Music Industry, an infinite Journey:
Part III – The Future

Music Industry – 2020, is there anybody out there?

Downloads vs Streamings, the War is Open

Werner Reiter likes it.

Considering we all live in this current era, most of you already know the differences between downloads and streaming. Rather than repeating known elements, we will focus on studying what is implied by them and how they will impact upcoming years.

Before checking those differences, let analyze specificities brought by downloads. Historically, we have always been exposed to a restricted number of songs. As a result it seemed quite normal to also buy a restricted number of records. Internet destroyed this reality, nowadays, we are exposed to a far greater number of songs from way more artists.

As levels of both discovery and awareness naturally increase, the average consumer has more knowledge than in the past. People never listened to as many music as during the digital era. This trend will accelerate in the future considering 8-12 years old kids listen to over six hours of music per week, over twice as much as during the physicals era. This overall increase in knowledge and culture concluded into a unseen situation: in the US in 2015, for the first time ever, sales of catalog items, e.g. songs and albums over 18 months old, topped sales of new releases. This is true for albums (catalog 122,8 million, new 118,5 million) but also for songs downloads (catalog 484,9 million, new 479,8 million).

Therefore, consumers naturally expect to listen to a large set of songs, they do not want to be limited to a few new releases anymore. That’s the outrageous nonsense of downloads: an open window on the entire music world that requires you to pay for each and every small piece you wanna hear. Streaming solves this anomaly.

Another fundamental difference between both systems is that downloads, although being dematerialized, still require you to own a physical device with the song stored on it to listen to the tune. On your friend’s house, you can’t listen to your playlist unless you spent your precious time in copy and synchronization processes. On that same friend’s house, you barely need to open a web browser and log in into your streaming platform to get all tracks you want and all your saved playlists.

Which advantages downloads provide over streaming? There have been mostly two. The main one was that owning a song enables to listen it despite having no internet connection. This is a key factor has most of the moments favored to listen to music include travelling in car, moving in public transports or during vacations. This problem is mostly solved by paid subscription in streaming platform as most of them provide the capability to download a certain number of songs locally.

The second positive side of downloads is to pay only one time for a specific song. With streaming, even if you listen to zero new music compared to previous month, or even zero music at all during a month you will still pay your monthly fee. This is an issue in theory only yet. As shown with mobile unlimited subscriptions as well as a few years later internet connections of smartphones, once the habit of using such a services is taken the consumer can’t get rid of it anymore, they don’t won’t to lose this service.

6 thoughts on “Music Industry, an infinite Journey:
Part III – The Future”

  1. This is another fascinating article, quite long and detailed, with plenty of numbers, as I like.

    There are way so many things to comment, but one of them is about record companies. You are projecting the whole music industry (mostly thanks to streaming) will easily top the earnings achieved in 1999, record year. The question is, are record companies prepared for this sort of tsunami? Do they understand what it is going on right now? It seems you have been able to grasp this, but, overall, most people (both consumers and probably majors’ executives) don’t fully comprehend this phenomenom. It is like some of these things are passing unnoticed by most chart watchers and experts; most of them tend to be conservative and impugn Spotify and similar social services.

    In other words, what I’m asking is: how will promotion work once the streaming/subscription system is totally developed to stay? Traditional promotion may not work in this new stage. And I guess this new technology, far more democratic, may open room for smaller record companies.

    1. Hello Hernan! Indeed, this will be a real tsunami for the industry. Most of the industry is aware of how much profit they can make in the future, which explains why all there have been several strong movements to get a bigger share of this new pie lately. I expect years 2016-2018 to be marked by a ferocious war between all actors to take the lead and end on a powerful position to negociate as good as possible.
      I do not expect promotional campaigns to vary much yet as they are impacted by numerous external factors – radio programs, TV programs etc. The main difference should be that artists should get a higher profile promotion overall, just like it was the case in the 90s. B-League worldwide acts will be strongly promoted, A-League acts will have air-time on largest channels etc. unlike recent years that saw most acts be promoted only on local / network channels.

  2. Plus, you have also thrown another vital factor, not studied either up until now: the role of China in the future music industry.

    As the years go by, technology gets cheaper and thus more people across the globe has access to it. Smartphones are more “democratic” than the already old music players, so the market for music is potentially bigger than it ever was. This means more people in developing countries are starting to consume music in a way that was probably impossible some years ago.

    But China is a different story. Their music market is getting bigger not only because of technology but because of the country’s level of growth.

    I’m rasing this issue because, over the past 15 years, China has produced a huge impact on both the food and agricultural market. They eat more and better than in the past (adding basically pork and chicken to their diet), elevating the price of soybean, wheat, corn and meat (plus many fruits and beverages, like wine). Can they “distort” the music market like they did with food, for instance?

    Now not only are they eating better, but they are starting to consume music like in the Western world. Of course, USA, Europe or Australia will be consuming more music per capita than China, but China will have a role it has never had before.

    Perhaps China deserves a separate essay, don’t you think? The consequences (I’m not saying “consequencies” in a bad way, of course) of China finally entering the music industry haven’t been analysed yet. And it would also be interesting to know: which Western acts are popular there?

    1. Hello again Hernan! Indeed, demographics will change big time in upcoming years. In the 50s/60s, the world music industry was massively oriented towards English-speaking countries. In the 70s/80s, developped countries got included in the discussion – France, Germany, Japan & such. During the 90s, even small / isolated countries got a decent music market like most Asian countries, Brazil etc. During recent years, this phenomenon stopped with the map even coming back to the 70s situation – we can see how Adele’s 21 sold almost 19m copies out of 29 in North America, UK and Australia alone. The reason is that music industry isn’t profitable enough to develop local business, thus majors closed their offices in smallest countries (music sales wise).

      Streaming, as you mention, is incredibly democratic as Mexico or Brazil for example end up being as big or even bigger than France or Germany.

      China will be a tremendous actor in upcoming years. In movies industry for example, the 1999-2005 Star Wars trilogy grossed less than $20 million there. The new album is over $120 million alone by now. Fast & Furious 7 grossed more in China ($391m) than in the US ($353). The once irrelevant market is expected to become the biggest in the world as early as in 2017. Situation will be no different in the music industry with streaming arrival. In a few years only one may expect China results to top even the US music industry.

  3. Call me conservative. But somehow I missed the old days of going to the stores and buying physical album sales. People appreciate artist as well as their album so much more than today.

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