What has been happening in the music industry
The music industry as a whole has had to adapt to changes in the way that people buy and listen to music. With the rapid growth in household and mobile internet access since the mid-2000s, online sellers of music in physical formats (usually CD) have won market share away from traditional, shop-based music retailers and the home delivery sector now accounts for around 25% of the total market with Amazon the dominant home delivery retailer. (Total physical format sales continue to fall each year as the influence of digital grows - see below.)
An even greater change is the ongoing shift to digital. In a very short space of time, digital music has gained a large share of the total market for recorded music. Initially, this came in the form of singles and albums in digital format that users paid for and downloaded to their own devices. More recently, 'streaming' services like Spotify and Apple Music which allow music listeners to select tracks to listen to from a huge online library have greatly increased in popularity and have been driven by the roll out of super-fast 4G mobile internet and the growing trend for people to use small-screen devices like smartphones to go online. Digital download sales have been falling due to the rise of streaming services. This rise has been a boon to independent labels, with a reported increase in sales due to streaming in 2017 of £380 million. The growth in streaming revenue was particularly strong in Asia and Latin America.
Although the capture of a significant share of the market for physical format music by the home delivery sector and the growth in popularity of digital music have brought some challenges, this changing landscape has also created many opportunities for small record labels who are now better able to expose their catalogues to a wider audience. And if a label decides to release music only in digital format then the recording, manufacturing and distribution costs are significantly lower than releasing music on physical formats.
The internet has also made it easier for unsigned artists to promote themselves - and for record labels to find them - by using music-specific social networking websites like SoundCloud and LastFM, as well as general social networking sites like Facebook and Twitter which are often used for marketing purposes.
Despite the shift to digital music, the 2010s have also seen a surprisingly strong resurgence in the popularity of vinyl records among music listeners, supported by high profile promotions like the annual Record Store Day. By 2017 sales of vinyl had increased by nearly 800%, reaching 4.1 million, with a 26.8% increase over 2016 in these sales. The large increase in sales of vinyl has benefited the small number of surviving independent record shops and the independent labels that choose to put out their music on this format.
The number of independent record shops had been in long-term decline until 2014, when there were only around 300 according to British Phonographic Industry figures, with a further 120 or so HMV outlets. From 2015 until 2017 the number of independents grew until in 2017 there were nearly 400. The total number of shops selling records, CDs, DVDs and Blu-ray, including supermarkets and chain stores, reached nearly 15,000 by 2017. Depending on how you plan to distribute your music, you may want to consider what is your best option when preparing your business plan.
The sector is dominated by the three biggest record companies, Universal, Sony Music and Warner Music which have over 75% of music sales. Independent labels have around 22% of both the albums and the singles market. Their total share increased a little in the early 2010s and has remained largely stable since, suggesting there is still room in the market for a well run, independent record company that specialises in niche records and artists.
Keeping up to date with developments
Joining a trade association is an excellent way of keeping up with developments in your industry.
The British Phonographic Industry (BPI) is a trade association that represents all record labels in Britain. They can provide you with a great deal of helpful advice on starting up, training and industry statistics.
The Association of Independent Music (AIM) is a trade association that only represents independent record companies in the UK. They produce a number of helpful resources for people wanting to start an independent record label, including the AIM Guide to Survival and Success in the Music Industry.
Visit the BPI and Music Indie websites for more information.
There are also a number of information and news websites available for the music industry, including the Music Industry News Network (Mi2N) and MusicTank.
There are many trade exhibitions for the music industry. Both the BPI and the AIM include listings for national and international events on their websites.