the situation as a “great moment to highlight the difference between independence and autonomy. Artists believe they’re independent when they do a deal with the independent distribution arm of a major label because their deal terms might be more flexible. In reality, they still have very little control over their rights, and this is a great example of how a big corporation is deciding on their behalf whether or not their music is available on a platform and whether or not they are willing to trade off earnings for exposure.”

Independent artists should be taking this time to examine their relationships with all social media and make sure they are taking full advantage of each platform despite TikTok’s current dominance, says Seth Faber, Stem’s general manager of music distribution and payments. “Time will tell if Universal’s maneuver will lead to a meaningful redistribution of the viral pie. In the meantime, artists should continue to lean into the full landscape of snackable content,” Faber says. “The power of Instagram’s Reels, Spotify’s Clips and YouTube’s Shorts aren’t to be ignored. Diversify those content portfolios.”

For Burgess, UMG vs. TikTok is a repeat of an age-old battle pitting the industry against artists, with artists often coming out on the short end of the stick. “[TikTok] plays this promotional exposure-discovery game. How many times do we get sucked into that?” Burgess asks. “Radio hasn’t paid [artists] for recorded music. MTV didn’t pay. We keep making the same mistakes. Good thing is that Universal is big enough, and especially with the publishing and everything, the tendrils from that go far and wide.”

Burgess further likens the UMG-TikTok battle with the ongoing battle with secondary ticket markets, saying that most of the money is not making its way to artists. “That is the essence of the problem,” he says. “It would be good if people did the right thing here and stood together to get a better deal for everybody.”

Live Nation shares gained 4.0% to hit $103.77 this week, marking the stock’s best closing price since May 2, 2022, and the first time the concert promotion giant had five straight closes above $100 since late April and early May that same year.

Other music stocks didn’t fare as well. Most of the 20 companies in the Billboard Global Music Index dropped this week, with 13 stocks losing ground and just seven finishing the week in positive territory. The index fell 0.1% to 1,697.90, marking the first time it’s decreased in successive weeks since it fell during three consecutive weeks in October 2023. Multi-week declines are rare for the index: Since the beginning of 2023, it has had just two two-week declines, two three-week declines and one four-week decline (in July and August 2023). This week’s slight drop brought the index’s year-to-date gain to 10.8%.

In a relatively quiet week free of earnings releases or market-moving news, there was roughly an even mix of gains and losses from the most valuable companies. Universal Music Group increased 2.1% to 27.32 euros ($29.77) while Spotify dropped 1.7% to $254.89 and Warner Music Group (WMG) fell 2.9% to $32.94. Elsewhere, German promoter CTS Eventim rose 2.1% to 76.70 euros ($83.56) and reached a new 52-week high of 77.80 euros ($84.76).

K-pop companies rebounded after a string of weekly declines. HYBE improved 2.3% to 199,000 won ($149.59) and SM Entertainment climbed 2.5% to 74,900 won ($56.30). YG Entertainment jumped 6.3% to 43,050 won ($32.36) but is still down 19.6% year to date.

French indie music company Believe finished at 15.52 euros ($16.91), still well above the 15.00 euros ($16.34) tender offer by a consortium that seeks to take the company private. WMG has expressed interest in Believe at 17.00 euros ($18.52) per share.

The companies with the largest gains and losses are among the least valuable on the index. The week’s greatest gainer was Abu Dhabi-based music streamer Anghami, which rose 15.6% to $1.11 and has a market capitalization of just $30.7 million — less than 0.1% of Spotify’s. Radio broadcast giant iHeartMedia and French music streamer Deezer had the index’s biggest losses of 10.0% and 10.3%, but iHeartMedia’s market cap is only $255 million while Deezer’s is about 245 million euros ($267 million).

The index’s four live music stocks had an average gain of 0.9% this week, topping the 0.4% gain of the seven record label and publishing stocks. Five streaming stocks averaged a less than 0.1% decline. Three radio companies — iHeartMedia, Cumulus Media and SiriusXM — had an average decline of 5.1%.

Key U.S. indexes also saw small declines this week. The Nasdaq composite fell 0.7% to 15,973.17. The S&P 500 fell 0.1% to 5,117.09. In the United Kingdom, the FTSE 100 gained 0.9% to 7,727.42. South Korea’s KOSPI composite index declined 0.5% to 2,666.84. China’s Shanghai Composite Index grew 0.3% to 3,054.64.

The global record business will soon pop the champagne to celebrate another year of streaming-led revenue growth, judging from the handful of individual country revenue figures for 2023 made public so far this year. The IFPI won’t release its 2023 report until Thursday (Mar. 21), but major markets such as the United Kingdom, France, Germany, Spain and Japan have already released data that shows 2023 produced another bumper harvest for record labels.  

But while streaming continues to push markets in positive directions, growth has slowed, and revenue in some markets remains well below the levels of the CD era. Worse yet, some countries may have insufficient streaming growth to get back to earlier peaks.   

