Not.
Firstly, the old model is still the best we have. You make money when your record is backed by a TV campaign, gets major commercial radio play and sells lots of physical copies.
Lady GaGa doesn’t need your approving blog post to make it to number one.
But anyone with an eye on the future knows that the old model is unsustainable. People are turning off their TVs, ignoring adverts, getting more selective about how they consume music, and buying fewer and fewer physical records.
The future of music lies in finding new ways to monetise the relationship between the band and the fan.
In 2003, digital sales accounted for 0% of the global music market.
In 2007, that figure was 15%. Digital music sales are expanding while physical sales fall.
In the digital realm, the relationship between the artist and the fan can be tracked, monitored, maintained and enhanced.
The future of music has to be online.
With that in mind, here are four emerging digital music trends.
1 - Event ticketing will diversify.
In the past few years, live music and festival prices have increased while the price of recorded music has fallen. Punters won’t spruik $29.95 for a CD. But they are happily dropping $200+ for festivals and concert tickets.
The trick then is making recorded music an integral part of the live music equation. There is a massive opportunity to enhance and monetise the content associated with the live experience and engage fans before and after the event takes place.
CDs could be included in the price of the ticket. So too could merchandise or a DVD. And after the show is over, people could buy the audio mix on mp3. They could access and purchase post-show photos and video content. Online it’s easy. And the data capture opportunity will allow for an ongoing relationship between consumer and provider.
2 - Labels will start going direct to consumers.
Online, you don’t need a middle man.
Labels currently push online retail traffic to iTunes. Labels are now looking to take some of that traffic back. A relevant, engaging, unbiased direct to consumer (D2C) site would deliver labels higher returns because the marginal cost of digital distribution is practically zero. And the the opportunity is there for invaluable data capture allowing labels to build more personalised, targeted relationships with fans.
Records could be sold in a variety of formats ranging from digital-only, to physical, vinyl, merchandise packages, and deluxe editions.
Just like Pitchfork, Stereogum and RCRDLBL are doing, labels could bring in traffic with quality content, reviews, free downloads, news and exclusive offerings.
The challenge lies in making the sites an authentic consumer experience, not just a means of labels indiscriminately flogging everything they have.
3 - iTunes will slip.
Ask anyone selling music online and you’ll soon realise that in pure dollar terms, digital music is 90% iTunes. But with the addition of Movies, TV Shows and iPhone Apps, iTunes is suddenly far less about music.
Furthermore, a Google search for your favourite artist isn’t going to direct you to iTunes. Given that search dominates web navigation, that’s a big drawback for the iTunes model.
And with the ugly spectre of DRM still hanging over iTunes music, the door is wide open to a music-focussed etailer to deliver a better online music retail experience than iTunes currently does.
While the iPod still dominates the portable music market, consumers aren’t attached to the iTunes store. If there was a better, easier, cheaper, cooler place to get music, they would.
Usability guru Jakob Neilsen suggests that Google will fall when someone figures out how to do search better than they do. The same applies in music. When someone figures out a better way to sell music online, iTunes will fall too.
Amazon mp3 is doing it the best of the rest. Their brilliant Twitter integrated album specials show them to be well ahead of the curve. emusic is in the toddler phase (looks like it’s walking but often prone to falling over) while Rhapsody, Napster et al are still trying to resuscitate broken subscription models.
Elsewhere there are four major movements worth keeping an eye on.
Nokia is making serious plays at new ways of delivering music to consumers but they haven’t yet captured people’s imaginations.
MySpace’s new retail option, touted as an iTunes killer, is yet to entrench itself with people as a viable music consumer destination.
YouTube’s new purchase option has the potential to convert massive traffic to music sales but the mechanics of it are yet to be finalised.
And finally, labels, who lament Apple’s centralised control of the digital market and control the content are beginning to wake up to the potential of D2C offerings.
In the race for dominance, iTunes is way out in front. But their victory is far from guaranteed. As online music consumption fragments, expect new players to give the iTunes apple cart a good shake.
4 - YouTube will challenge MySpace as the number one destination for music discovery.
12 of YouTube’s top 20 most viewed clips of all time are music clips. Clearly, YouTube, is as much about music consumption as it is about watching lolCats and Fails.
Where MySpace streams, or 30 second iTunes snippets don’t satisfy, YouTube increasingly is coming to the rescue. YouTube is emerging as a genuine source of music streaming.
Youtube markets and exposes music like MTV once did, only now, that exposure is immediate, viral and trackable. With increased profile editing capabilities, links to purchase, and opportunities to capture traffic and channel it accordingly, YouTube could emerge as a major rival to MySpace is an artist’s most necessary online presence.
***
This article was first published in Digital Media magazine.
{ 1 trackback }
{ 14 comments… read them below or add one }
Matt Granfield 01.07.09 at 2:08 pm
It’s interesting that an increase in the number of festivals hasn’t led to a decrease in demand in the market place. As you point out, people seem happier than ever to drop large amounts of cash on a festival experience and massive events like the Big Day Out, Splendour in the Grass, Falls and Meredith can sell out within minutes. Could it be that the oversupply of MP3s, which has led to a fall in recorded music sales, has actually created a greater demand for the live experience?
Penny 01.07.09 at 2:13 pm
Thanks for sharing. This was a really interesting read with valuable insights. I look forward to seeing what the future holds in the way of music.
Nick 01.07.09 at 2:36 pm
Re: Matt Granfield
Thanks for the comment Matt. I would argue the appetite for music consumption now is greater than ever due to the ease with which music is now shared between people.
Unfortunately for the music biz, that consumption is not consumption in the traditional “I’ll buy a CD sense” but more in the “I’ll get my brother to fill my iPod with all the songs he downloaded from Limewire” sense.
