Where’s the tipping point in the transition from owned to rented music? Is Spotify the fulcrum in this change?
Robert Andrews via paidContent
Globally, digital music subscriptions rose 64 percent to 13.4 million through 2011 (source: IFPI) - but that is just three percent of UK industry revenue. Downloads, dominated by iTunes Store, shipped 1.1 billion singles in the U.S. alone in 2010 (source: Nielsen SoundScan).
“For streaming to go mainstream, we need to hit somewhere like 10 times that,” MusicWeek editor Tim Ingham told a MusicTank industry seminar on the topic last week.
And industry analyst Mark Mulligan said: “We need to get to the next level of scale before ARPU (average revenue per user) actually matters to artists as well as labels.”
Spotify, which currently leads the sub-sector with three million subscribers amongst 10 million active users, has stated its aim to reach 100 million users all by itself. On its current free/premium conversion ratio (20 percent of active users), Spotify could bring labels some 20 million paying subscribers by the time it hits its target.
“A hundred million subscribers would change the game completely for artists and managers,” Ingham said.
But how will Spotify and its peers, like Rdio, Mog, Rara and WiMP, get there?
Each has had growing but relatively little success selling direct to customers. Many are revelling in the extra exposure brought by their recent Facebook connection. Mobile has been the thing to drive the business for everyone so far. But each ultimately wants to be offered through bundling deals with telcos and ISPs.
Time and again, online economics show one way to achieve scale is to become part of the fabric of the internet. Many talk about Spotify’s API, the technology rules which allow developers to make new products from Spotify’s platform - but, right now, the offering is notably limited for such a high-profile service and has gained few adopters.
“If Spotify goes to scale in the way Tim was talking about and gets hundreds of millions of people using it, Spotify could end up becoming effectively an API for music,” industry analyst Mark Mulligan told MusicTank’s seminar.
Emergent Futures Tumblelog
Reblogged from kickstarter|61 notes |# Comments
Reblogged from futuristgerd|52 notes |# Comments
Reblogged from futuristgerd|33 notes |# Comments
Digital music sales top physical sales
According to a Nielsen and Billboard report, digital music purchases accounted for 50.3% of music sales in 2011. Digital sales were up 8.4% from the previous year, while physical album sales declined 5%.
Full Story: CNN
Reblogged from futuristgerd|34 notes |# Comments
Reblogged from fred-wilson|110 notes |# Comments
a picture tells a thousand words
Slacker And The Innovator's Dilemma - Mark Mulligan via Forrester
Reblogged from stoweboyd|20 notes |# Comments
Mulligan is right to say that innovation is being stifled in the music world by the stranglehold of the labels:
Mark Mulligan via Forrester
Music subscription services are stuck with the Innovator’s Dilemma, but an unusual flavor of it. They are a sustaining technology that is forced to improve through modest sustaining improvements because of the restrictions inherent in the agreements with rights owners. In any other fast-moving technology market, locking a product’s feature sets down five years ago and refusing to significantly change them would result in the inevitable demise of the product. Imagine if Apple had stuck with the first-generation iPod and not introduced touchscreen technology, the App Store etc… . . A disruptive challenger would have quickly usurped Apple’s market lead with a disruptive alternative. (Of course, Apple does so well in this regard because it does such a good job of being its own disruption, but that’s another story.)
Music rights owners have a monopoly of control of content, and the net effect is a closed market not subject to normal laws of free market competition. And because rights owners are inherently conservative (some less so than others), they are inclined to license to sustaining technologies rather than disruptive ones. Their priority is — totally understandably — protecting against revenue decline, rather than technology innovation. They argue that both are important, but in a world where consumer demand is shaped by disruptive (unlicensed) technology such as Rapidshare and BitTorrent, dual-prioritization is a luxury they cannot afford.
And so, what happens is that the main licensed products fail to break through to the mainstream despite the best efforts of the innovative startups doing all they can within the constraints of their licenses. They have the benefit of knowing that their competitors are chained with the same manacles, but it is cold comfort because the net result is overall market stagnation. Sure, there will be some market share achievements, but the overall market will be continually outperformed by the disruptive alternatives that aren’t shackled by rights owner conservatism: the illegal free sector.
Unless rights owners start to license to truly disruptive alternatives (e.g., subsidized $3.99 unlimited MP3), the market will continue to fail to compete effectively with free. Lots of choice of the same service isn’t choice at all. There are c.300 download stores in Europe, but they are all very minor variants of the same basic offering. Hence, the market has stalled.
It is time for dramatic music product innovation. It is time for the record labels and publishers to become their own disruption, whilst they still can.
Reblogged from stoweboyd|21 notes |# Comments