SNEP, the recorded music trade group in France, issued a stark warning this week when it announced that the country’s 2023 revenue rose a respectable 5.1% to 968 million euros ($1.05 billion at the average exchange rate in 2023). But even though digital revenue rose 8.8% to 620 million euros ($671 million) and streaming revenue climbed 9.2%, a 10% increase in subscription streaming revenue “remains too weak to fully fuel the development of the market even though it is the primary source of value creation,” SNEP wrote in its 2023 report.  

France might reasonably be expected to be faring better in 2024. The country was the sixth-largest recorded music market in 2022, according to the IFPI, and is the home of Deezer, an early entrant to the music subscription market. But in 2023, France had only a 16% penetration rate for paid subscribers, according to SNEP, “one of the lowest among the main music territories. The growth in revenue from these subscriptions is slowing down here while our market is far from having reached maturity.” This isn't a brand-new concern: SNEP sounded the same alarm a year ago. 

So, while streaming is creating new opportunities globally for labels, publishers and creators, it hasn’t grown enough to help France recapture revenue lost during the fall of the CD in the 2000s. France’s revenue of 968 million euros in 2023 was 25% below the 1.3 billion euros of revenue it enjoyed in 2002. In contrast, the U.S. market’s $15.9 billion in recorded music revenue was well above the peak of the CD era, $14.5 billion, set in 1999, according to the RIAA.

Elsewhere, some major recorded music markets have announced decent gains in 2023 without voicing the kind of dire warning seen in France.  

The German recorded music industry grew 6.3% in 2023, the BVMI announced Mar. 6. Digital revenue grew 8.4% and accounted for 81.5% of total revenue. Audio streaming rose 8.4% and accounted for 74.8% of the total market and 92% of digital revenue. Physical sales accounted for 18.5% of total revenue and rose 0.1% from 2022. CD sales dropped 5.9% but accounted for 11.3% of total revenue and about 61% of physical revenue. Vinyl sales grew 12.6%.  

Spain’s recorded music market grew 12.3% to 520 million euros in 2023, Promusicae announced Tuesday (Mar. 12). Streaming grew 17.3% to 398.6 million euros ($432 million) and accounted for 77% of total revenue, which was a remarkable 150% higher than the low point of 159.7 million euros ($212 million) in 2013. But, like France, Spain has yet to match its peak revenue from the CD era. Last year’s revenue was on par with the 475 million euros ($534 million) seen in 2005, itself a sharp decline from revenue that surpassed 700 million euros ($630 million) in 2001.

Aside from SNEP in France, only the BPI in the United Kingdom sounded an alarm of any sort. The market’s recorded revenue rose 8.1% in 2023 to a record 1.43 billion pounds ($1.78 billion), the organization announced Thursday (Mar. 14), with streaming revenue increasing 8.4% to 962 million pounds ($1.2 billion) and accounting for 67.4% of total revenue, up from 67.3% in 2022 and well above the 8.6% seen a decade earlier. But BPI CEO Dr. Jo Twist cautioned not to take the growth for granted and emphasized the need for “significant label investment” to keep the market prosperous.  

There’s a reason the kind of gains music markets are seeing currently might not feel like unqualified success stories: inflation. Adjusted for inflation, revenue in France last year was actually 48% below 2002; and in 2022, the United States was 38% below its 1999 peak. 

These major markets’ failure to return to CD-era highs helps explain the music business’s unprecedented land rush as companies invest in developing markets in search of export-ready artists and untapped streaming potential. Both majors and independents are investing in Africa, the Middle East/North Africa, Asia and South America — regions with large populations, under-monetized streaming markets and exportable music that could generate royalties in Western countries.  

Those developing markets, and some major ones like the United States and United Kingdom, helped global recorded music trade revenue reach a new high of $24 billion in 2021, surpassing the $23.2 billion from 1999 (unadjusted for inflation). While both the United States and United Kingdom surpassed their CD era peaks in 2021 (without adjusting for inflation), some other major markets are still trying to recapture their glory days. Growth-minded companies in those markets may have to look beyond their borders to get there.

To many people, Joe Keery is the actor known for playing Steve Harrington on the beloved Netflix show Stranger Things, or Gator Tillman on the most recent season of FX’s Fargo. What those people may not know is that he’s also the creative behind the music releases under the moniker Djo and has been releasing music for the past five years under that name through Sony-owned AWAL. He started by licensing his music through the company’s distribution service and, over the years, rose through its tiered offerings to release two projects via its AWAL Recordings label.

The most recent of those projects was Decide, Djo’s 2022 album that broke through and was well received by critics, garnering him his biggest looks from the music press to date. Now, two years later, the Decide track “End of Beginning” has become a massive hit on TikTok. The song has flown to the top of the TikTok 50 chart and landed “End of Beginning” not just a spot in the top 25 of the Hot 100 (it currently sits at a new peak of No. 23) but into the top 10 of both the Global 200 (at No. 6) and the Global Ex-U.S. charts (No. 7) as the song explodes not just Stateside but around the world.

