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

Impact Red Marker

Some tips that will impact positively the number of streaming paying subscribers which are estimated over 70 million as of 2015 pending official numbers:

  • The number of smartphones in use will keep booming
  • 3G/4G connections are booming as well
  • The industry is just getting started in promoting streaming platforms
  • Industry catalogs are still not completely available on streaming platforms
  • Sector giants like iTunes and Youtube just ended to jump into the bandwagon
  • Current streaming platforms are of mostly bad quality. Songs are poorly sorted, repeated in each album etc.
  • Offline mode is not fully developed and awareness of it is low

At the very start of this series, I mentioned I initially wrote this piece in French in early 2014. At the time, I wrote about Apple and Youtube not operating in the streaming sector so far – ironically they both did so one year later. Upcoming IFPI Digital Music Report 2016, expected to be released in a few weeks, will show how much of an effect they are doing. I’ll be posting an appendix to this report once it drops.

All factors mentioned ahead result into promising expectations. There have been 250 million iTunes buyers, with 50 to 100 million likely purchasing a subscription before 2020. That’s about at least five times the current count. Assuming the same increases for the full sector would mean 400 million subscribers. As Spotify keeps growing fast while new local Asian services will explode as well, this is a very realistic target. Additional revenues from ads supported streaming would generate the last billions needed to top the all-time 1999 record. Then, there will still remain some casual physicals purchases and performance rights for radio airplay. All in all, forecasts of an $60 billion industry isn’t out of reach, about four times more than 2014 results.

A last point remain which is the good old formula Start cheap & Go Up. This well-known industry technique consists in providing a service relatively cheap, get users usage to turn into a habit, and then increase the price of the service, just like it happened with internet connection. Applying this principle to our case would set subscription prices to $15-20 in the future. This is without mentioning specific subscriptions which will necessarily appear in the future like an additional $2/3 for each family member, or $5 more to couple streaming service with a unlimited download functionality.

I’ll be taking a risky bet to conclude by saying an overall gross of $100 billion within’ ten years is possible. There is only one thing to do if you want to make this expectation a reality – let the music play! Oh, wait, this is about streaming, that’s right, but what about other formats? How will they perform in the upcoming years?

5 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.

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