After years of declining sales, the
music industry has seen revenue increases the past two years. Do you think the
industry has finally found a way to adapt to the changes in ways people consume
music? Do you think that sales will continue to increase, flatten, or decline
in the coming years? Limit: 8 responses
The music industry has finally seen revenue increases in the last two years after years of declining sales and I believe this in part has to do with the industry beginning to adapt to the changes in ways people consume music. Consumers have been moving away from digital sales and moving towards streaming sites for the past few years now, and sites such as Spotify and Apple Music have been getting more and more subscribers. In fact, “80% of music listeners used an online streaming service in the last 12 months” (Nielsen Music 360). This is an increase from 75% in 2015 (Nielsen Music 360). According to Nielsen, in 2016 the music industry “…did experience sales decreases in nearly all formats, particularly digital sales. However, the growth in streaming was more than enough to off-set the declines, which resulted in a positive year for the music business” (“Nielsen 2016 Year End”). This growth in streaming included a 39.2% increase in on-demand music streams, with a 76.4% increase in audio and a 7.5% increase in video (“Nielsen 2016 Year End”). So, as we can see, there is a definite shift towards streaming services when it comes to consumers’ music consumption, and this shift has been able to offset the decreasing sales seen in the other music formats. Given the increase in revenues in the music industries in the last two years being in large part due to streaming, I would say the industry is definitely beginning to adapt to this change in consumer preference. For example, Warner Music Group stated that the 2016 fiscal year “‘…marked our highest total revenue in eight years and our highest OIBDA in a decade’” (Christman). This is in large part due to the company benefiting from the growth of streaming services as they said, “Within its record segment, digital, which includes streaming, generated…nearly 50 percent of the total recorded music segment's income” (Christman). Their year-over-year growth in digital "reflects a continuing shift to streaming revenue" (Christman). Almost half of the company’s revenue came from their digital segment, and their growth in that area was in large part due to streaming revenue. The company knows how important streaming has become and has adapted to this change, leading to their best performance in eight years.
ReplyDeleteHowever, I am unsure whether sales will continue to increase in the coming years. Yes, consumers are moving towards streaming, which has had major growth and increases in subscribers, leading to increases in revenue for the music industry. But, “While streaming has been great for the major labels, its economics are rarely as rewarding for songwriters, ¬publishers and even some labels and artists. And so far, none of the companies in the streaming ¬business are making money” (Levine). If the people making the music aren’t making money for putting their music on streaming services, they are definitely going to be disinclined to do so. Take Taylor Swift for example. She refuses to put her music on Spotify because artists do not get compensated enough for their work. The average artist on Spotify only makes approximately $0.001 per stream (Claymore). Combine that with streaming services not yet making their own profit, and it’s hard to tell if streaming will continue to grow. As the article puts it, “…if this is a ¬turnaround, then it’s a fragile one” (Levine).
DeleteWorks Cited
DeleteChristman, Ed. “Warner Music Group 2016 Earnings See Frist Post-Blavatnik Profit.” Billboard 8 Dec. 2016. Web.
Claymore, Gabriela Tully. "Spotify Explains Royalty Payments." Stereogum 3 Dec. 2013. Web. 01 Dec. 2015.
Levine, Robert. “Is the Record Business Really Back? How Streaming Is (And Isn’t) Turning a Profit.” Billboard 3 Nov. 2016. Web.
“Nielsen 2016 Year End Music Report.” Nielsen January 2017. Web.
“Nielsen Music 360 2016 Highlight Report.” Nielsen January 2017. Web.
The ability to adapt is crucial for survival in all walks of life. In this case, the music industry faced a life or death situation; a situation where only an adaptation to their customer’s needs would help them prevail through a time plagued by piracy of music and as a result, the act of purchasing of music was being boycotted by nearly everyone. We have seen adaptation in the music industry come in many different forms over the years, but when society made the switch to digital, a complete overhaul became required in order to continue generating revenue. When people started consuming music illegally, the industry looked down what seemed to be a dead end road. How are the major players in the music industry going to continue making money when most people are “stealing” digital copies via downloading songs on sites such as LimeWire or listening to music for free on services like YouTube? CEO of Azoff MSG Entertainment, Irving Azoff, said, “YouTube can spin it any way they want, but the reality is that they’re the reason that paid streaming hasn’t exploded. There is a huge value gap in consumption versus revenue” (Goodman). In order to close the value gap, the players in the music industry had to adapt.