That marks a huge success for Djo and serves as an example of how AWAL’s tiered offerings can help an artist go from hobbyist side project to worldwide success; it also helps earn AWAL CEO Lonny Olinick the title of Billboard’s Executive of the Week. Here, Olinick talks about the success of “End of Beginning,” Djo’s rise through the AWAL ranks and how the company helped support the song’s growth as it began to take off on social media. “We are seeing many people who are discovering ‘End of Beginning’ and loving the song, and are digging deeper,” Olinick says. “And when they do, discovering that the person behind it is so talented in many different ways is just adding to their connection to the project.”

This week, Djo’s “End of Beginning” jumps into the top 10 of Billboard’s Global 200 (No. 6) and Global Ex-U.S. charts (No. 7), his first global chart entry and first top 10. What key decision did you make to help make that happen?

Projects that create meaningful impact always begin with the right A&R decision. You never lose when you partner with artists who have a real creative vision, the drive to be successful and great music to go along with it. That has been the case with Joe and this project since day one. 

When it comes to the success of this record, the way we have structured AWAL really allows us to mobilize on a global basis immediately. As we started to see “End of Beginning” react, we were able to spread the story in every country, tied in with the specific way it was reacting. That meant everything from press to content creation to DSP partnerships to radio, depending on the market. Joe even went to the U.K. to present at the Brits and visit key partners, with only a few days’ notice.

Djo first started out distributing his music through AWAL, then rose up through the company’s offering tiers to now doing full recordings deals with AWAL. How did you help guide that trajectory?

We are really lucky that we work in a system that allows us to find the best way to work with music we are passionate about. Ultimately, the projects help guide this process themselves. It becomes pretty clear when an artist is raising their hand and is in the right place to be supported further. I think the traditional way of looking at it — that an artist goes from doing everything on their own to counting on someone else to do everything — isn’t relevant in today’s world. The ramp should be guided by the connection an artist has made with an audience and the potential to grow beyond that base.

In Joe’s case, that is exactly what happened. When we first started working with him, he needed distribution and marketing/content advice. If we had pushed to do more too fast, we might have suffocated the creative process and organic growth he was experiencing as an artist. By the second project, there was a more defined fan base and he was ready for our team to handle marketing and push the story globally. And then we have a moment with “End of Beginning” where we are pushing every lever available to a record label on a global basis. And most importantly with that, pushing them in a way that is focused on creating fans of Djo, not just fans of “End of Beginning.”

“End of Beginning” was originally released two years ago, then caught a new wave on TikTok earlier this year. How were you able to capitalize on that to continue to boost the song’s success?

It is critically important that we let the artist and the art dictate what is possible. In this case, we started to see such great engagement around this song and amazing content being created. Joe was excited to continue the dialogue with the audience and so our job was to spread this in a way that respected the song and artist. From there, we dig into the who, what and where of the moment. From creating new content to support the song, to pitching DSPs, radio and press, and facilitating in-person moments, our team created and executed this strategy on a global basis. And importantly, it changes in real time as the moment evolves. 

But most importantly, this has to be led and driven by the artist and that is what happened with Joe. And Joe is supported by an amazing manager in Nick Stern, who has always known when to lean into moments and when to let the fans do what they do on their own.

The song’s appearance in the top 10 on the global charts speaks to the enormous success it’s having not just in the U.S., but also around the world. How have you worked to help the song grow internationally?

To start with, we don’t care where an artist is signed or even where they are based. We let the fans tell us where there is an opportunity to engage further. Since this is ingrained in our DNA, we look at every artist with a global perspective. That has meant that our team has spent as much time focusing on what we can do in Latin America and Asia as we have on what can be done in the U.S., U.K. and Europe. As it turns out, the audience for this song is everywhere and so our team has been everywhere. But it’s easy to say we want to be global. What’s hard is to create and execute a unique plan for each and every market, and that is exactly what our team has done.

Djo — Joe Keery — is also an actor that many people know from Stranger Things and Fargo. How has his success in other mediums also helped you guys with his music career?

To be honest, this is one of the things that makes this project most meaningful and that starts with Joe. Even when I was introduced to the project five years ago, I had no idea it was Joe. I listened to the music and loved it and only found out after the fact. And that has been the way Joe has wanted it to be. He puts the music first and doesn’t want people to listen to it or discover it because he is an actor. And because of that, he has built up a hugely engaged music audience first, many of whom don’t know that he is behind Djo.

It has been interesting to watch this moment evolve. We are seeing many people who are discovering “End of Beginning” and loving the song and are digging deeper. And when they do, discovering that the person behind it is so talented in many different ways is just adding to their connection to the project.

What else are you looking to do to continue to push the song, and Djo’s career overall, moving forward?

Career is the most important part of that question. We are relentlessly focused on using this moment to create new fans for Djo, vs. just fans of “End of Beginning.” We are seeing great engagement with his whole catalogue and there are so many great songs he has put out that are getting new exposure. We believe there is a lot of life left in this song, but at the end of the day, we are spending a lot of time planning out the next two years and continuing to build a story that has already been five years in the making. So many artists have moments that they aren’t ready for and you see that, quickly, it can only be about the song. In this case, we have an artist and their team who has done the work in so many different ways and is fully ready.

How has AWAL shifted along with the music business in the last few years?

