The major record companies (and Merlin) saw their Spotify market share fall again in 2023.

Title: Shift in Power Dynamics: Indie Aggregators Challenge Major Record Labels on Spotify

In a notable shift in the dynamics of the music industry, Spotify's recently released earnings for Q4 and FY 2023 indicate a change in the balance of power between major music rightsholders and DIY aggregators on the popular streaming platform.

As of the end of December 2023, Spotify reported a growth in its Premium Subscriber base, reaching an impressive 236 million paying users. While Spotify's annual report with the SEC highlights key events from the past year, including workforce layoffs and zero material acquisitions, the most significant revelation comes from the changing market shares of major record companies and independent aggregators.

The joint market share of the three major record companies (Universal, Sony, Warner), along with independent label licensing representative Merlin, dropped below three-quarters (74%) on Spotify for the first time in 2023. In contrast, the global market share of recordings uploaded by DIY aggregators and indie labels with direct Spotify deals surged to an all-time high of 26% during the same year.

The annual report sheds light on Spotify's dependence on content licensed from major record labels, accounting for approximately 74% of streams of audio content delivered by the recorded music industry in 2023. Notably, this joint market share has been declining for the sixth consecutive year, albeit at a slower rate compared to previous years.

It is crucial to clarify that the 74% 'majors plus Merlin' statistic does not represent a simple partitioning of majors versus indies but rather a distinction between 'majors and large indies at Merlin' versus 'DIY aggregators and non-Merlin indie record companies.'

Spotify's direct license agreements with hundreds of independent labels and aggregators, including CDBaby, Distrokid, and TuneCore, are highlighted in the annual report. The company notes that the majority of these agreements have a multi-year duration and are generally automatically renewable.

In a strategic move, Spotify plans to introduce royalty changes in Q1 2024, aiming to benefit artists signed to major music companies and premium independent labels. This includes core Merlin members, contributing to the 74% share of audio recordings licensed via recorded music rightsholders to Spotify in 2023. However, indie aggregators in the other 26% may face potential challenges with the introduction of these 'artist-centric' royalty policies, particularly the 1,000 annual stream threshold and unique listener threshold.

Despite these changes, the slowing decline of the major record labels' market share on Spotify suggests that professional and professionally aspiring artists continue to dominate the platform. Warner Music Group CEO, Robert Kyncl, emphasized the increasing relevance of major music companies in navigating the complexities of the modern music business, highlighting their ability to process data, drive repeatable results, and differentiate themselves in a crowded market. As the industry continues to evolve, these dynamics are reshaping the landscape for both major and independent players on Spotify.

BW