ReplyDeleteI think that the industry, from a label’s standpoint, has done a good job at adapting to the changes in ways people consume music. For example, this is the first time during the millennium that the music industry has posted gains in two consecutive years (Christman). Artists are still getting the short end of the stick, but things are looking up for them. The Recording Industry of America has announced that streaming will now contribute to the certification of albums as Gold or Platinum (Billboard). RIAA has even created a formula to determine how each stream counts. "For nearly six decades, whether it’s vinyl, CDs, downloads or now streams, the Gold & Platinum Program has adapted to recognize the benchmarks of success in an evolving music marketplace," said Cary Sherman, chairman and CEO of the RIAA (Billboard).
Since the music marketplace is constantly evolving and consumer behavior changes just as rapidly, the music industry will have to continue adapting. The exclusive playlists, live streams, music videos, radio interviews, single releases, original video content, and countless other attempts at adaptation can be looked at as a prequel to all of the change that will be demanded in the coming decades. The sales in the coming years will be a reflection of how successful these adaptation attempts are. If the music industry continues to make smart adaptations, I can only see the industry increasing its sales.
DeleteWorks Cited
Christman, Ed. "Nielsen 2016 Report: Streaming Smashes From Adele, Drake & More
Offset Sinking Music Sales." Billboard. N.p., 09 Jan. 2017. Web. 27 Mar. 2017.
Goodman, Fred. "Can Music Exec Lyor Cohen Bridge the Divide Between YouTube and
the Music Industry?" Billboard. N.p., 2 Mar. 2017. Web. 27 Mar. 2017.
"RIAA Accepts Streams for Gold and Platinum Certifications." Billboard. N.p., n.d.
Web. 27 Mar. 2017.
Rys, Dan. "It Was the Year of the Album Exclusive... and the Year They Faded Away."
Billboard. N.p., 22 Dec. 2016. Web. 27 Mar. 2017.
Music sales have been a topic of conversation ever since streaming came to be. Both artists and music companies alike have had trouble getting the revenue they deserve. Revenue originally saw a decrease when streaming began and companies were unsure how to compete in this new market. However, the past two years have been a changing time for the industry. Chance the rapper broke the record for” first ever release to appear on Billboard 200 chart with 100 percent of its equivalent album units coming from streaming,”(Rys). That is an incredible milestone for not only Chance bit marked a new era in music. Following the successful release other artists took note such as Drake, Beyonce and Kanye West. According to Nielsen, U.S. music reports doubled in 2015(Rys) Music groups started to catch onto the trend and change their ways. Universal music group attributed “52 percent of all digital revenue in the second half of 2015”(Rys). Sony music also saw a jump in revenue due to streaming “record music sales increased primarily due to an increase in digital streaming revenues” (Flanagan, Blair, Associated Press). Music companies have adapted to this new way of obtaining music. At first they were against the streaming sites and refused to put their artists on them. However, they have realized it is the way to compete. They have discovered that putting their music directly onto streaming and not selling physical copies is a benefit to them and the artist. This is because” there were more streams on average day in 2016 than song downloads for the entire year.” (Strauss). The industry has realized that they cannot beat streaming services so getting on board is their best bet. I think as streaming becomes more prevalent more people will be paying for commercial free services. Due to the increase in paying customers though the fee is small, sales will go up. People look for convince in every aspect of their life now and music is no exception. They do not want to have to pay and download a song on iTunes; they just want to select a song on Spotify. Also streaming services offer a social aspect that just downloading or purchasing a CD does not. The ability to make playlists and follow others adds a new feature to listening to music. I would not be surprised if streaming services up their fee in years coming with more music companies adding their content to services listeners may be charged more for additional content. Even despite that sales will continue to increase in years to come.
ReplyDeleteStrauss, Matthew. "Streaming Now Officially the Number One Way We Listen to Music in America." Streaming Now Officially the Number One Way We Listen to Music in America | Pitchfork. N.p., 06 Jan. 2017. Web. 28 Mar. 2017.
"Sony Sees Music Revenues Jump Thanks to Streaming." Billboard. N.p., n.d. Web. 28 Mar. 2017.