We have been fortunate to be ahead of where the industry is going for a while now. We always had fair deals and a model that allowed us to partner with artists in different ways. And most importantly, we always were a music company that prioritized being in business with artists that we love and knowing how to truly develop those artists. Our track record of developing meaningful artists really is different from any other non-traditional company. 

But that doesn’t mean we are in any way complacent. I find that our team is hungrier than we have ever been. And being a part of Sony has been an incredible accelerant to everything we planned to do. We have doubled down on the creative side of our business both in helping on the music side and the content side. The creative part of our jobs is what we ultimately all are here for. We have also built out the global side of our business even further. We have new teams in India, Spain, Brazil, Mexico and Nigeria with more offices opening up in the coming months. I look at the last eight years as the hard preparation work for where the market was going. It is fun to see now how uniquely positioned we are even as so many others are trying to adapt to this new music world.

Billboard Power Players is expanding to Canada for the first time in 2024, nominations have now officially opened via this nomination form.

For its relative size, the country has produced some huge international success stories over the last decade, with artists like Drake, The Weeknd, Shawn Mendes, Justin Bieber and Tate McRae making big waves on the world stage. 

That’s the case behind the scenes, too, including previous Power List honourees like Kristen Burke, the president of Warner Music Canada and the only female head of a major label in Canada; Wassim “Sal” Slaiby of The Weeknd’s XO Records and the founder of Universal Arabic Music; and Michael Rapino, the Canadian-born president and CEO of Live Nation who finished fourth on the recently revealed 2024 Power 100 list, behind only Taylor Swift and the global CEOs of two major labels.

Billboard Canada Power Players, however, will be the first time the award will be exclusive to Canadians or those who’ve made an impact in Canada’s music industry. – Richard Trapunski

New U.S. Visa Fees Could Prove Costly for Canadian Musicians

The U.S. Citizenship and Immigration Services (USCIS) has published its final rule updating visa fees in several categories, along with a Frequently Asked Questions page summary.

Overall, creative arts petitioners will be hit with higher costs, increased petition prep requirements, and lengthier times for premium processing. This will affect Canadian and other musicians, as well as art workers, travelling across the border to play in the U.S.

After consultation with stakeholders including the American Federation of Musicians, final fees have been reduced from the initial amounts proposed by the Department of Homeland Security for nonprofits and certain small businesses with 25 or fewer employees.

The new fees, though, could prove costly for Canadian musicians, for whom crossing the border is a necessary part of a music career. 

The fee increases were originally for early 2023, but will now take effect on April 1, 2024. – David Farrell

Music Declares Emergency Will Host a Climate Summit in Halifax Ahead of the Juno Awards

Music Declares Emergency (MDE) Canada is looking to spark conversation about the climate crisis at this year’s Juno Awards. Ahead of the ceremony on March 24, the advocacy organization will host a Mini Music Climate Summit at the Halifax Central Library, on March 22, to promote the need for climate action in the music industry.

The free, one-day event will consider topics such as sustainable transportation, carbon calculation, merch and food, and much more, providing an opportunity for industry members to share best practices and develop strategies around curbing emissions in the industry. MDE Canada previously held Canada’s first Music Climate Summit in Toronto in 2022.

The climate summit accompanies MDE Canada’s Climate Emergency Concert on March 17 in Halifax, where artists like Talia Schlanger and Jenn Grant will pay tribute to Neil Young and Joni Mitchell, two Canadian musicians who have used their platforms to promote environmental awareness. – Rosie Long Decter

Last Week ‘In Canada’: No to ‘Laughs,’ But Yes to Women in Music

These days the music industry sometimes seems like a media business version of “Trading Places” in which every label wants to be a distributor and every distributor wants to become a label.

On March 7, Warner Music Group disclosed its interest in buying the French digital music distributor Believe, but all the label groups are focusing more on the distribution game – think Sony Music’s 2021 acquisition of AWAL and Universal Music Group’s October consolidation of Virgin Music and Ingrooves. At the same time, distributors are offering more of the services that only labels used to provide, including radio promotion and different kinds of marketing.

From the perspective of an independent creator, these two once-separate sectors have moved close enough that they’re competing – the majors are offering more flexible contracts that allow artists to keep their copyrights, while distributors are providing advances and an array of services to successful acts. For anyone who was in the industry before streaming became the standard, this seems like the music business’ Reese’s moment: You got your distribution in my label! You got your label in my distribution! To outsiders and young creators though, the distinction might not even make that much sense in the first place. Behind all the complicated corporate org charts, isn’t Sony just investing in, marketing and distributing Bad Bunny’s music (through The Orchard), just as it invests in, markets and distributes Beyoncé’s (on Columbia)?

Sort of. Companies spend less, and make less, on the music they distribute, while acts signed to labels represent bigger bets both in terms of investment and potential upside. Distribution is steadier, while the label business involves more risk and some very profitable successes that more than make up for them. That’s not new. What is new, though, is how what was once a binary choice has become more of a question of finding the right point on a spectrum of risk and reward that has a traditional label deal at one end, distribution on the other and plenty of options in between.

