The music industry is a very public and volatile one, dominated by risk and uncertainty in signing new artists, and, more so in recent years, a significant change in revenue generation. This shift has been brought about by the increased digitisation of media, moving music away from CDs to digital formats which are rapidly turning it into an abundant resource.
Abundancy in resources creates changes in how the economics of that resource work, which can be both a good and a bad thing. The term applied for discussions on the topic is the ‘age of abundance’ - and there conflicting views on the subject.
Peter Diamindis – chairman of the Singularity University and author of Abundance: The Future is Better Than You Think – takes a very positive view on how abundance has improved our lives, and uses this to paint an optimistic picture of our future – you can view his TED talk here. On the other hand, less optimistic commentators fear that our economic model relies too much on scarcity of both materials and products, and the effects of these materials and products becoming abundant are being ignored.
For a simple outline of how far we have come already on a different area to music – consumer electronics - the following graphic should prove interesting.
Source: Discover Magazine
In the iPhone, a swathe of once state of the art technologies have reduced to features bundled in the software of a smartphone. Features which are now not regarded as a selling point, but simply a minimum requirement to engage a consumer enough to purchase the phone. Apple forecasts 51 million iPhone sales in the first quarter of 2014 – which means two things:
- We have dramatically increased the number of people in the world with access to those technologies
- We have massively reduced the relative value and cost of all those commodities.
These are – hopefully - all big and interesting ideas, so how does the same principle apply to the music industry? I argue that that an age of abundance in the music industry has already irreversibly altered our consumption of music, and more crucially, the way that ‘value’ is perceived when it comes to purchasing music.
The age of abundance
First, some figures to demonstrate how the landscape of music sales has changed already, which I will divide into two periods covering the last 15 years.
1998 to 2012
This graphic shows a familiar story – we see the decline in cassette sales in the late nineties as CD becomes the dominant format (For what is worth, I bought my last cassette in 2001…but I can’t confess what it was). In 2004 we see the appearance of digital sales (iTunes, the pre-eminent vendor of digitised music, was unveiled in April 2003).
The growth of digital sales then grows in momentum, and in 2011 surpasses physical sales as the format generating the most revenue. We can see this driving some changes in consumer sentiment towards music consumption:
- The CD is becoming something of a dinosaur – offering nothing over a digital download except a trip to the shops, a higher price point, and something to scratch, lose, or use as a coaster
- Singles, previously accounting for a tiny percentage of sales when physical was the only format available; now generate more revenue in digital sales than digital albums. This represents a more subtle shift in the industry – a shift from a model where an album is bought for a few key singles, to a model where the consumer can and will pick and choose only the tracks they wish to purchase.
2013 to now
2013 represented another landmark year in the music industry, as for the first time since iTunes came onto the market, digital sales actually decreased compared with 2012. Although it is a point of some contention, the primary reason for this failure to grow – especially when physical sales continued to decline – is that the digital music market is being cannibalised by ad funded and subscription based services. A look at the graphic above confirms this story – the jump in relative size of the subscription based market, which had been steady for a handful of years, is significant in the both 2011 and 2012.
This tale indicates the direction in which the music industry is headed – the physical market will likely not recover and the digital market, aside from working towards being the dominant format, is being split into two. This tells us that the music industry is undergoing not one but two major shifts – a general shift in format preference from physical sales to digital, and then a second shift, from an individual purchase basis, to consumers preferring to pay for instant access to any music they choose.
Increasingly universal high speed mobile and Wi-Fi connections to the internet have enabled this shift in how music is purchased, with purchases no longer being in terms of individual units, but instead in paying for access to an abundant amount of music, at anytime, anywhere.
What the music industry can do
A direct result of this shift in mind set towards how we want to purchase our music has made individual albums and songs less important, and the delivery of those songs more so. To harness this shift in attitude, the industry must adapt to adopt new delivery platforms, keeping in mind the updated expectations and preferences of fans towards music consumption.
- Provide instant accessibility to music – this is more important than ownership as it creates more choice at less cost
- Personalise the experience, and cater for interactivity and social elements to reinforce the sentiment towards the delivery platform and not just the music itself
- Harmonise the experience across multiple platforms and devices – enable the use of the same profile, and the same UI, that is available on desktop, on a smartphone application.