Modern Music Industry: overview, trends, directions
In this article I would like to show you how does the modern music industry look like, what trends are of a current interest and where it’s gonna move in the coming years. No matter what style of music you play, this information will be useful to you any way. Your local stage may be different from the others but if you want to play for high stakes - you will be working in the same economic system, like the rest of the musicians.
To start with, I’d like to show you where I got the data I’m operating. There is an organization that makes annual reports of all the indicators and trends of the music industry - IFPI. Unfortunately, the most relevant of its report for 2016 costs a lot of money but the report for 2015 is available absolutely free of charge in PDF format. It includes 44 pages and contains A LOT of useful information, which is still very relevant. If you don’t belong to those who are too lazy to read, you can read the full version in English here:
However, I can make things easier and describe the most important and useful (in my opinion) information later in this article.
The first thing I want to say is that the music industry has quite an optimistic future. In recent years it has had not the best times - piracy flourished, it was quite problematic to regulate copyrights, industry income fell, physical mediums receded into the background, and digital distribution has not been well organized yet. Now, however, it can be argued that the music market has passed its transformation and is now showing a positive growth. This transformation can be well described in words of Edgar Berger (CEO Sony Music Entertainment Company): "The music industry is managing the transitions from physical to digital, PC to mobile and download to streaming at the same time." Taking it into account, we can already identify the main trends that I will describe below in more detail.
Digital era. In 2014 there was a very significant event - the first time in the history the income from digital distribution (including both downloading and streaming services with a paid subscription) exceeded the sales of physical media. They reached 46% of the total music industry income. This is 3% more than in 2013. This growth dynamic is a good indicator, that the music market is moving to an electronic environment, and the sale of music on physical media is becoming less and less popular with each next year.
Streaming and the model of monthly subscription. I suppose, my previous paragraph about digital distribution was not something brand new for you – we all can see that the sale of music through the Internet has become an integral part of the life of every musician and music fan. However, it is worth considering in more detail what exactly is included in the digital distribution, and which part of it is the most important.
About 52% of digital distribution income is the music downloads (buy - download). But listen to music through streaming services such as Spotify, for example, bring the industry 23% of the total income gains. Moreover, 9% of the profit bring free for the listener streaming services, which get their income by advertising. Thus, the total income of streaming services is 32%. This is much less than from the downloads but it is not important. The main thing is the dynamics of growth. The incomes from streaming services have increased by 39% in one year, indicating that music streaming is currently in trend and will soon become the main way to generate income from music. By the way, it has already become popular in many countries. For example: Sweden, South Korea, Norway and Finland. However, America, Germany, Australia and Canada still prefer to buy and download.
Vinyl Revival. Despite the fact that sales of physical media fall, the percentage of vinyl sales is growing strongly. Already in 2014, vinyl brought 2% of income from the entire world music industry. Selling vinyl is becoming another one trend, and I think hipsters and their subculture have played not the last role in it. For the first time in MANY years, the world has begun to produce new machines for printing vinyl.
Higher requirements for content quality. With the development of IT technologies and the Internet, the ordinary user’s needs are also growing. Previously, users were satisfied with the quality of mp3 music, now more and more people prefer lossless formats (FLAC for instance). Moreover, nowadays there are services, providing music streaming in lossless formats (Deezer) and video services providing video clips streaming in Full HD formats. So to say, demand creates its own supply.
Strengthening the musician’s position. Globally, the musician’s position has strengthened. Comparing 2014 to 2009, it can be argued that musicians get a larger percentage of the incomes than the music labels. During this time the average percentage of musician’s income of the music has increased by 13%. The record companies’ income of music sales has fallen by 17%. The reason is the new technologies. Nowadays almost any musician can build a digital distribution of his music inexpensively, that is why the role of labels has decreased significantly and they are forced to create more profitable conditions for musicians. Many world famous stars already use the services of digital distribution aggregators, such as TuneCore, to distribute their music on their own and not to pay extra interest to the label.
The main problem of the market is still piracy and competition for copyrights. However, the tendency is that the culture of paying for music is gradually developing even in the most pirated countries. The fans appear to understand that they "feed" musicians and their work must be paid.
These are all the trends that I would like to present to you. More information you can find in the IFPI report - Digital Music Report 2015, and perhaps in more recent sources. Hopefully, this information will be useful to you and you will be able to use it in management and marketing of your musical projects.
Vladyslav Tsarenko (CEO of All4band.com)
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