Royalty Rumble at Spotify and a Crisis at Hipgnosis
Jan 11, 2024
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Hypnosis Song Fund faces conflicts of interest and shareholder revolt, while Spotify changes royalty payout rules sparking a fight for the future of the music industry.
The Hypnosis Song Fund has faced difficulties due to a decrease in valuation and delayed financial results, impacting shareholders.
Spotify's changes to its royalty payment system aim to create a fairer payment structure, combat artificial streaming, and maintain dominance in the industry.
The shift in power dynamics within the streaming industry has led to major labels losing market share to independent music distributors, influencing Spotify's recent actions.
Deep dives
Hypnosis Song Fund Faces Challenges
The publicly listed Hypnosis Song Fund has experienced difficulties with a significant decrease in valuation and a delay in financial results. This affects shareholders who rely on reports to track their investments. Hypnosis Song Fund had previously attracted attention by investing in song rights, claiming that songs would continue to be valuable in the digital age. However, the changing market dynamics and rising interest rates have had negative implications for the fund.
Spotify Announces Changes to Royalty Payments
Spotify confirmed changes to its royalty payment system, generating discussion among artists and the music industry. One noticeable change is that tracks with fewer than 1,000 streams will no longer receive royalties. Additionally, Spotify aims to tackle artificial streaming, such as bots and click farms, by imposing fees on labels and distributors engaging in these practices. The goal is to create a fairer payment structure for artists and mitigate fraudulent activities that manipulate streaming figures.
Understanding the Shift in Streaming Industry Dynamics
The changes made by Spotify reflect a larger trend in the shift of power dynamics within the streaming industry. Previously, major labels had more control, but with the rise of independent music distributors like DistroKid, CD Baby, and TuneCore, their market share has decreased. Spotify's recent moves align more closely with the major labels' interests, aiming to maintain their dominance and leverage by targeting DIY distribution services and maintaining control over the distribution of revenue to artists.
Strategic Move Towards Maintaining Control and Fairness
Spotify's recent actions can be seen as a strategic move to ensure long-term stability for the streaming platform. By addressing issues such as artificial streams and setting higher thresholds for monetization, Spotify aims to strengthen relationships with major labels and establish a system that supports blue-chip artists. The changes also align with a potential future of AI-generated music, as streaming platforms navigate the complexities of an evolving musical landscape.
Anticipating the Future of Streaming Platforms
The reinvention of streaming platforms like Spotify has larger implications for the entire music industry. As platforms grapple with issues of AI-generated music, maintaining fairness, and redefining payout structures, the landscape is shifting. The goal is to balance the power dynamics between labels, artists, and streaming platforms in an increasingly automated musical environment. These changes will shape how music is discovered, consumed, and monetized in the years to come.
New year, same old music business. To get things kicked off right, we circle back to check in on two of our favorite industry players, and things….well, we hate to tell you, but things aren’t GREAT, you know? Regarding Hipgnosis, the once high-flying music fund is very much in hot water—conflicts of interest flying, shareholders revolting, and board-members unceremoniously shown the door. Who could have possibly seen this coming? Certainly not us…
And then Spotify, where the times—or at least the streaming payout structure—are a-changin’. On the surface, new rules regarding monetization (under 1000 plays? No cash for you!) might seem relatively minor, but they reflect a more fundamental set of shifts within the power-structures of the industry. Everyone is gearing up for a fight about the next 25 years of music—moves like this are the first steps towards a new world order. And if recent events are any indication, Spotify doesn’t seem like it’ll be the one calling the shots…
