The Orchard: The Place of 'Indie-Focused' Major Label Subsidiaries in Today's Music Business

In recent years, major labels (Universal, Sony, Warner) have experienced a consistent decline in market share on streaming platforms like Spotify. This is because the rise of independent artists and labels has led to an increase in the amount of music being uploaded.

Per Spotify's yearly report, the market share of major labels on the platform went down to 75% in 2022 from 77% in 2021. This decline has been consistent since 2017 when their market share stood at 87%. The major labels are understandably concerned because streaming now accounts for over 80% of recorded music revenue.

In the past, artists had limited options and often needed to partner with major labels to reach a wider audience due to the high costs of physical production, distribution, and marketing. However, with the advent of digital consumption and streaming platforms, artists and independent labels now have more accessible pathways to global recognition. 

As new developments call for new business strategies, major labels have now invested in independent-facing alternatives to their traditional labels, widely known as Label Services. 

• Universal Music has Virgin Music Group

• Sony Music has The Orchard and AWAL

• Warner has Alternative Distribution Alliance (ADA) and Level Music

These companies now play a significant role in the strategy and modus operandi of major labels. Artists can leverage the influence, global machinery, expertise of major labels for short-term licensing/distribution of their work while retaining actual ownership. 

It just makes sense that the best ways that major labels can maintain streaming market share will be through independent alternatives to their traditional approach. 

While Label Services are major labels’ strategy to counter the market share shift towards independent distribution, it is worth noting that major labels often do not promote themselves as an interconnected services stack comprising their independent-facing subsidiaries.

The overarching concept behind this strategy is to ingest a larger volume of independent music into their system through dedicated indie-focused operations like Virgin Music to Universal; The Orchard to Sony; and ADA to Warner.

Between Distribution Service and Label Service Companies

Label service companies have a distinct advantage over regular distribution service companies as they provide independent labels and artists with access to expert skills and relevant resources for marketing and promotion.

Let's explore their use cases: Regular distribution services such as DistroKid, CD Baby, TuneCore, and Ditto offer cost-effective options for independent or DIY artists starting out; allowing them to release music to streaming platforms. However, these platforms primarily focus on basic distribution and lack personalized support in key areas such as playlisting and marketing. 

This is where label services like Virgin Music, The Orchard, and ADA excel. Unlike the aforementioned distribution services, these Label Service companies take a more selective approach to partnerships with artists and labels. They value mutual dedication between their own team and the independent label/artist teams. This ensures the involvement of a professional team that possesses fair understanding of the music business and can provide vital support during the execution process. 

Therefore, platforms like DistroKid, CD Baby, TuneCore, and Ditto are not direct competitors to label services like Virgin Music Group, The Orchard, and ADA. Instead, Warner’s Level Music can be placed as a competitor to the likes of DistroKid.

Who Then Are Their Competitors?

Competition among Label Service companies ranges from major label-backed companies to independently-owned label services. In the past years, a number of such companies have emerged in Africa, thrusting for market share. 

Universal's recent launch of Virgin Music Nigeria and partnership with Dvpper represents an aggressive move to outpace contenders like the Sony-backed The Orchard, which inked partnerships with TY Bello, YKB, MUIS three years after entering the market. Warner, however, seems to be missing out as I’m not sure they have debuted an indie-focused subsidiary in Africa yet.

Major label-backed subsidiaries aside, a swathe of independently-owned label services such as ONErpm, IDOL, Horus Music, Zikii Media, Believe have established a presence in the market, vying for market share with new releases and the digitization of older content.

A recent viral moment on Twitter, sparked by a tweet from David Hundeyin featuring the lyrics of the classic hit "Chinwe Ike" from Resonance’s album, shed light on Believe's acquisition of the right to that album, which was previously inaccessible on streaming platforms a few years ago.

Differentiating a Traditional Label (Sony) and their Label Service (The Orchard)

Sony, through its Label Services approach, has found a way to bridge the gap between independent artists and major labels. This approach allows artists to release music on their own terms, while still benefiting from the expertise and industry resources of major labels.

What makes a Label Service company unique is its ability to provide a variety of solutions that can be customized to meet the specific needs of artists and labels. They offer services like distribution, marketing, royalty collection, audience development, and even funding. The flexibility of this mix-and-match approach allows artists and labels to select the services that align with their current career goals or business trajectory.