It’s easy to understand why distributors are offering services that were once solely the domain of labels – pure online distribution has always been a low-cost commodity business, and label services offers are one way to get better margins. But what about the opposite? Why are labels getting into a lower-profit business that essentially endangers the best part of their existing business? Especially as label deals get less standard, companies make higher margins on acts that are early in their careers, before they score the success that gets them the leverage to negotiate a better deal.

Understanding why the major label groups are investing so much in a less profitable sector than the one they’re in requires seeing the issue like a media executive in the Internet Age, which is to say through the lens of disruption. This is the idea that companies which pioneer a good-enough product or service at a much lower cost will eventually challenge the market leaders – think of Netflix and cable television, for example. Although the theory isn’t as simple or as applicable as technology executives say it may well apply here: The market share of recorded music from traditional labels is slowly but steadily shrinking, in favor of distributors. The good news for the major labels is that much of that shift involves distributors they own, including The Orchard, owned by Sony, which raised its U.S. market share from 1.5% in 2021, to 7.1% in 2022, to 8.7% in 2023, according to Luminate. Much of that business comes from Bad Bunny, of course, but the company already has another bona fide Latin music superstar in Peso Pluma.

The labels basically just want to disrupt their own businesses before other companies can. If you think this kind of change is inevitable, it’s worth running toward it. (The music business has a reputation for being fearful of technology because it took so long to embrace the internet, but the business school idea of disruption doesn’t apply to pirated music; Napster wasn’t offering another product – it was offering the same product illegally.)

The second reason companies are buying distributors is, as MUSIC founder and CEO Matt Pincus recently told Billboard, “it solves a real stack problem for them.” Pincus was talking specifically about Warner, which like all label groups focuses on trying to break and market stars. A “stack” – programmer-speak for underlying technology – would let the company serve beginning creators and more emerging ones, as well as stars and a few artists that it wants to develop into stars. Warner already does this with ADA, which distributes independent labels, but ADA has tended to focus on a moderate number of mid-size indies, rather than a larger number of smaller ones.

But the most important reason labels are investing more on distribution could be the sector’s potential to serve as a kind of talent farm system. In the movies, label executives discover artists in bars or office auditions, but that hasn’t been the dominant way of doing business for a generation. These days, even beginning creators are distributing their music online, starting their careers on their own rather than trying to be discovered. Which means that by the time a major label gets interested in them, they may already have a deal. Since it’s easier to sign an artist who’s already involved with another division of the company, it makes sense to cast the biggest net possible. This is a defensive move, too: Now that Sony and Universal have big distribution businesses that can potentially serve as talent pipelines, Warner arguably needs one, too.

For that matter, the same applies to Believe. Most indie creators want to start their careers with basic distribution deals – but few of them want to stop there. Believe could be much more attractive to creators if it could offer them a place to grow to as well as services to grow into.

While the Mechanical Licensing Collective’s announcement last month about the “final final” Phonorecords III Copyright Royalty Board rate determination adjustment seemed to imply songwriters and publishers were due another roughly $400 million to, sources say the number likely overstates the coming financial windfall.

After a more than two year wait that included an appeal process, a remand, a new partial rate trial, and then the time to recalculate and resubmit adjusted play reports, sources say that number may correctly assess how much more money was earned and reported due to the CRB determination covering 2018 through 2022 — but it also likely includes payments that have already been made.

Within the total adjustment, about $250 million in net extra mechanical royalties will be paid out thanks to the adjustment, with practically all of that coming from the 2021-2022 period. Those royalties will be paid out beginning in May by the Mechanical Licensing Collective, the agency created by the Music Modernization Act to collect and disburse mechanical royalties from on-demand digital streaming services. This means adjusted monies paid out by the MLC will probably begin reaching songwriters from their publishers in the following quarter.

The rest of the roughly $400 million adjustment comes from performance royalties. But sources at the U.S. performance rights organizations say they are surprised by the MLC’s claim that another $138 million has been discovered in the resubmitted play reports required by the final rate determination.

The MLC may be the best positioned to understand this, though. Because the mechanical rate formula calls for the digital service providers to report how much they paid in performance royalties each month — or estimate how much they will pay — the MLC has insight into how much was reported collectively for mechanical and performance royalties for the period of 2018-2022 before the rate determination was finalized. It also has insight into how much performance royalties totaled after the play reports were resubmitted with the adjustments due to that final determination. The final determination happened in August 2023, eight months after the 2018-2022 term ended, with the resubmitted reports due Feb. 9, 2024.

In contrast, the PROs themselves only know what they each individually have been paid, and each digital service only knows what they individually have paid out to each PRO. Neither of those sides can see the whole performance revenue pool like the MLC can, unless they share information with competitors, which is unlikely but possible. Consequently, sources at PROs and digital services say they are surprised and puzzled by the MLC’s announcement that more performance royalties were found due to the adjusted reports. Others say the MLC’s announcement has caused consternation between songwriters and PROs. One source at a PRO suggests that the MLC including performance royalties in its report was a “marketing mishap.”

PRO sources insist that whatever performance royalties came in have largely already been paid out, and they don’t expect any new windfalls. And sources at the digital services say that, from what they can tell, the streamers have already paid out all the performance royalties that were due and they don’t expect to be making further payments.

