Monday, February 21, 2011

Another very interesting look at the music industry


Last month I cited an English study, and concluded, 'Methinks the music industry doth protest too much!' Now a Business Insider study of the US music industry makes me wonder whether they get it at all. Here's a short excerpt.

Turns out that, somewhat unsurprisingly, the recording industry makes almost all their money from full-length albums.

Equally unsurprising, no one is buying full albums any more.




That’s just over 1 album per person per year now, and only 0.25 downloaded albums per year.

. . .

What Does The Future Hold?

Let’s dig deeper into those precious few newer sources of revenue, all of which were at zero in 2003.




Downloaded albums & singles have grown nicely, but we’ve already established that is not nearly enough to offset the loss of the physical equivalents.

Mobile, which includes 'Master Ringtunes, Ringbacks, Music Videos, Full Length Downloads, and Other Mobile', hit its peak in 2007 and has actually been in decline the past 2 years. Looks like the death of the ringtone - and possibly the birth of the iPhone?

Subscriptions - presumably Rhapsody, Zune Pass, and the like - have also drifted downward the past 2 years.

To reiterate what I was very surprised to find: two of the big new areas, mobile and subscriptions, appear to both already be in decline.

That only leaves internet & satellite radio - Pandora, etc - and others that pay via SoundExchange. It had a good uptick since 2007, but that’s when they negotiated royalty rates for online broadcasters. Even if they maintain some solid growth, it still adds up to a pittance.

Looks like the smaller and shrinking recorded music industry is here to stay.


There's more at the link, including lots more graphical representations of music industry data. It makes very interesting reading.

This is a wonderful example of how technology can change, not just a market, but an entire industry. I'm sure many are familiar with the oft-quoted example of the 'buggy whip industry'. Other examples would include newspapers and the railway industry, as the New Yorker pointed out a few years ago:

Newspaper readership has been slowly dropping for decades - as a percentage of the population, newspapers have about half as many subscribers as they did four decades ago - but the Internet helped turn that slow puncture into a blowout. Papers now seem to be the equivalent of the railroads at the start of the twentieth century - a once-great business eclipsed by a new technology. In a famous 1960 article called 'Marketing Myopia', Theodore Levitt held up the railroads as a quintessential example of companies’ inability to adapt to changing circumstances. Levitt argued that a focus on products rather than on customers led the companies to misunderstand their core business. Had the bosses realized that they were in the transportation business, rather than the railroad business, they could have moved into trucking and air transport, rather than letting other companies dominate. By extension, many argue that if newspapers had understood they were in the information business, rather than the print business, they would have adapted more quickly and more successfully to the Net.


There's more at the link. If you're interested, Theodore Levitt revisited the concept of Marketing Myopia in a short 2004 article. It's also worth reading.

It seems to me that the music industry is running around in circles, trying to make consumers buy their product in the way - and in the quantities - that they did before, while refusing to accept that advances in technology - and consumer adoption of that technology en masse - have changed their market forever.

This is not a good way to survive and prosper.

Peter

2 comments:

SpeakerTweaker said...

I've been saying for a while that it is precisely this that made the difference: the return of The Single. Remember when you could buy a 45, and later a cassette tape with the hit song on one side and another song - frequently unavailable anywhere else to make it the package more appealing - for those who wanted the hit?

Well, in those days, if you wanted to make it, you had to sell whole albums. In order to sell whole albums in that day, you had to make a whole album of great music. Sure, some garbage got through, but for the most part the whole album had to be at least good, if not great, in order to have a shot at all. If you'll recall, that's also when single acts could go on tour with one support act and sell out an arena.

The CD, with all its digital glory, brought about the end of the single. It became more and more common for hit songs to be featured on albums full of filler material that completely sucked rocks up off the ground. Gauge this by modern tours. You almost don't see an arena tour anymore unless it's got seventeen friggin bands on the bill, and all the tickets are north of three figures unless you want to watch the show through binoculars.

Enter downloads, where you can purchase singles all day long, never purchase whole albums unless you like the whole thing - and you have the added advantage of previewing the album from the comfort of your home. Furthermore, with digital recording being such a breeze to get into, artists can effetively self-publish and start making money on their material long before any contracts with major labels are even considered. Add to that the plethora of minor labels out there, and you've spelled disaster for major-label record companies.

I liken it to domestic autos. They've been cramming crap down our throats for years now, and the market responds by breaking all the traditional rules and collectively sending a big middle finger to the giant soulless corporation bigwigs.

I love it. I'm all for it. The industry higher-ups are going to have to change, and there's not a bloody thing they can do about it.

Anonymous said...

I can't do better, so all I'll say to that is ditto!

Jim