Hello Reader — happy Friday!

As the holidays approach, we at Water & Music are looking ahead at the major trends that will shape music and tech in 2024. Today, we zoom out and examine macro shifts in who is buying and investing in music rights and tech companies — and all the potential risks involved.

---

The music-tech market is hotter than ever — so hot that it might be reaching a boiling point.

While music and tech have always been tightly intertwined throughout history, the concept of music-tech as a vital investment category has emerged only in the last two decades, with significant momentum bubbling up in the last five years. We can break down this evolution into three stages:

2005–2015: Widening the playing field. This period introduced more accessible models for music production (e.g. DAWs like GarageBand), financing (e.g. crowdfunding platforms like Kickstarter), distribution (e.g. social content apps like SoundCloud), and consumption (e.g. streaming services like Spotify) — laying the groundwork for more people than ever before to participate in the music economy, as both creators and consumers.

2015–2020: Turbocharging investment. This period saw a new influx of revenues and financing to support a wider playing field in the music business. 2015 in particular was a major turning point: Not only did the global recorded-music sector register annual growth for the first time in 15 years thanks to streaming, but investment in music-tech startups also doubled from the year prior, to just under $2 billion. Music rights, and the infrastructure that supported them, were seen as increasingly valuable to outside financiers — leading to a string of industry IPOs between 2018 and 2020, from music-tech companies like Spotify and Tencent Music, record labels like Warner Music Group, and catalog acquisition funds like Round Hill and Hipgnosis.

2020–present: Experimenting by brute force. The COVID-19 pandemic wiped out $30 billion in annual revenue from live shows, bringing a sudden, unforgiving wave of disruption to the entire music business. To cut through the noise, connect directly with fans — and, fundamentally, survive — artists and music brands embraced unprecedented levels of experimentation with new tech channels, especially in livestreaming, social audio, gaming, Web3, and generative AI. Both private and public investors poured money into music companies leveraging this digital transformation, as illustrated in major VC rounds for startups like Royal, Splice, and BandLab and IPOs from the likes of Universal Music Group, Believe, and Deezer.

---

As a result of these shifts, the shape of commercial power in the music business looks quite different, and much more crowded, from 20 years ago.

Major music rights holders and tech companies are now expected to generate profits for a dizzying array of stakeholders sitting outside of industry borders, including banks, private equity firms, big-tech conglomerates, and sovereign wealth funds — not to mention public retail investors.

There has been no central resource tracking these macro shifts in music-tech ownership and financing over time. So, we decided to build out that resource ourselves.

---

The music ownership ouroboros

We built an interactive diagram to map out the macro ownership structures of the modern music business, with a focus on the growing influence of non-industry-native institutions. It is non-exhaustive and intended to serve as a launching pad for further exploration, discussion, and debate on key issues facing the industry’s future.

Over the past four years, we’ve been pulling out investment and ownership changes from press releases, company earnings reports, and stock market coverage from sites like Bloomberg, visualizing these relationships in a color-coded FigJam flowchart.

Some examples of relevant news from 2023:

• ​Kakao Entertainment lands $966 million from sovereign wealth funds, including Saudi Arabia’s PIF (Jan 2023)
• ​Songtradr acquires Bandcamp (Sep 2023)
• ​Morgan Stanley Invests Over $700 Million to Buy Catalogs With Kobalt (Nov 2023)
• ​New Mountain Capital Announces Majority Growth Investment in BMI (Nov 2023)
• ​STG completes acquisition of Avid Technology (Nov 2023)
• ​Muse Group buys Hal Leonard with backing from Francisco Partners (Dec 2023)

There’s an intentional reason why this diagram is overwhelming, at least at first glance. Media publications tend to talk about “the music industry” as a singular, homogenized entity that thinks and acts as one. In reality, the “music industry” is a complex system of many sub-industries, each with their own distinct set of business priorities and incentives. Changes in one part of this system can have significant, long-term ripple effects throughout the rest of the system, in ways that can be hard to foresee without a macro view on what’s happening. (For example: we didn’t realize until building out this diagram that Bandcamp is three degrees of separation away from Tencent Holdings, or that BlackRock is three degrees of separation away from Rotana Group, a media conglomerate owned by a Saudi Prince.)

Upon closer examination, two major meta-level patterns emerge from the diagram that speaks to the boiling point of music and tech that we are currently in. These two patterns can be defined as the globalization and financialization of power in the music industry — both stemming from the idea that the companies at the top of the music food chain may not be what we expect.

Read our full analysis

---

[ICYMI] Artist-DSP relationships in 2024: Top five trends to watch

Over the last several months, we’ve explored the many options that artists and their teams have to leverage DSPs to reach, grow, engage, and monetize a fan base. We've been systematically comparing DSPs’ “For Artists” platform offerings across profile customization, data analytics, and fan marketing, diligently tracking the status of over 80 features in a dedicated product matrix.

What did we find? The good news is that on the whole, DSPs seem to be growing their feature offerings for artists. That said, several recent market forces could significantly change the relationship between artists and DSPs in 2024 and beyond — from company-wide layoffs and new royalty payment thresholds, to competition from social platforms, niche streaming services, and generative AI content.

Read our full analysis for the details:

Dive into future artist-DSP trends

---

Look stylish for the holidays

Our merch line, designed by Ana Carolina, allows you to signal your passion for music-tech innovation in bold style.

We have two new featured collections:

• ​THE ESSENTIALS — Elevate your everyday look with our classic tees, sweatshirts, hats, tote bags, and stickers, all adorned with the signature Water & Music icon and logotype in black and white.
• ​STREAM SEASONS — Bring the language of the future to your wardrobe with this premium collection, featuring the signature colors from our flagship Season reports on emerging tech trends.

As a valued member, you get an exclusive discount — use the code WM-MEMBERS at checkout for 25% off your entire order.

Every purchase you make directly goes to our independent research and education projects. Thanks so much for your continued support! 😊

---

If you'd no longer like to receive our research updates, click here to opt out.