Meanwhile, sources at PROs say the MLC’s announcement has caused significant confusion, leading songwriters to inquire about when they will get additional payouts for performance and why they were not made aware of this sooner.

Even if the performance royalties have already been paid, many executives in the music industry are speculating about what caused such a significant increase. The all-in mechanical formula that was determined by the CRB in Phonorecords III, by itself, doesn’t do anything to change performance royalties, which are typically decided by private negotiations between PROs and streaming services.

It’s possible digital services made mistakes when they reported the monthly performance royalties the first time around. The MLC could also have made a mistake either when it added up all the interim royalties paid while parties were awaiting a final determination or when it subsequently adjusted performance royalties for the period.

Alternatively, some of the PROs could have negotiated deals that tie their performance rates to the statutory mechanical rate. That would mean when digital services reverted to paying a lower mechanical rate while the 2018-2022 rate was still being determined, they wound up paying lower performance royalty rates, too — which later increased after the final CRB rate determination. But while some PRO sources concede that they try to negotiate for at least 50% of the statutory rate as a floor, they also say they don’t have any deal triggers specifically tied to the mechanicalrate.

Another theory is that one or two of the PROs might have been operating under an interim royalty rate with one or more streaming services while working through negotiations, which hypothetically weren’t finalized until recently. If those performance royalty rates have now been decided, the adjustments could be reflected in this total reported number. But several sources say they aren’t aware of any instances where this has happened.

It isn’t unusual for there to be streaming royalty adjustments after the fact, even without a new subsequent “final final” rate determination, sources point out. As it is, streaming services will sometimes need to make estimates on reporting monthly performance and mechanical royalty payments and then later adjust if necessary once the period has closed. At that time, the new payment would be made and the expense adjustment would be reported to the MLC — not two years later, sources say.

Performance and mechanical royalties have a see-saw effect where an increase in one will result in a decrease in the other. That’s because the formula for calculating the mechanical rate includes a first step in the formula that initially acts as a cap for an all-in publishing royalty pool that combines the two. This has publishers worried. If the services have already fulfilled all of their performance payments and the PROs have paid out all the received performance royalties, then how can the services now claim that $138 million as an additional deduction in the resubmitted reports? By claiming additional performance payouts, that would likely reduce the potential mechanical royalty payouts on the resubmitted report.

Aside from whether more money is coming, how these publishing royalties are paid — as performance or mechanicals — matters to publishers and songwriters.

For example, if that newfound $138 million in performance royalties needed to be paid out, it would likely mean that only about $120 million to $125 million of it would flow to songwriters and publishers because of the PROs’ overhead expenses.

If, instead, that $138 million was mechanical royalties, the songwriters and publishers would get all of that because the MLC has no overhead expense deduction since digital services finance the operation. But, instead of it getting paid out separately and directly split between publishers and songwriters, these royalties are paid to publishers, who then distribute royalties to their writers, but usually after recouping. So, the difference in where the payment comes through matters significantly to songwriters and publishers.

Overall, this adjustment seems to weigh more favorably for the mechanical royalty pool. Previously, during the interim period, the $2.77 billion in total publishing royalty payouts from digital services were weighted 50.93% to mechanical and 49.07% to performance. But after adjustments, including subtracting a slight overpayment in mechanicals for the years of 2018-2019, the $3.16 billion in total publishing royalties paid out by digital services to the PROs and the MLC works out to 52.63% paid in mechanical and 47.37% to performance, or nearly a two-percentage point increase for the former.

Eventually, when the MLC digs into the resubmissions and compares them to the earlier monthly play reports, it will likely be able to discern if the additional $138 million is coming across the board from all services or if a specific service or two accumulated the bulk of the new reported performance royalties. But if that doesn’t solve the mystery, another process is beginning that could bring in an answer. Last month, the MLC served notice on some 50 digital services that it is performing audits on them. If all else fails, that should bring some clarity to the mystery.

A year ago, Matt Najdowski, like many business managers for top artists, was routinely going over royalty statements when he discovered an unusual plunge in revenue.

For years, Pandora, the internet-radio streaming service, had paid 50% of song royalties to the artists through a collection agency called SoundExchange. But suddenly, artists signed to Universal Music Group were receiving a much lower percentage, similar to what they received from on-demand streaming services like Spotify or YouTube. And the payments were now arriving directly from UMG instead.

Najdowski researched further and learned UMG was able to change the way it reported Pandora revenue because Pandora itself had changed. In 2016, the streaming service began evolving from webcasting to a Spotify-style “search and play what you want” model. Because Pandora now offers an interactive service, rather than a non-interactive webcaster, it needed to make new deals with labels rather than relying on a government-mandated compulsory license at a standardized rate.

As such, UMG and other labels were able to change the flow of royalties so they collected and paid them directly — rather than SoundExchange distributing to artists, as law mandates under these compulsory licenses. With UMG’s change in policy last year it became the first and only label so far, according to sources, to take advantage of this change. With that, the royalty splits for artists changed, too, from a 50% split through SoundExchange to whatever, often smaller, percentage their record deals dictated for on-demand streaming revenues. That’s significant as the world’s biggest record label contributed $135 million to SoundExchange as part of its Pandora share for artists, according to Billboard estimates based on financial reports and other public information.