Candy 01.07.09 at 3:20 pm
Nice article.
A Co I have worked for are making online digital music and film distro, publicity, and marketing easier for content creators and Co’s. We are also reiterating to people that we need to evolve if the industry will survive.
Their software is currently in prototype phase, they got govt funding which was hard work convincing them that we need new ways of getting art, music and film out there.
I think over time it will be interesting to see what happens to the industry especially with new co’s and avenues available that are catering to the new needs that are arising from all these changes.
Christopher Norton 01.07.09 at 3:59 pm
I wonder if your thoughts on iTunes have changed with Apples announcement of removing all DRM by April. (or at least having a DRM free option for ALL music on the store)
Nick 01.07.09 at 4:22 pm
Re: Christopher Norton
It’s cool they are doing that but it doesn’t change my view at all.
It’s a surprise to me they’ve taken this long to do it.
David 01.11.09 at 11:34 am
another new direction are the various recommendation and discovery engines like pandora, mufin, itunes’ genius, etc. We’re recently released one’s that psychology-based (using research from best-selling author Dan Levitin) that provides a personalized playlist using music that ‘people like you’ (your music preferences via an audio survey) listen to. We invite you to check it out at http://signalpatterns.com/music_survey.
jim bellizzi 01.12.09 at 8:10 am
@matt has a great point on festivals, but I think it is noteworthy who average consumers pay $200 to see. Mainly mccartney, u2, rolling stones, etc. Dave matthews is the only new face in top 5 touring last I checked, and while keith richards won’t die mick jagger doesn’t have that luxury.
Some of this is just the time it takes to build that fan base. Some is that pop music just doesn’t bring people to the live show. I agree that live shows combined with other methods are a good part of the future, but I think we need to find ways to get people excited for newer acts. I think its there, but it may be a combo of huge festivals plus small niche shows(smaller crowd, higher price tag) that do it. Great thoughts everybody!
jim 01.12.09 at 1:57 pm
Great thoughts! I think it is important to note thought that the majroty of high selling touring acts is still older artists. Dave matthew seems to be one of few making headway. Granted, building an audience can take a career, but the question of reaching the level where your live act is valued at $20 to $60 a tix.
As long as we don’t get burned out on them festivals are one fantastic enue for artists. Also, I am seeing some artists experiment with going back to house shows, and use a less people higher cover model. Anyone find anything else working well?
Gavin Heaton 01.18.09 at 3:59 pm
Really thought provoking, Nick! To me, it looks like we are happier to pay for music consumption when it occurs in an experiential setting - where it’s not just about the music, but also about hanging out with your friends. Music as a transaction (ie purchase x track) has not only fragmented our tastes and spending patterns, it has also shifted our sense of value.
I can remember when an album cost $30. It was an investment. I was much more selective. I worked harder for the music that I loved. Now, I think events are bringing that selectivity back.
Scott Drummond (Come Together) 01.18.09 at 11:29 pm
Love the post Nick - you really break down some of the key challenges facing the music industry as the digital landscape matures.
You hit the nail right on the head when you bring up the need to make recorded music an integral part of the live music equation.
Considering the low cost of digital reproduction and promotional merchandising, I’m surprised that more artists aren’t putting together more exciting marketing strategies that plug into the path to purchase of music and avoid what Gavin describes - the music simply becoming a commodity, a transaction rather than an overall experience.
In other sectors marketers are innovating to try and bring the customer more intimately into the product lifecycle (crowdsourced design, increased transparency in the customer service provision, ideastorm-like product iteration etc), yet in the music industry this still seems to be frowned upon.
We tend to forget that the album as a distinct entity is a relatively new musical phenomenon, not the normative way music should be packaged.
I think we also forget that the industry we are repeatedly urged to save is itself only one solution to the complex challenge of how to ensure the ongoing production, distribution, promotion and monetisation of creative musical works, a solution that you rightly point out is looking more and more anachronistic.
What’s the future of digital music look like? I don’t know, but I am sure that innovative thinking will play a major part in its creation.
Matches 02.03.09 at 8:54 pm
Nick,
Great article, bro. Well thought out and succinct.
Not sure if I totally agree on the ticketing front, but you undoubtedly know more about that stuff than me.
Festivals: I totally agree with Matt Granfield on his point that the mp3s are now acting as a form of marketing for the festivals. BTW the festival thing is something I’ve never really understood. If I go to see a live act I want there to be some sort of communion with the artist and I find that you just don’t seem to get this at the (big) festivals. Big Day Out? I’d rather go to the Commonwealth Games (the badminton semis perhaps). Festivals to me are brilliant until the become too big, which is of course the inevitable fate of all festivals.
Re: iTunes, I totally agree with you on this one and it couldn’t happen soon enough. Apple have been kicking their customer’s in then n*ts for a long time. Low bitrate, DRManaged albums for more than I can get the real product at JB? Get f**ked. Although I will concede that even my manly nails have been destroyed by JB, his shrink wrapper and his pricing machine gun.
I think the anticipated decline of iTunes will slowly drift into their players (iPod) as well, but perhaps that’s an article waiting to be written.
Andy 04.15.09 at 12:01 pm
records are now produced to promote tours. They are positioned as a seeding piece to get people excited to spend $150 to see Pink.
I am all for the survival of the record industry as my nostalgic heart loves to have my shelf full of vinyl and CDs. I of course can see the demise here where there can only be so many reunion tours to generate CD sales for bands as people seek to use DRM free files to fill their MP3 players.
I say find your own music taste and dive deep into it. Thousands of songs means f*#k all in the real world.
Managing a band also means I leverage all digital platforms for sharing the talent these guys have. I am not sure I will ever find my happy middle ground.
Nick 04.15.09 at 3:43 pm
@Andy - Great comment. Who are you managing?