"Chance the Rapper's Chart Debut Is the Latest Streaming Milestone in a Year Full of Them."Billboard. N.p., n.d. Web. 28 Mar. 2017.
Mackenzie Rowe (1/3)
ReplyDeleteWith the continuous declining sales, I think that the music industry was finally faced to confront the reality that consumers were not going to be running back to paid, downloadable music or even conventional purchases of records or CDs at any point in the immediate future. I believe that up until recently there were still executives and large companies that were hoping they could find a way to swing the pendulum back to where they knew profits existed at one point, and as such would not have to devise a new strategy to save the sinking ship. That being said, I think they finally did come to terms with that and as such have begun to find ways to adapt. I see this being demonstrated excellently through the rapid growth in internet streaming platforms. A few years ago, Pandora was really the only service around and the one that most people I knew were utilizing. Now, we have Pandora (which has kind of gone by the wayside), Spotify, Apple Music, Amazon streaming services, Tidal, iHeartRadio, etc. etc. the list continues to grow on a fairly regular basis. The thing that the industry is finally realizing and accepting is that this is the method by which consumers prefer to receive their music now. According to Billboard, Spotify’s recent numbers release, “…are especially significant as 2016 was the first year streaming overtook physical sales and became a dominant driver of revenues in the music industry” (Gensler 2017). This is a huge insight to be gained because it entirely changes the traditional revenue methods that music industry has previously relied on to gain their dominance. Further, Billboard went on to state that these streams were responsible for, “…accounting for 51.3 percent of album consumption units and besting physical and downloads combined” (Gensler 2017).
Mackenzie Rowe (2/3)
DeleteThis trend is by no means limited to huge brands such as Spotify. Sony released figures within the past 6 months suggesting these trends carried over into their profitability as well. In their earning statement, as reported by Billboard, “recorded music sales increased primarily due to an increase in digital streaming revenues” (Flanagan 2016). This straightforward statement suggests to me that they believe that revenue to the degree they achieved would no longer be possible without the adaptation of their business model – to capitalize on the revenue stream of digital/internet music. This article also mentioned that the RIAA recently announced, “largely thanks to streaming, the U.S. recorded music industry had seen an 8.1 percent growth this year” (Flanagan 2016). It’s so incredibly smart that the industry is finally adapting because I wholeheartedly think that without it they would be dead by now. Even in the last 6-8 years, I think about the drastic changes in my own music habits – shifting from purchasing and downloading music on iTunes every week, to now I solely use Spotify Premium (which is the paid version and hence a revenue!!).
Mackenzie Rowe (3/3)
DeleteIn regards to future sales, I think it might be difficult to predict what they will do because I honestly didn’t expect internet streaming services to take off like they did. That being said, I feel like it might be difficult to continue to gain profit so I feel as though it’s more likely that they will either flatten or decline in coming years. One article suggests that it will be a sharp decline, as they argue it is already happening with streaming services. Barron’s argues that, “..the rise in paid subscription services has not helped to offset this decline… far more users – 900 million – prefer listening to music for free… The industry earned only $634 million from these sites last year” (Borre). Further, when mentioning the possibility of future trends, this article suggests that it’s actually millennials to blame for future decline as, “a good number of the users opting not to pay for music are Millennials” (Borre). This is definitely an industry and area worth keeping an eye on in the future, as it’s sure to make either a significant surge or dramatic flop once and for all.
Borre, Michelle and Daryl Armstrong. “Millennials’ Preferences Are Disrupting Music Business.” Barron’s 2017. Web.
Flanagan, Andrew, Gavin J. Blair & Associated Press. “Sony Sees Music Revenues Jump Thanks to Streaming.” Billboard 1 Nov. 2016. Web.
Gensler, Andy. “Spotify Officially Hits 50 Million Paid Subscribers.” Billboard 2 Mar. 2017. Web.
Carly Knowles
ReplyDeleteWhen I was little, I only knew how to listen to music through CD’s. Nowadays, I don’t own a single CD and I don’t even think there is a built-in CD player in my car. Everything has transitioned to digital, and online streaming has taken over the industry. Society is so technologically advanced now and it’s easier to listen to music through programs such as Spotify or YouTube, but it has been difficult for the music industry to adjust.
