Like it or not, the advent of the digital age has transformed the media landscape into a skyline of new possibilities - and the none-too-gradual demise of others. It seems as though every industry is teetering on the brink of apocalyptic change: print is dead, radio is on its last throes, traditional television is heaving its final breaths.
Unsurprisingly, the music industry is not exempt from these grim predictions of doomsday. The sale of CDs and MP3 files has flown swiftly south over the past decade, more than halving from 730 million units sold in 2000 to the 326 million (including digitally downloaded albums) sold in 2010. This year also proved devastating for industrial titan Apple as iTunes downloaded music sales plunged 40 percent. What gives? Well, illegal file-sharing is a viable culprit. But perhaps a more formidable foe for the music industry is the advent of online radio - Pandora, Spotify, and other non-broadcast radio - who are luring listeners to their service at the expense of other music platforms. Just last year almost 150 million people tuned in to internet radio, and another 20 million listeners are expected by the end of next year.
According to Paul Goldstein, an audience development executive, these IP-based radios are "fueling an important growth category for the music industry." This growth derives from the big bucks that is brought in by two main sources: subscriptions to the radio and advertising. However, its become apparent that the latter is so much more lucrative than the former; eighty-eight percent of Pandora's revenue is from advertising.
"If artists and labels go on the offensive, fully embracing streaming services (who help replace diminishing MP3 and CD revenue), and also innovate by developing audiences themselves through their own branded offerings, they will exert far more control over two critical assets that advertisers want: Large audiences and big data," said Goldstein.
The main take-away I get from this digital revolution is that music is not really what's for sale in its future industry: it's the listeners. Rather than depending on CD and MP3 sales in the future, labels will have to start reeling in revenue from another source or risk a future every bit as bleak as the forecasts say. By catering an audience to advertisers, the music industry can save its skin from a sorry fate at the hands of declining CD sales.
I'm very curious to see how the industry will rebrand themselves to monetize off its listeners. It seems like a match made in heaven - both music and advertising heavily rely on attention, and maximizing the overlap within these two industries promises to yield sizeable profits for both. I always thought of the music industry in the glitzy trappings of a pop star and the advertising agencies as a cerebral, calculating Mad Men-esque business exec. Britney Spears, meet Don Draper. Now get married. It's the only thing that'll save the music industry.
Goldstein, P. (2014, April 24). The Future of the Music Industry: Selling Audiences to Advertisers. Retrieved November 28, 2014, from http://recode.net/2014/04/24/the-future-of-the-music-industry-selling-audiences-to-advertisers/