You can see Label Service companies like accelerators and essential partners for independent artists, labels, or creative entrepreneurs. A significant difference between traditional major labels and label services also lies in their approach to copyright ownership. Traditional majors often prioritize acquiring and owning as many copyrights as possible. However, label services take pride in empowering creator independence and typically declare that they will never own copyrights.

Unlike with traditional labels, contracts between artists and Label Service companies are usually short-term, offering artists more flexibility.

So, to expand its distribution network and counter the impact of DIY and indie distribution on market share, Sony acquired The Orchard to enable access to a broader range of independent acts.

The Orchard

The Orchard, a major player in label services, initially began as a digital and physical distribution company specializing in independent music and film. Their trajectory took off in 2003 with the launch of iTunes, where they fast became a leading distributor of independent music to digital consumers. Just a year later, they achieved the feat of being the first indie digital distributor to surpass one million paid downloads. Expanding its presence into the European market, The Orchard solidified its position as the largest distributor of independent music on iTunes.

Sony Music's involvement with The Orchard unfolded in stages. In 2012, Sony acquired a 51% stake in The Orchard through a deal reportedly worth between $50 to $100 million in cash and equity. Then in 2015, Sony took complete ownership by acquiring the remaining half for $200 million, making The Orchard a wholly-owned subsidiary of Sony Music Entertainment.

Despite being under Sony's umbrella, The Orchard operates autonomously within the larger company. In 2019, Sony sold The Orchard's Film and Television division, which was subsequently rebranded as 1091 Media, allowing The Orchard to solely focus on music distribution and services.

The Orchard's impact on Sony Music's overall business strategy has since been evident, as Sony's CEO, Rob Stringer, revealed The Orchard generates hundreds and hundreds of millions of dollars in revenue.

Representing over 17 million tracks from 26,000 independent labels that it distributes, its success with artists like Bad Bunny, RAYE, Ozuna, Jorja Smith, T-Pain, BTS, 21 Savage, RedBull Records has propelled The Orchard to capture a 7.0% market share in the US in Q1 2023; surpassing even Sony’s frontline labels like Columbia and RCA. The Orchard's growth has been interesting, with its US market share increasing from 3.5% in 2019; to 4.8% in 2020; 5.3% in 2021, and its current figure.

The successful partnership between The Orchard and Bad Bunny, one of the current biggest names in music, highlights how major labels can gain market share by leveraging their subsidiaries, both through new releases and by capitalizing on the potential of older catalogs.

The Orchard’s Play in Africa

The Orchard has made significant executive appointments in key African markets, including South Africa, Kenya, Nigeria etc.

Leading the Johannesburg office is Mpumi Phillips, serving as the Director of Distribution. In Nairobi, Beth Achitsa oversees Artist and label Relations while in Lagos, Ikechukwu Onuorah holds the position of Director of the Nigerian division.

Notably, Lanre Masha has been appointed as the Director, West Africa, where he will be instrumental in driving The Orchard's presence in the Francophone and Anglophone parts. Masha will report to Prashant Bahadur - EVP, Head of Strategy, and collaborate closely with Ben Oldfield - VP, Market Development for Africa.

Within a short time, Masha has facilitated The Orchard's expansion into French-speaking West Africa and Ghana, while strengthening presence of the Lagos team. He has also played a crucial role in signing the Ghanaian hip-hop duo R2Bees while introducing artists like Lojay and Patoranking.

The Orchard has ambitious plans to further expand its presence in Africa, with a focus on countries like Rwanda, Tanzania, Lesotho, and more. The company has already made significant strides, working with notable South African artists such as Busiswa, BlaQ Diamond, Babes Wodumo, and labels like Ambitiouz Entertainment (ex: Emtee) and Ghetto Ruff.

In West Africa, The Orchard has history with artists like Lady Donli, Wavy the Creator, Zinoleesky, Mohbad, Ghanaian Banku, Juls, and labels like Marlian Music. In East Africa, they have since collaborated with Maurice Kirya, Bushali, Eric Wainaina, Green Ferry, and Bongo Records.