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

By 2020? Keep The Faith, Future is Bright

Physical formats disappearing, downloads crashing, streaming too limited to ever take over, depressing? Obviously not. Clearly, current context doesn’t enable to live again music industry hey-days, but how will be this context by 2020?

As we noticed in previous paragraph, there is two key indicators to forecast upcoming years: the number of paying subscribers and the amount of money they are willing to pay.

The former is limited by smartphone propagation but that one is increasing incredibly well. By 2020, near 6 billion smartphones are expected to be operating. Looking at the example of China, where foreign acts almost never sold a thing – bestselling foreign albums of all-time there struggled to sell half a million copies – there is already over 800 million internet users including 50 million paying subscribers for various downloads services. While last IFPI report ranked China as the 19th largest market for music, the country will most likely rank at least inside the Top 5 by 2020, by that time the country will have over 700 million unique users of smartphones.

The latter indicator, e.g. the price consumers are willing to pay, is also favorable to streaming. In fact, despite $120 being almost twice the old $64 average of spendings, the service is not the same anymore. Instead of buying a few albums, an average streaming service user will listen to more than one thousand different songs per year. No more music player limitation also improves greatly the service, which ends up being naturally worthier. As for the old $64 average, it needs to be separated in two classes: regular buyers and intermittent buyers. First group used to spend a huge $380 per year in music purchases, meaning a spending of $120 for a better service is truly a given for them.

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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