Music Industry, an infinite Journey:
Part II – The Present

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After having reviewed the music industry history, what strikes the most is that it goes further than the simple model of an album / single by an artist the consumer buys. All schemas are possible. The album format, the physical record, the music player, the artist, the singer, the major: all those elements, as essential as they may seem, have all been left out of the industry model at some point. There is only two elements that ever remained and ever will: the music and its purchase.

Here again, we are wrong. If every era had at least one supposedly essential element ignored, the newly debuting era will get rid of one new element: the purchase of the music. Economical model structured around the purchase of a standalone music piece (song or album) is over. In the end, and incredibly naturally, the only element that appears to be really essential in the music industry is the music itself.

If we look around at other industries, not being limited to music one, the Cloud is revolutionizing various methods. Companies understood the possession doesn’t need to be physical and that even digital products do not need to be stored locally. Why would we ask millions of people to download a song if everyone may listen to the same shared file?

Coming back to the composition / the recording / the media panorama, we realize the latter category will now be a shared media which won’t be purchased anymore, consumer simply purchase the right to access this media.

Is this model sustainable?

A key indicator on 2014 and 2015 reports, more important even than the drop of downloads, is the increase of streaming. Each one is worth about $0,006 for the music industry. Clearly, tons of streams are necessary to compensate revenues lost because of sales fall. In the US alone, 163,9 billion streams were registered in 2014, a gigantic of 54,5% boom, before exploding again in 2015 to 317 billion, an increase of 92,7%. While the IFPI has yet to publish the Digital Music Report related to year 2015, streaming helped digital sector (that encapsulates both downloads and streaming as well as a few performance rights) to continue growing, meaning the revenue increase of streaming more than made up the fall of download sales. Digital market revenues worldwide per year:

  • 2009: $4,4 billion
  • 2010: $4,7 billion
  • 2011: $5,3 billion
  • 2012: $6,0 billion
  • 2013: $6,4 billion
  • 2014: $6,9 billion

By the end of 2014, there was 41 million paying subscribers to streaming platforms, led by 15 million subscribers to Spotify. While there has been no official data issued at the end of 2015 so far, Spotify alone increased its subscribers to an estimated 25 million while newly created Apple Music  hit 10 million within’ six months. Last Deezer count was on 6,3 million while Jay-Z‘s Tidal passed the million mark. Overall, the number of paying subscribers to streaming platform is likely around 70 million by now. The increase has been outstanding during last few years:

  • 2010: 8 million
  • 2011: 13 million
  • 2012: 20 million
  • 2013: 28 million
  • 2014: 41 million
  • 2015: estimated 70 million

One may wonder why the industry hasn’t jump into streaming from the start rather than wasting time on downloads. The point is, offering 30 million songs, as Spotify does, implies immense fixed costs. Despite amazing results the Swedish giant had a cumulated loss of $400 million from its creation to the end of 2014. Strong marketing investments and expensive deployment plans in new countries are causing this situation. Expectations are still fairly good as effectiveness of promotion will automatically increase as the amount of people turning down former sales system increase as well. Spotify or Deezer also had the handicap of starting from zero with no trademark. The 2015 arrival of industry monsters like Apple and Youtube will push streaming results in a new dimension.

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One thought on “Music Industry, an infinite Journey:
Part II – The Present”

  1. This is a fascinating collection of essays, I want more to come.

    The most interesting thing is what it shows about our current world. When it comes to music (and any other thing), the “hardware” part has never really been that important. And it is all the more clear now that we are approaching an era where the physical format will be insignificant. It is all about the knowledge.

    Many societies work around that, but I know many countries, including mine, where most people associate progress with the manufacturing sector, whilst it is actually the services (knowledge-intensive) sector that brings progress. Well, not sure if I’m making any sense out of this. Very intriguing.

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