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Summary:

As media and entertainment went digital, many looked to the music sector as the canary in the coal mine. Digital comprises over 40 percent of consumer sales, but the whole market was worth only $5.9 billion in 2010. Even digital felt stagnant. But that’s changing.

David Card, Research Director for GigaOM Pro, at GigaOM RoadMap 2011

David Card, Research Director for GigaOM Pro, at GigaOM RoadMap 2011As media and entertainment went digital and online, many looked to the music sector as the canary in the coal mine — a scary harbinger of things to come. Indeed, the transition to digital music has not been enough to restore the industry to growth, let alone to its 1999 glory days of $14.6 billion in recorded music sales. Digital now comprises over 40 percent of consumer sales, but the whole market was worth only $5.9 billion in 2010. Even digital felt stagnant.

But that’s changing.

At GigaOM Pro, we’ve identified six digital music disruption vectors: areas of huge innovation and disruption where big shifts in market share are there for the taking. The companies that can ride these disruption vectors will be the winners in digital music in the years to come:

  • Smartphones are driving anywhere access, but don’t forget about cars, the place where most listening by Americans occur. Anywhere access will be the most important digital music disruption vector.
  • Two business model disruptions will be nearly as critical. Subscription services from companies like Spotify, Rhapsody and MOG aim to unseat the traditional music spending mix from purchase to “rental.” At the same time, Pandora is reinventing radio, and using advertising revenues to pay royalties that terrestrial radio station never had to pay to music rights holders. So advertising, and subsidization schemes along the lines of what Deezer is doing with Orange in France, will be highly disruptive.
  • Social media is changing music and music service discovery. Facebook’s open graph is exposing friends’ listening habits and encouraging sharing. Social media plus personalization and sophisticated recommendation technologies could unseat radio as the most critical means of music discovery.
  • Two areas will be less disruptive. The newer digital music services mostly replicate listening experiences – on-demand versus programmed. Highly engaging services like Turntable.fm probably require too much participation by casual listeners to have mainstream impact. And someone will have to fund artist development and marketing, even if the role of labels will evolve.

The near-term net result of this disruption will be a shift of dollars to digital services and downloads. Digital will total 65 percent of the overall $6.3 billion U.S. spending we’re forecasting for 2015, finally returning the overall industry to growth.

Photo by Pinar Ozger.

  1. Very insightful. We’re definitely keeping an eye out for all of these new/reformatted music platforms.

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    1. I agree, very insightful David, do you see a time when music labels will evolve into something very different looking from today and perhaps find different revenue streams to support their artists?

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  2. Daniele Calabrese Thursday, November 10, 2011

    David very insightful. This are all things that we predicated in 2007 when nobody believed this would happen. I am very proud and happy that Soundtracker was born an incredibly innovative gene pool. I would add something that is incredibly overlooked. The role of location as disruptive force in the music industry and particularly in the radio model. One that we take very seriously at soundtracker.fm

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  3. If we want to grow Music industry we must first promote online music or digital music industry and merge it with traditional music industry. It is the only way to stable music industry or piracy and other online media creates many difficulties for music industry.

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  4. Le 6 rivoluzioni in atto per la diffusione della musica digitale http://t.co/gcyj7oR1

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