“That specific royalty stream can range from a couple hundred dollars per month to a couple thousand. It can be a significant amount of money,” says Najdowski, royalty manager for Farris, Self & Moore. This change in accounting, he adds, “is more or less taking money out of [artist’s] pockets.”

Perhaps most notably, Najdowski discovered that the many UMG artists who are unrecouped – meaning they have yet to earn back the money the label spent on recording, marketing and other costs – were receiving a worrisome amount: zero. These acts were previously being paid directly by SoundExchange, so their unrecouped status with UMG was not an issue for these royalties. “A lot is being withheld, and it feels like a grab for money from the labels,” says Heather Gruber, royalty manager for Fineman West, a business-management firm that represents artists.

Although Pandora has struggled in recent years – monthly users have dropped from 81.5 million in 2014 to 46 million in 2023 – it remains a potent outlet for hitmakers such as SZA, Megan Thee Stallion and Lil Durk, as well as bubbling-under singles like contemporary-Christian singer-songwriter Lauren Daigle’s “These Are the Days.” Newer artists rely on the exposure, too, and Pandora royalties have provided crucial revenue while they absorb touring and merch expenses. “If you’re making millions of dollars, this isn’t going to have a big impact on you,” says Harold Papineau, associate lawyer for King, Holmes, Paterno and Soriano, which represents Metallica and others. “But if you’re living paycheck to paycheck, then this is a significant problem. Now you’ve lost money that you may have relied on to pay your bills.”

In a statement, a UMG representative responded by explaining the difference between interactive (like Spotify, YouTube and Apple Music) and non-interactive streaming services (like internet radio). For the former, recording royalties are “subject to direct negotiation between an individual rights owner and the service,” the rep said, adding that Pandora “has substantially changed its functionality such that it has evolved into an interactive service, where users can select tracks on demand.” In other words: The label has every right to make this change.

Still, UMG didn’t fully change the way it reported the royalties to artists until 2022, and it caught many business managers and music attorneys by surprise. “It kind of happened in the dead of night,” says Mike Merriman, a business manager for the firm PARR3 who represents DJ Alison Wonderland, singer 6lack and producer Louis Bell, among others. “It does create some ambiguity and lack of transparency.”

When the Pandora change first kicked in, business managers were confused about the streaming service’s identity. “We’re still running analysis on it,” says Erica Rosa, owner/vp of royalties and contract compliance at FBMM, a business management firm that represents top artists. “I’ve asked a lot of questions to attorneys and various industry figures: ‘How would you define Pandora? Would you consider it to be an interactive or non-interactive stream? I don’t know that anyone has given a clear definitive answer yet.”

Additional reporting by Glenn Peoples.

When the board of directors at Hipgnosis Songs Fund (HSF) cut the value of the company’s catalog by 26% last week, it admitted something investors had long believed. Although the London-listed royalty fund had amassed an enviable collection of songs since going public in 2018, changes in market conditions and the very nature of some of those rights may have merited a significantly lower fair value all along.  

A new valuation by Shot Tower Capital put the portfolio of music rights — which includes Neil Young, Shakira and Red Hot Chili Peppers, among other A-list artists and songwriters — at $1.8 billion to $2.06 billion. As recently as Sept. 30, the catalog was given a fair value of $2.62 billion by HSF’s longtime valuation expert, Citrin Cooperman (previously Massarky Consulting). Six months earlier, it was said to be worth $2.8 billion.  

HSF’s new board of directors hired Shot Tower in the wake of investors’ Oct. 26 votes against continuation and a partial catalog sale — effectively a vote of no confidence in both the previous board and the investment advisor, Hipgnosis Song Management. Shot Tower will give HSF’s board its final due diligence by Mar. 25, and HSF will provide an update on those findings by Mar. 29. 

Some longtime critics of HSF’s previous valuation found validation in Shot Tower’s lower number. Stifel analysts claimed the new number shows HSF “clearly overpaid for catalogs,” they wrote in a Mar. 4 investor note. To date, HSF has spent about $2.2 billion on acquisitions. It raised over 1.3 billion pounds ($1.67 billion) from an IPO and seven successive offerings and has drawn $604 million from a revolving credit facility.  

Such a large decline in the valuation suggests the various experts had differing opinions on both the catalog’s revenues and the riskiness of those revenues. Shot Tower calculated HSF’s net revenue after third-party royalties and administration expenses at $121.7 million for the 12-month period ended June 30. The accounting firm BDO calculated a similar amount — $119.4 million for the 12-month period ended Sept. 30 — for a quality of earnings analysis. 

The higher $2.62 billion valuation appears to be based on a higher annual net revenue. A July 2023 investor presentation put HSF’s annual revenue at $134 million (based on a $2.8 billion portfolio fair value and an implied historic net publishers share, or NPS, multiple of 20.89). That’s $12.3 million more than Shot Tower’s figure and $14 million more than BDO’s estimate. The difference in annual revenues, however, only explains part of the difference in valuations.  

