What’s the Future of the Music Business?
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Happy weekend everyone!
A year ago around this time, I started this newsletter hoping to learn more about the Music Industry and how the business behind it works, and not just do that but use this medium as a way to share my learnings with whoever comes across it 📩
107 editions and countless cups of coffee later, I still have the same curiosity as I begin researching around a particular topic in this space, whether it is doing a deep dive into the story of how The Eagles polarised America, or trying to explain the latest Music NFT project 👨🏻💻
Over this course, I have been fortunate to write on topics that enabled me to connect with the ‘Who’s Who’ of this industry, most notably the former Chief Economist of Spotify- Will Page, who’s book- Tarzan Economics was a wildly entertaining read, and a front-seat view into how the music industry changed because of streaming in the past decade 🎧
You can check out my previous edition where I covered anecdotes from his book right here 👇🏻
Will is one of the clearest thinkers in this space, and his role as an Economist and a Music enthusiast means that his book is full of stories around how data was pivotal in Spotify’s growth, led by playlists and personal recommendations making music streaming a habit forming behaviour 📲
So when last week Dan Runcie of Trapital fame, who’s infamous for his podcast and newsletter on all things Hip-Hop & Music Business, sat down to discuss the future of the Music Industry with Will, I couldn’t help but take notes 📝
Here’s a brief into some of the topics they covered:
Lopsided Growth of Music Streaming 📊
While the Music Industry has been growing steadily, and is back to its 1999 heights (before adjusting for inflation), Will uses data to point out that the growth isn’t all equitable, but in fact becoming more ‘American’.
How exactly? He explains further 👇🏻
So if you go back to when Spotify launched, Americans made up 20 to 23% of the business round, about just over a fifth.
Today, it’s 37%; so we have seen the business grow and become more American.
And that raises questions, economic questions, like globalisation questions, should poor countries catch up with rich ones, a theory says yes, the reality often says no, so we’re seeing this kind of lopsided growth where the business is growing, but it’s growing in favor of an American market, the biggest country is growing at the fastest rates.
Recovery of Vinyls 💽
A topic that we have covered on this newsletter as well previously, Will spoke at length on the podcast around how there’s more than what meets the eye when it comes to the recovery of Vinyls.
We’re now looking at Vinyl being worth $1.5B, which is more than what it’s been worth in the past 30 years.
It’s worth more than CDs, cassettes, and downloads: the three formats that were supposed to declare that vinyl is dead. I saw a survey which suggested that the majority just over half of all vinyl buyers today don’t own a record player.
I mean, something’s cooking here. The cost of wall frames to frame vinyl on your wall often costs more than the record itself. So I’m willing to pay more for vinyl to be called new framed on my wall than I am for the record 🤷♂️
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Bearish View on Streaming 📉
When Dan posed a question to Will, asking for his views on the future of music streaming in particular, and how saturated the market had become, Will had an interesting analogy to draw:
On saturation point, you’re now in a situation where I’d put it as in America, we’ve had herbivores we’ve had Spotify growing Apple growing, Amazon growing, YouTube growing, everybody’s reporting growth.
What we’re gonna see at some point soon is carnivores, which is Apple will grow by eating into Spotify as growth or YouTube will grow by eating into Amazon’s growth.
So the key question we got to ask is, when do we go from the herbivore market we’re in today to a carnivore market of tomorrow.
In Oil, we have this expression called Peak Oil, which is we know that we’ve extracted more oil in the world than what has left to be extracted, and all that’s left is going to be even more costly to get out of the ground. I think we’re in peak subscriber territory where at some point soon we’re going to start seeing growth happen through stealing other customers as opposed to finding your own.
Post Spotify Economy ⏯
When discussing about how music streaming has suffered from a lack of imagination when it comes to pricing; Will had interesting ideas on how all you can consume $9.99/month deals by most music apps are a ceiling for fans 👇🏻
There’s a great academic paper by Francesca Cornelli from Duke University, she asked how should you price a museum and intuition says top-down mindset, the museum should set the price adults 10 bucks kids, five bucks pensioners, some type of discount arrangement, but she said no, let the visitors set the price because that way rich people will give you even more and poorer people can attend. And you’ll see more cash overall.
And I would like to see a little bit more of that experimentation around pricing compared to the past 20 years where we’ve had a ceiling on price where if you really love a band, all you can give a platform is $9.99 and not a penny more.
I think that’s we’re suffocating love. We’re putting a ceiling on love. We need to take that ceiling smash through it and let people express love through different means.
Apart from this, Dan and Will covered a bunch of other topics around the role of Web3 in Music, and Will’s apprehensions about the same, along with the current landscape of Hip-Hop music and it’s relevance in Pop Culture today.
Our take on this?
I think that Will hits the bulls-eye when it comes to the pricing bit around music streaming 🎯
As a service, getting access to 100 Million songs on your fingertips is a no-brainer as a value proposition to the consumer, but the fact that we are restricting this to just $10/month, and even lesser in developing countries means that the difference between value created and value captured is bleeding artists and creators from making a sustainable living from music streaming, even if they have a dedicated but small fanbase.
We at Incentify, are building something out that helps solves this problem, and as a first step we’re bringing the fragmented world of music sharing and discovery together with our social network for music.
Check out our latest website, that talks more about the same and hit us up if you’re interested to know more about the same!
Have a good weekend folks 🍻
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Originally published at https://incentify.substack.com on April 23, 2022.
