Music labels: a rake too far

In 2013 Bill Gurley wrote a blog post titled A rake too far: Optimal platform pricing strategy. It’s an amazing guide to how much middlemen take in different industries and leads to the conclusion that if you’re taking more than 10-20% out then you are ripe for disruption. It is one of the top two posts that I refer entrepreneurs back to (the other is Fred Wilson’s Employee equity. How much?).

I’m thinking about that today because I’ve just read that music labels keep 73% of the money paid to them by music streaming services Spotify and Deezer. The artists and songwriters get just 27% between them.

labelpayout

That is definitely a rake too far. Bandcamp and others have been after this market for a while, but labels are ripe for disruption. Have been for a long time.