Is The Music Industry Sleepwalking Into Disaster?
[UPDATED] While the popularity of streaming has been increasing, revenue from downloads has been declining, and as more companies like Apple and Spotify focus on a playlist model of distribution, traditional albums, and the music industry as a whole, could be in trouble.
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Guest post by Darren Hemmings, Founder – Motive Unknown
The recorded music business is entering into arguably one of the biggest shifts in its existence to date - specifically, the speeding up of the death of the album format and with that a campaign structure that has for decades focused on converting fans to album buyers, with the price for that album having occupied a price range anywhere between £4.99 and £15.99 over the years.
But first, let’s start with some facts here:
One: Downloads have been in decline for some time, with streaming being a major contributor to that.
However with Apple Music now live, the world’s #1 music store — iTunes — will fairly certainly now focus more on streaming and less on downloads, thus accelerating the already steep decline. It has only been live a week and already people are noticing their buying habits change. Additionally, existing iTunes links now redirect users to Apple Music — as sure a sign as any as to which service is now the priority.
Two: Both Apple and Spotify have now made clear their intentions to focus on a playlist model that sits somewhere between album and radio in format.
Whether it is Apple’s paid curators-cum-radio stars, or Spotify’s dynamic running playlists, one thing is clear: the emphasis does not appear to be on an album model of consumption, but instead one more akin to radio in which playlists deliver predetermined music — curated either algorthimically, or by paid staff.
Three: Latest research from Midia suggests that streaming music service users are becoming more fickle.
Albums are no longer being streamed and listeners’ focus is very much on the playlists mentioned above. With that, loyalty per-artist is dropping, making it harder for new artists in particular to break through as users are happy to discard genres and take in catalogue across the decades.
If you are a large catalogue owner, these latest developments may well benefit you greatly. Music that has sat unplayed for some time may now see more chance of being unearthed again — and indeed for the likes of Universal, Sony and Warners, with their Digster, Filtr and Topsify playlisting brands respectively, they are already committing to mining their catalogue in this manner to ensure a consistent ‘churn’ of plays that deliver revenue.
But where does this leave new artists? After all, in most labels I have spent time in, the whole model for a new artist revolves around the same mechanisms it has used for years now — namely, album sales.
Discussing this with a friend (who, it is worth noting, has now exited music to working in online marketing in a different sector — a trend I wouldn’t be surprised to see happening more in due course…), Calvin Harris was pointed out as an example of ‘the new artist model’. That is: release a series of killer singles throughout a year, then roll them all up onto a compilation to sell around Christmas time, when — perhaps mercifully for some — the market buying habits swing back toward the physical format so that albums can be presented as tangible gifts.
Certainly that model works — and Harris is proof of that. Is it a model that scales though? No. It is something only that top 1% can really pull off. There are only so many CDs that will be gifted at Christmas, after all.
Alongside the issues above, more and more social networks are emerging, causing a kind of FOMO (Fear Of Missing Out) response from labels and managers. Which social network should my artist be on? All of them of course! When there were maybe three key platforms to service — Facebook, Twitter & YouTube (if we can call the latter a social network) — there was a clear ROI here. The time spent on working these networks paid back by driving sales.
Now though, we have more networks than ever — and the value of each one is diminishing as a result. Furthermore, whilst Facebook’s usage figures remain high, the growth of private messaging platforms like Snapchat, Viber, Messenger and WhatsApp — the last two owned by Facebook, lest we forget — coupled with the simple fact that there are only so many hours in a day, suggest that more and more social interaction is happening privately.
Put simply, where new music in particular is concerned, the music industry is hitting an “ROI Critical Mass” — a point where the time spent trying to be across all networks simply doesn’t stack up. As we move to the post-album world, this situation will only get worse.
Let’s look at this another way: paid advertising is inevitably a part of any marketing campaign. When retailing a £4.99-£7.99 album, driving people through to a retailer at — for example — 20p per website click was gauged as an acceptable balance of budget. But how does this transfer to the streaming age? Given what one stream pays out (figures vary but for now it is enough to know it is less than a penny), and factoring in the fickle nature of consumer behaviour on streaming platforms, is there a demonstrable ROI in driving users to your album stream? I would argue it is certainly up for debate…
So is the end of the music world nigh? Well no — but some fundamental changes need to be made in order to make the model work now. For one, labels desperately need to think beyond the safe haven of an album model and explore what lies beyond that. Within that, more focus is also needed on what genuinely makes money. For too long everyone has trodden the same old paths on the basis they once worked. That has to stop, with a ground-up re-evaluation of what connects with fans and genuinely drives a return on investment.
Additionally, where the indies are concerned, more consolidation is required across labels. It took Sammy Andrews calling out the independent sector at AIM’s Music Connected event to make the indies consider a unified policy around playlisting that might benefit all stakeholders rather than simply the biggest ones. With the most challenging times ahead for indies, I’d argue a discussion is badly needed as to how those labels can come together to better protect their future. New areas should be explored. Knowledge should be shared. But what absolutely cannot happen is for everyone to keep labouring under the delusion that the album model can survive. Right now, all signs point to that simply not being the case.
UPDATE 11/07/15: Thanks everyone for sharing the article and for all the positive responses. This whole topic is discussed in more length on the Motive Unknown Podcast, which you can listen to online here, or find on iTunes and all other good podcasting directories. I also manage a free email list called The Daily Digest that covers the day’s events in the music business along with some editorial commentary, which you can sign up to here.
Heads up Bruce. An article written in 2009 inadvertently got published today!
The future of the recorded music industry is much clearer now. All record labels and all record stores will soon shut down.
Most people no longer buy music. Music is free almost everywhere. More and more artists and bands make their music available for free online.
And in parallel, the book industry will no longer publish books. They will instead publish only short stories and tweets…
Once again the system is moulded around the wrong business model… Based on a one size fits all model that benefits just the few… The Music makers and content creators need to wake up before disclosing their content and look for a better solution…
Grat post I am the person Who like to buy the álbum in digital but also the Cd, i think music is a important business¡ everybody like music.
Very interesting post