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Expand chart
Illustration: Caresse Haaser, Rebecca Zisser / Axios

An explosion in people paying for music via streaming services is helping to revive the decades-old record label business, which is now preparing for a slew of public offerings.

Why it matters: "There hasn't been this much optimism in the music business since the invention of the CD," says Ross Gerber, co-founder, president and CEO of Gerber Kawasaki Wealth and Investment Management.

Driving the news: Record labels are eyeing public exits at huge multiples of what they were once worth just a few years ago.

  • Universal Music Group is planning an IPO within the next three years, according to its parent Vivendi's latest earnings report out last week. In December, Vivendi sold 10% of UMG to a group of buyers led by Tencent Holdings, valuing the company at $33 billion.
  • Warner Music Group said two weeks ago that it's filed to go public. The company is owned by Access Industries, which is owned by billionaire Len Blavatnik, who also owns the streaming service DAZN. Blavatnik bought Warner Music in 2011 for $3.3 billion. It's likely Blavatnik wants to bring Warner public now after seeing UMG's valuation skyrocket with the Tencent stake sale.

Be smart: Record labels have increased their valuations by huge multiples in just a few short years, not because they are bringing in more money historically than ever before, but because they are on an upward trajectory.

  • "The music industry still hasn't touched the revenue that it used to make 20 years ago," says Gerber, "but it's going up versus going down."
  • "There's been double digit revenue growth for each of the last three years," says Larry Miller, Professor and Director of the Music Business Program NYU Steinhardt.
  • "Wall Street respects that momentum."

How it happened: "The record companies have transformed themselves into music entertainment companies that provide services to all artists at any stage of their career and regardless of whether they are signed to that label," says Mitch Glazier, Chairman and CEO of the Recording Industry Association of America (RIAA) in a phone interview with Axios.

  • "[T]hat kind of diversification expands revenue options, creates more opportunity in the industry and creates more competition," says Glazier.
  • Glazier notes that record labels today provide everything from social media strategy to merchandising for artists, not just distribution deals.
  • Miller notes that in the digital era, not every artist will rely on a label for distribution. "Labels are much more willing and in fact must meet the artists where they are."
  • He notes that today, technology makes it easy for artists to upload their own content to platforms like YouTube or social media where they can be discovered. He does note, however, that promotional teams at record labels are a huge help in getting many artists discovered.

Yes, but: A slew of public offerings may indicate that executives think there's a growth ceiling on the horizon.

  • Studies indicate that most consumers aren't willing to pay much more than the roughly $10 monthly they pay for music streaming services, and unlike video services which are differentiated with exclusive content, most consumers will only pay for one audio streaming service.
  • "I think that's why these companies want to go public now. I think there's some growth limits to this model," says Miller.
  • Music subscription services that tried to go the exclusive content route, like Tidal, haven't been as successful as the big 3 services: Apple Music, Spotify and Amazon Music, which offer as much content as possible for a low monthly subscription fee.

By the numbers: Paid subscriptions now account for about 80% of streaming music revenue. According to Glazier, that's up from about 25% just five years ago.

  • "Five years is a short amount of time for an industry, even one adapting quickly. That kind of transformation in revenue base and streaming growth adoption for subscriptions is really remarkable," he says.
  • According to recent earnings and company reports, Amazon Music currently has roughly 55 million subscribers. Spotify has about 124 million and Apple Music has more than 60 million.
Expand chart
Reproduced from Recording Industry Association of America; Chart: Axios Visuals

The bottom line: "If you were to walk through any of major or large independent record companies today, they are exciting places. They're fun. The vibe is amazing. Ten years ago, not so much," says Miller.

Go deeper

Biden to sign 15 executive actions on Day One

President-elect Joe Biden. Photo: SAUL LOEB/AFP via Getty Images

President-elect Joe Biden is expected to sign 15 executive actions upon taking office Wednesday, immediately reversing key Trump administration policies.

Why it matters: The 15 actions — aimed at issues like climate change and immigration — mark more drastic immediate steps compared with the two day-one actions from Biden's four predecessors combined, according to incoming White House press secretary Jen Psaki.

Off the Rails

Episode 7: Trump turns on Pence

Photo illustration: Eniola Odetunde/Axios. Photos: Elijah Nouvelage, Alex Wong/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. Axios takes you inside the collapse of a president with a special series.

Episode 7: Trump turns on Pence. Trump believes the vice president can solve all his problems by simply refusing to certify the Electoral College results. It's a simple test of loyalty: Trump or the U.S. Constitution.

"The end is coming, Donald."

The male voice in the TV ad boomed through the White House residence during "Fox & Friends" commercial breaks. Over and over and over. "The end is coming, Donald. ... On Jan. 6, Mike Pence will put the nail in your political coffin."

Big Tech's post-riot reckoning

Photo illustration: Sarah Grillo/Axios. Photo: Tasos Katopodis/Getty Images

The Capitol insurrection means the anti-tech talk in Washington is more likely to lead to action, since it's ever clearer that the attack was planned, at least in part, on social media.

Why it matters: The big platforms may have hoped they'd move to D.C.'s back burner, with the Hill focused on the Biden agenda and the pandemic out of control. But now, there'll be no escaping harsh scrutiny.