The consequences of the feedback loop
Focusing on the same genre of artists or music leads to increasing homogeneity in the marketplace. This has several consequences for labels, artists and their audiences:
1. Low engagement between artists and their core audiences
Solely focusing on what is popular, leads to a translation of data into artistic compromises just to target mainstream audiences. This leads to a disconnect with actual core target audiences. Record labels underestimate the potential of these core segments in terms of revenue, leading to seized opportunities.
2. Limited creative freedom
Increasing homogeneity in the marketplace in terms of music is also problematic for labels in the sense that they limit the creative freedom of artists. This can lead to less trust in record labels from artists and in the end an increasing amount of artists that prefer to release their material through independent labels. In the end this negatively affects the market shares of the major labels.
3. Extreme bidding wars and exploding A&R budgets
All labels are targeting the same segment of mainstream music consumers. This leads to extreme bidding wars with regard to talent acquisition and exploding A&R budgets. Consequently, because of the high investments, labels cannot afford their expensively acquired artist to fail. So they push even more money into marketing those genre of artists. What results is a high competition between similar artists all targeting the same mainstream audiences. This and the fact that it are actually the core target audiences that are the most interesting in terms of revenue, increases the probability that investments are not earned back.