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Hey, happy holidays! It’s been good to see several startups in the industry close out the year with big announcements: Breakr, Medallion, Baton, We Are Giant, and CreateSafe, and others have all raised bigger rounds in the last few weeks. There’s a lot more to company success than raising money, but it’s been a challenging year for the sector so these deals should encourage other founders to believe there’s opportunity out there. Excited to make the space even stronger in 2024.

This is the last Trapital episode of the year. We answered a crucial question for the soul of the business: Can today’s new stars ever surpass the existing superstars?

To break it all down, I was joined by Tati Cirisano from MIDiA Research. You can listen here or read a few highlights below!

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Which young artists have the best shot?

This episode's topic kicked off with a text exchange. I shared this tweet with Tati about how Dua Lipa’s song “Houdini” dropped in the charts after its initial release. It’s a good song that Dua did a bunch of press for, but the moment came and went. It was like a viral video that everyone in the group chat saw once or twice, said how much they liked it, but moved on to the next thing soon after.

In a prior era, Dua Lipa would have been the biggest artist in the world after Future Nostalgia and “Cold Heart” with Elton John. But today, she’s a hit-to-hit star. Dua is one of a dozen big stars who are commercially successful. Still, the current fragmented landscape makes it nearly impossible for them to be as big as the superstars who came decades before them, like Taylor Swift, Beyonce, Drake, or Adele.

Some of these younger stars have better shots than others. Bad Bunny is arguably already there. The Puerto Rican rapper is Spotify’s most-streamed artist of the year four times in a row. Artists like Bad Bunny, Burna Boy, and Karol G reach global audiences that are far less saturated than the US and UK. Unfortunately, the streams from those markets don’t pay nearly as well as the streams from regions where streaming service subscriptions cost more money. Latin music generates $1.10 around 1,000 streams compared to 3-4x higher for other genres.

But the current landscape makes it even tougher for the newer US and UK acts to reach that same level. Billie Eilish, Doja Cat, Morgan Wallen, SZA, and Olivia Rodrigo are all major stars, but this year they competed for attention in a year that was dominated by (relatively) older superstars who have been hitmakers longer than some of them were born. It’s music’s version of LeBron James and Tom Brady dominating competition that’s closer in age to their children.

This dynamic is even stronger given the growing demand for superstar tours. It takes time for an artist to build a fanbase that warrants a global stadium tour in the biggest venues in the world. It’s a much longer timeline than getting billions of streams.

Several of the stars we discussed plan to upgrade to stadium-level tours soon, which is great. But even if they sell out, it takes several tours to get to the frenzy we saw from Taylor Swift and Beyonce this past year (and likely will for years to come).

You can listen to the full episode here or read below for more highlights.

How this shifts industry economics

It’s in a company’s best interest to attract and retain the current superstars on their roster, even for artist-friendly terms. The proven stars have leverage since most newer stars can’t reach the proven star’s level. Proven stars are a finite resource. It’s not because the newer stars aren’t less talented. Many of them are more talented than the proven stars if we’re keeping it real. But today is a different era.

But how favorable is too favorable? In 2022, former Warner Music Group CEO Stephen Cooper shared skeptical thoughts on Taylor Swift’s licensing and distribution deal with Republic Records and Universal Music Group.

The logic is easy to follow. The major record labels have supplier power because of their valuable back catalogs. If they no longer own those assets moving forward, then that power erodes over time.

For Taylor Swift though, it’s hard to call her commercial success “a little bit of revenue.” She had five of the top eleven best-selling albums of 2023! Would a major record label rather receive a skinny distribution charge from the estimated $400 million value of Swift’s music released since 2019 (and count her sales toward their year-end market share) or own the masters of some viral TikTok sensation who’s lucky if they recoup their $4 million advance?

Plus, newer stars are signing artist-friendly deals too. Olivia Rodrigo reportedly maintains control of her masters in her current deal with Geffen Records.

In the same talk, Cooper did say that Warner (at the time), had reduced its financial dependency on superstars. The term “superstar” can be subjective, but sentiment makes sense especially since advances are getting larger and talent acquisition costs are rising.

It’s unrealistic to expect a new star to be as big as Taylor Swift. But can a new star be as big as Doja Cat? And if so, how much is that worth paying for since a lot has changed since her career took off? That’s a more realistic conversation.

The grand slam hits may be harder to come by, but the homerun hits are still out there.

The mighty indie model

In Hollywood, the A24 model is praised and beloved. Its quirky movies have a brand, an audience, and budgets that align with expected outcomes. They don’t make Marvel Cinematic Universe-levels of box office revenue (but to be fair, even MCU movies haven’t made MCU money in a while).

Music has several models like this. EMPIRE and Create Music Group both have their lane and serve it well, whether through individual releases, short-term deals, or online creator-centric resources. These are businesses built for the modern, digital-first, fragmented era of music. They can break through in a crowded landscape. Companies like AWAL and The Orchard are the in-house versions of these. They sit under the major labels but can tap into their resources when needed.

Every industry has its version of this. Music is arguably the most challenging since there’s more “noise” than ever, but there are also more success stories from both artists and companies. Several of them were ahead of the curve and built viable businesses in the long tails and areas that the majors and superstars were less focused on.

If you enjoyed the highlights, listen to the rest of the episode for more on:

• similarities in gaming with Grand Theft Auto 6’s $1B+ budget
• where artists like Lizzo, Cardi B, and Post Malone stack up

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