The discount rate appears to have also played a major role in HSF’s lower valuation. Shot Tower used a weighted average discount rate of 9.63% for the entire catalog, more than 1.1 percentage points higher than the discount rate used for previous valuations. Experts Billboard spoke with called the rate “on the high side” and “a particularly high number.” Some other recent valuations used a lower discount rate. Discount rates and valuations are inversely related: A higher discount rate will produce a lower present value of cash flows, and vice versa.  

Until this week, HSF had been valued using an 8.5% discount rate since the Sept. 30, 2020, valuation conducted by Citrin Cooperman. FTI Consulting’s valuation of a Kobalt portfolio used in an asset-backed security (ABS) offering in February used an 8.5% discount rate for songs older than 18 months (and 11.75% for songs aged 3 to 18 months). FTI’s valuation of the portfolio behind Concord’s $1.65 billion ABS used an 8.25% discount rate for catalog songs (and 11.75% for recorded music frontline content and options for future releases).  

The HSF discount rate has been a point of contention amongst analysts and investors in recent years. When HSF lowered its discount rate to 8.5% in 2020, analysts complained the valuation increased even though the investment manager had not yet added value and market assumptions hadn’t changed. When interest rates started rising in 2022, analysts wondered why HSF stuck with the 8.5% discount rate.

The discount rate depends on the riskiness of those future cash flows. Perfectly safe revenue is discounted using a risk-free rate of return such as a 10-year U.S. Treasury Rate. Because no business is without risk, a company’s revenues would merit a higher rate. If a company carries debt, its borrowing cost — also more than the risk-free rate — would also be baked into the discount rate.  

Shot Tower’s discount rate took a variety of factors into account, according to the press release, which could explain how it got to 9.63%. For example, Shot Tower found that 65% of HSF’s revenue derived from passive rights where the company does not control publishing, administration or licensing. In many cases, HSF owns only a songwriter’s share rather than the publisher’s share, or the producer’s royalties from a sound recording. Investors might have assumed that HSF had more control over administration, distribution and licensing: In HSF’s annual report for the year ended March 31, 2022, it said it had 100% interest ownership in 96% of the songs in its catalog (138 of the 146 catalogs).

“That control has a lot of value,” explains an industry insider. Strategic buyers — usually music publishers and record labels — will pay a premium to control a song’s administration and licensing or a recording’s distribution. Passive rights typically trade at a discount because they carry more potential risks of counterparts (co-writers, for example) and potential collection risk (as is the case when royalties are re-directed from a label rather than received from a PRO). With a writer’s share, “you’re a lot more along for the ride,” this insider says. The producer royalties that HSF acquired — such as RedOne, Jimmy Iovine and Timbaland — are also passive.

For a company looking to bolster its credibility with investors, Shot Tower’s valuation was a double-edged sword. The lower number confirmed some investors’ long-held belief that the portfolio is worth less than HSF had claimed. But the decrease in valuation further hurt HSF’s share price. Shot Tower’s lower valuation prompted HSF’s board to commit to using its cash to pay down debt rather than resume the dividend it suspended in October. So, while the lower valuation better reflected HSF’s market capitalization, the continued loss of a dividend was the likely cause behind the stock dropping 11% the day of the announcement.

Elevation Worship’s “Praise” — featuring Brandon Lake, Chris Brown and Chandler Moore — rises to No. 1 in its 42nd week on Billboard’s streaming-, airplay- and sales-based Hot Christian Songs chart dated March 16.

During the March 1-7 tracking week, the song surged by 30% to 3.3 million official U.S. streams and 27% to 1,000 downloads sold, according to Luminate. On Christian Airplay, it rises 21-20 for a new high, up 49% to 1.6 million audience impressions.

Elevation Worship frontman Brown co-wrote the song with Lake and Moore, as well as Pat Barrett, Cody Carnes and Steven Furtick.

“It is such an honor to be No. 1 again,” Brown tells Billboard. “We’re blown away by what God has done with ‘Praise,’ and we’re thankful for everyone who has streamed, tuned in and shared the song. We hope it is a great reminder of all the reasons to praise God not just for what He’s done, but for who He is.”

The latest gains for “Praise” were sparked by the March 1 release of the five-song Praise EP featuring five different renditions of the song, including its rootsy “Carolina Version,” the Spanish-language “Alaba” take and the dance-driven “Alastair Remix.”

“Praise” marks the third Hot Christian Songs No. 1 for the Charlotte, N.C.-based Elevation Worship, the fourth chart-topping billing for Lake and the first each for Brown and Moore.

Meanwhile, “Praise” dethrones Lake’s solo hit “Gratitude” after a 28-week reign.

Gavin Leads ‘Again’

Kelontae Gavin banks his third total and consecutive No. 1 on the Gospel Airplay chart with “Live Again” (up 2% in plays).

Jekalyn Carr, who has notched seven Gospel Airplay No. 1s as a recording artist, solely wrote the song.

The 24-year-old Gavin, from Charleston, S.C., previously led the list with “Great” for a week in December 2021, and “Hold Me Close” for one week, that February. His first of four chart entries, “No Ordinary Worship,” became his first top 10, reaching No. 5 in February 2019.