How much should indie artists fear a major label push for a two-tier payout system?

I wholeheartedly agree with him. Any action by major labels to increase the rates paid on their repertoire (when we're talking about major label repertoire, it's the corporations, not the artists, who own the IP and get paid) at the expense of smaller, indie artists wouldn't just be wrong; it would be egregiously wrong. I'm not sure which is worse: major label executives, flush with massive cashflow from recent IPOs, trying to chisel additional profit out of the hides of indie artists, or Mr. Burns buying 12 greyhound puppies to make a new tuxedo.  

It's easy to worry that the major labels are finally waking up, flexing their muscles, and are getting ready to crush the indie sector, just like Amazon and Walmart have deep-sixed local retailers and countless small businesses worldwide.  

But that's not the story here.  

As "unfair" as a two-tier pay system would be, this is not so much a story about unfairness but just how much the major labels have already lost their grip.    

As recently as ten years ago, most new artists viewed getting signed as a marker of career success. There was a good reason for that, as major labels played a key role for artists in the old world. Majors invested in artists when they didn't have a sizable fanbase, paired them with great creatives to aid their development, provided exposure with marketing teams and radio promotion, and accessed distribution in ways no one else could.  

For decades, there was no meaningful path to get even close to the charts without a label contract. This was the source of the labels’ power and the thing that allowed them to amass the mountains of IP that earn them billions in profit today.  

But that world has changed. Today, plenty of artists top the charts and win Grammys without the help of major labels - even artists on DIY platforms (who aren't even on indie labels) are reaching No. 1. Canadian singer-songwriter Lauren Spencer Smith and French hip-hop artist LANDY, both TuneCore artists, have topped charts this year. TuneCore isn’t the only independent distributor to have achieved such a feat. It won’t be the last either.  

Global streaming platforms have lowered the cost of distribution and enabled artists to develop huge fanbases and create momentum without the (formerly unique) marketing capabilities that resided within major labels. According to MiDIA research, fewer than 30% of independent artists think signing with a label is "important to their career." Even half of the artists who have already signed to a label don't believe it’s essential to their success.  

As a result, major labels aren't just losing market share; they're already minority players in new music. Let’s walk through the math. Majors maintain between 60% and 70% market share (the exact number depends on whether share is based on ownership of music or distribution and whether some large indie labels count as "major" or not). But, as recent Nielsen reports tell us, about 70% of all music consumption is catalog, and the majors are sitting on mountains of it from when they had upwards of 90% of the market.  

So, if majors have even 80% share of catalog, and catalog is 70% of the market, that means that their share of new music across the world has to be much less than their overall share — possibly even less than 40%. That’s simple math. 

Majors also have an even smaller role in developing new artists at the very earliest stages of their careers, which is where all the long-run value, leverage, and power in the music industry comes from in the first place. Most new artists signed by majors today have already developed a fan base and a ton of momentum. Strong and scrappy management teams, more efficient independent labels, and artist service companies - all of whom leave the bulk of IP ownership with the artist - have stepped in to fill the void left by the major’s abandonment of new artist development. 

Given all this, any move by the majors to create a two-tier pay system looks less like a power move and more like the old guard trying to milk their assets before the music stops. A push to get legacy and superstar artists paid more - and indie or developing artists paid less - represents another incremental step away from a commitment to new artist development.  

Efforts to leverage preferential rates, however, are likely to be fleeting and marginal at best.  

The DSPs know the majors are losing share and that new artist development isn't what they do anymore. They also know that even though 70% of music consumption is from catalog, new music and artist development is where the game is played; 50% of music consumption is from songs released in the last five years. So, before long, the minority position of the majors in new music will become a minority position in catalog. Given this set of facts, don’t expect the DSPs to hand the majors better rates and more leverage when they've already lost hold of the source of their power. It’s just not in the DSPs’ interests. 

As evil an impulse as the push to create a two-tier system may be, it's not major labels that independent artists have to fear; it's independent artists who are scaring the major labels, and rightfully so.