Growth is usually treated as evidence of strength.
More artists.
More songs.
More territories.
More revenue streams.
More customers.
More partners.
All of that sounds like diversification.
But I have been thinking about something.
Can a music business become more diversified on the surface while becoming more concentrated underneath?
I think it can.
A company may have fifty artists, thousands of songs, several revenue streams and business across multiple territories.
From the outside, it looks diversified.
But what if most of the money still comes from a handful of artists?
What if most of the catalogue value sits in a small number of songs?
What if one territory contributes a disproportionate amount of revenue?
What if several revenue streams ultimately depend on the same group of clients?
The business has grown.
It may have become more valuable.
But it may not have become more resilient.
A Bigger Business Does Not Automatically Mean A More Diversified Business
Consider a company with fifty artists.
That sounds like a broad artist base.
But if five artists generate most of the revenue, the underlying economics are still highly concentrated.
The same thing can happen with a catalogue.
A company may own or control thousands of songs.
But if a relatively small number of works generate most of the income, the size of the catalogue can create an impression of diversification that the economics do not necessarily support.
The numbers are real.
The perception can still be misleading.
This is what I think of as the Concentration Illusion.
The business looks diverse because there are many things inside it.
But those things may not represent many independent sources of value.
Revenue Streams Can Hide Concentration Too
This becomes even more interesting when we look at revenue.
Imagine a music company that earns from distribution, artist services, marketing and publishing.
Four different revenue streams.
That sounds diversified.
But suppose most of those revenues ultimately come from the same group of artists.
Are those really four independent sources of resilience?
Or are they four different ways of monetising the same underlying relationships?
That distinction matters.
A business can have many ways of making money and still depend heavily on the same people, assets, customers or platforms.
So perhaps the question should not simply be:
How many revenue streams do we have?
It should also be:
How independent are those revenue streams from each other?
Diversification Has A Surface And An Underlying Structure
This is the distinction I find most useful.
There is what the business appears to have.
And there is what the business actually depends on.
You can count the artists.
You can count the songs.
You can count the territories.
You can count the customers.
You can count the revenue streams.
But counting them does not tell you how concentrated the economics are.
A company with fifty artists may be more dependent on five artists than another company with twenty artists.
A catalogue with ten thousand songs may be more dependent on a hundred songs than another catalogue with two thousand.
A business operating in twenty countries may still be heavily exposed to one market.
The number tells you the size of the business.
It does not necessarily tell you where its economic dependence sits.
The Same Dependency Can Sit Behind Different Revenue Streams
This is perhaps the part that businesses can miss most easily.
Imagine a company that earns money from distribution, publishing, artist services and licensing.
The revenue appears to come from different activities.
But if all four depend heavily on the same group of artists, there is a common dependency sitting underneath those businesses.
The revenue streams are different.
The underlying exposure is not.
This is why I think diversification should be looked at on more than one level.
What does the business do?
And:
What does the business ultimately depend on?
Those are not always the same answer.
Concentration Is Not Necessarily A Bad Thing
This does not mean concentration should always be avoided.
Some of the most valuable music businesses are built around concentrated assets or relationships.
One artist can transform a company.
One catalogue can become enormously valuable.
One market can become strategically important.
One platform relationship can create significant scale.
Concentration can create value.
The issue is whether the business understands where that concentration exists.
If management knows that a large part of the business depends on one artist, one catalogue, one client or one platform, it can make decisions with that knowledge.
The problem comes when the dependency is hidden by the apparent size and diversity of the business.
Growth Can Make The Dependency Harder To See
This is where growth becomes interesting.
Imagine a company that starts with ten artists.
Over time, it grows to fifty.
It enters new territories.
It adds new services.
It builds new revenue streams.
The organisation becomes larger and more sophisticated.
But if the original two or three artists continue to generate most of the economics, the business has increased its surface area without necessarily reducing its underlying concentration.
That is not failure.
The growth may still be creating enormous value.
But the business may be more fragile than its size suggests.
And the larger it becomes, the easier that can be overlooked.
Because the organisation now has more departments, more products, more markets and more numbers.
The underlying dependency can get buried inside all of that activity.
Count The Dependencies, Not Just The Assets
This changes some of the questions I would ask when looking at a growing music business.
Not just:
How many artists do you have?
But:
What percentage of your revenue or value comes from your largest artists?
Not just:
How large is the catalogue?
But:
How much of its value is concentrated in a small group of works?
Not just:
How many revenue streams do you have?
But:
How much do those revenue streams depend on the same underlying relationships?
Not just:
How many territories are you operating in?
But:
How exposed are you to each of them?
And perhaps one of the most important questions:
If one major relationship disappeared tomorrow, how much of the business would actually change?
That question can reveal more about resilience than the number of revenue streams on a presentation slide.
The Doors May Be Different. The Room May Be The Same.
A business can have several ways of making money without having several independent sources of resilience.
The doors may be different.
But they may all lead to the same room.
That is why I think there is an important distinction between diversification and resilience.
Diversification describes what the business owns or does.
Resilience depends on what the business ultimately depends on.
A business isn’t diversified simply because its revenue comes through different doors.
You have to ask whether those doors lead to different rooms.
What Should Growth Really Create?
I don’t think the answer is to eliminate concentration.
That would be unrealistic.
And sometimes concentration is exactly where the value comes from.
The more important question is whether growth is creating genuinely different sources of value and reducing dependencies where the business does not want them.
That requires looking beyond the number of assets, services and revenue streams.
It requires understanding what actually drives the economics.
Because a business can have more artists, more songs, more markets and more ways to make money and still be heavily dependent on the same few things.
Growth creates scale.
But scale does not automatically create resilience.
Sometimes it simply makes the underlying dependency harder to see.
And perhaps that is one of the questions a growing music business should ask more often:
We have become bigger. But have we actually become less dependent?
Written by:
Amit Dubey
Founder, Beat Street Music & Publishing | Music Business Strategist
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