The future of music industry
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The document discusses changes in the music industry over time as revenues have declined but music consumption has increased. It attributes the revenue decline to shifts in how people access and listen to music, from physical formats to digital. New services like Napster, iTunes, YouTube and Spotify provided convenient digital access to music for free or low cost, which impacted revenue streams. Streaming services in particular have grown rapidly and now drive most digital revenue, though artist royalties per stream are much lower than from other sources. Sustainable business models are needed that satisfy customers desire for easy, free access while also generating sufficient revenue to fairly compensate all industry stakeholders.
The future of music industry
- 1. the future of music industry
- 2. music revenues are declining
- 3. Global revenue (billion $US) 30 24 18 12 6 0 Over a decade of decline in revenues 15.7 15.0 17.1 16.6 Global revenue of music industry (billion $US) 18.3 19.8 21.2 23.5 22.7 24.3 24.2 26.2 27.4 28.5 28.6 28.1 27.7 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: IFPI Recording industry in numbers 2014
- 4. but we are not listening less music
- 5. it is changed how we listen music
- 6. napster 1999 With Napster Consumers began experiencing digital music for free. Record labels were not able to provide an attractive legal alternative. By then, illegal file sharing begun and consumers became accustomed to accessing music for free. iPod in 2011 was the first widespread successful portable media player. It further encouraged appetite for digital music. iTunes 2003 iTunes provided a legal and convenient way to download music. It became the top music vendor in US in 2008 and the top music vendor in the world in 2010. The successful business model is built around a simple yet compelling value proposition: a comprehensive digital world’s music catalogue available in an convenient and simple way. ! YouTube YouTube is quickly becoming the most popular music streaming service. It is a free and easy way to share and access the largest collection of videos. The “free” quality of the video streaming platform has led it to gain an impressive volume of consumers, thus making it an extremely attractive platform for advertisers. ! 2005 Spotify 2008 Spotify is quickly becoming the most popular on-demand and download music streaming service. The key driver of its business model is similar to both the iTunes Store and Youtube: it offers a breadth of music at the touch of the fingertips, either for free supported by advertising or with added benefits available through subscription plans. How we listen music is changed A roadmap of Innovative Music Services
- 7. Digital Music continue to rise Global digital revenues of music industry to $5.9 billion Globale revenue (billion $US) 6 4.8 3.6 2.4 1.2 0 5.6 5.9 5.1 4.4 4.6 4.0 2.9 2.2 1.2 0.4 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: IFPI Recording industry in numbers 2014
- 8. Revenues from Digital Music account for 39% of industry 25% 75% Physical Digital 5% 95% 39% 61% 2005 2009 2013 Source: IFPI Digital Music Report 2014 Global revenue of music industry (billion $US)
- 9. streaming is the fastest growing media
- 10. Streaming services drive the digital growth Streaming revenues more than tripling to US$1.1 billion in the last 3 years Global revenue (billion $US) 6 4.8 3.6 2.4 1.2 0 0.7 1.1 0.5 Digital download Digital streaming 0.3 4.7 4.9 4.8 4.0 4.4 4.3 2.9 2.2 1.2 0.4 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: IFPI Recording industry in numbers 2014
- 11. and it is changed the perceived value
- 12. revenues are challenged because of dominant methods consumers use to access music, such as Streaming, Torrents / P2P file sharing and YouTube, are either natively free or have a free option.
- 13. “There’s a new generation of people who’ve been conditioned to expect their music for free, either through piracy or YouTube. We’re connecting powerfully with that generation, giving them a far superior way to enjoy music while magnetizing them by the millions. We convert their investment of time into real revenues by magnetizing the free service with advertising. Crucially we’re also seeing them move to Spotify’s paid service in their millions by offering mobility and convenience.” Ken Parks, Chief Content Officer, Spotify
- 14. A different monetization model Download Song ! End User Price $0.99 ! Artist Royalties est. $0.60 Stream a Song ! End Price FREE ! Artist Royalties est. $0.008 Buy CD / LP ! End User Price $15.99 ! Artist Royalties est. $1.90 Source: Almighty Institute of Music Retail market research. Spotify doesn’t pay on a “per song stream” model, exactly: the total royalty pie is split among all rights holders based on the percentage of total streams and the company estimates that the average song generates between $0.006 and $0.0084 per stream in royalties.
- 15. each market is different
- 16. Different performance across the world 5,389 4,897 3,616 521 Revenue by Market (million $US) Overall music revenues declined by 3.9% in 2013, heavily influenced by - 16.7% in Japan, a market at the start of its digital transition, and almost flat revenues in most of the other countries. Source: IFPI Recording industry in numbers 2014
- 17. North America is the biggest market Global share of Sales of Recorded Music (million $US) 2,825 239 424 431 956 1,304 TOT 15,029 1,365 4,474 3,012 United States Japan Germany UK France Australia Canada Italy Other
- 18. And digital music consumption changes by country share of revenues 10% 60% 30% 18% 27% 55% 6% 21% 73% 11% 44% 44% 13% 34% 53% Physical Digital Other 11% 68% 21%
- 19. business model is key to monetization
- 20. “There are two real revolutions taking place in digital music: first, value today is in ubiquitous access rather than ownership. Second, the focus of development in the worldwide music industry is no longer as concentrated, as it used to be, on the US.” ! Axel Dauchez, CEO, Deezer
- 21. 1Easy and Free for Customers In a world where Consumers have access to free services at the touch of their fingertips and are overwhelmed by the abundance of choices Music services should be: ! Convenient and Easy to access ! Improved musical Experience ! Free (or “feels like free”) Source: based on customer surveys available online
- 22. 2 Satisfy all the Industry with a Sustainable model A complex challenge is for music market is to find business models that satisfy all the chain, from Artist to Publishers to Distributors: ! Monetize asymmetric revenue streams (such as Advertising or Mobile data fees) ! Distribute revenues fairly among the players ! Enable economies of scale, to increase competition on Services Source: based on customer surveys available online