The flexibility of small, independent labels gives them an advantage over the majors
Los Angeles, CA (PRWEB) February 02, 2013
The digital revolution has had a marked effect on the operations of music production labels large and small. The three major record labels (Warner, Universal and Sony) are rapidly adapting, while smaller independent firms in this industry are diversifying revenue streams to adjust efficiently. “Despite revenue growth from digital album sales, physical CD sales in America have dropped by more than half in less than a decade,” according to IBISWorld industry analyst Antonio Danova. As such, IBISWorld expects revenue for the Independent Label Music Production industry to fall 0.5% per year on average to about $347.9 million over the five years to 2013. In 2011, however, total album sales increased for the first time in more than six years as the economy slowly began to turn around and incomes strengthen. In 2013, industry revenue is anticipated to increase as indie labels benefit from rising disposable income and diminishing distribution costs.
In addition to the digitization of music, advancements in technology and online media platforms are creating a second wave of challenges for indie labels. As music recording, mastering and distributing abilities grows more widely available, new competitors will enter the Independent Label Music Production industry. At the same time, “technology is also affording artists the ability to record, market and distribute their own music without signing on to an independent music label,” says Danova. “Self-distribution is decreasing demand for industry services and causing an ever-growing number of players to share a shrinking amount of revenue.” Over recent years, the industry has experienced an influx of very small labels that often operate at a loss or no profit and are run by enthusiastic music aficionados, or artists themselves, looking to self-release their work. This influx has, in turn, diluted the industry's revenue pool even further and contributed to reduced industry concentration. The industry has also experienced consolidation, with companies either forced to shut down or being acquired as a subsidiary of one of the “big three” major labels. Over the next five years, IBISWorld expects industry concentration to remain low as the music industry's largest corporations buy more independent labels.
Looking forward, lackluster improvements will typify the industry through 2018. Labels will focus on creating growth in digital and other nontraditional revenue streams to offset continuing declines in CD sales. From within the industry, successful firms will implement innovative business models to counter the forces constricting growth. Industry operators are small, and the industry is highly fragmented. The small size of firms does make them flexible, though, which is a significant advantage during tumultuous times. Small labels can adapt their business models quickly to improve efficiencies, keep up with changing preferences and profit from nontraditional revenue streams. Externally, improvements in the general economy and consumer spending will help support marginal increases in overall revenue in the five years to 2018. For more information, visit IBISWorld’s Independent Label Music Production in the US industry report page.
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IBISWorld industry Report Key Topics
Record labels are responsible for finding musical talent, recording songs and distributing the work to retail outlets. Independent labels tend to have smaller budgets and operations compared to major labels, which have the capacity to distribute physical media and oversee comprehensive publishing operations. Major labels are included in the Major Label Music Production industry (IBISWorld report 51222).
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
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About IBISWorld Inc.
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