For awhile, there was a rapid decline in sales for the music industry because they had a difficult time keeping up with all the digital advancements. However, things turned a corner in 2016. As stated in Is the Record Business Really Back? How Streaming Is (And Isn’t) Turning a Profit, written by Robert Levine, “Many U.S. analysts and executives have been making the same claim, particularly since September, when the RIAA announced that recorded music generated 8.1 percent more revenue in the first six months of 2016 than it did during the first half of 2015. That growth was driven by the increasing number of streaming service subscribers: There were 10.8 million at the end of 2015 but an average of 18.3 million during the first six months of 2016” (Levine). However, even though the sales of streaming continue to grow, the sales of downloads and CDs are still struggling. As stated in Nielsen 2016 Report – Streaming Smashes From Adele, Drake & More Offset Sinking Music Sales, written by Ed Christman, “CD album sales fell 16.5 percent (to 104.8 million from 125.3 million in 2015)” (Christman). Online streaming sites, such as Spotify, have been great for the major labels, but it’s not as beneficial financially which is upsetting for the publishers and songwriters (Levine).
Knowles continued.
DeleteThe industry has come to realize that an important way to keep up with the way people consume music, is to focus on the paid subscription services. In the first half of 2016, paid subscription services brought in $1.01 billion, which is tremendously higher than $478.6 million, the amount brought in during 2015 (Levine). I think that sales will continue to grow from online streaming because there will always be competition. The major labels don’t want one company controlling every aspect in the music business. Also, when CD’s were around, the possibility of competing against an online streaming site was never a thought, but now, there’s always a new competitor (Levine). However, even though there have been positive changes made in the music business, they still are not completely stable. Labels have to make sure that streaming services don’t become so powerful that they start creating their own music and start controlling even the labels themselves (Levine).
Artists have obviously noticed that the industry is changing as well and they are doing their best to keep up. In 2016, Kanye West, Beyoncé, Drake and Chance the Rapper all released their albums initially only available on either Apple Music or Tidal (Titlow). It’s clear that online streaming is the way to make money right now and I think sales will continue to grow in the coming years. “The number of people willing to pay $10 a month for music skyrocketed in 2016, but it’s still pretty small…But considering that there are 319 million people in the United States alone, there’s plenty of room for growth” (Titlow). A perfect example of this is Apple Music. This service is already available in 113 countries and comes pre-installed on every iOS device. It only took a year and a half to get half of the amount of paying subscribers that Spotify has. Each service is going to keep expanding and they will include artists in the process. For example, in June 2016 Spotify hired former Lady Gaga manager, Troy Carter, to oversee its expanding artist relations initiatives (Titlow).
It’s been difficult for artists to bring in the same amount of revenue that they have in the past, but the music industry continues to find ways to keep up the changes. I believe that they will remain successful in the upcoming years.
Knowles continued.
DeleteCitation Page:
Christman, Ed. "Nielsen 2016 Report: Streaming Smashes From Adele, Drake & More Offset Sinking Music Sales." Billboard. N.p., 09 Jan. 2017. Web. 28 Mar. 2017.
Levine, Robert. "Is the Record Business Really Back? How Streaming Is (And Isn't) Turning a Profit." Billboard. N.p., 3 Nov. 2016. Web. 28 Mar. 2017.
Titlow, John Paul. "7 Ways Streaming Music Will Change in 2017, After Another Crazy Year." Fast Company. Fast Company, 22 Feb. 2017. Web. 28 Mar. 2017.
With the introduction of streaming, record companies are now finally seeing profits and the industry (for now) has found a way to adapt to changes in the way we consume music. Thanks to the growth in Spotify and Apple Music, music streaming has passed the milestone of 100 million paying subscribers worldwide (Nicolaou). The increase in paid streaming subscribers brought in $1.01 billion in the first half of 2016, which was more than double the $478.6 million for the same period in 2015 (Levine). These profits have greatly impacted the not only the artists, but the suffering record companies as well. For example, in 2016 Warner Music group had posted its first profit of its Len Blavatnik era, which was a net income of $30 million (Christman).
ReplyDeleteWhile it’s hard to know for sure where streaming will go in the next five years, there are some indicators that tell us it could improve. The number one factor that could continue to drive streaming’s success is something the download business never had: competition (Levine). As any economist would tell you, competition is extremely important in the free market because it both drives innovation as well as keeping prices low. Since streaming’s explosion in popularity, we already can see how companies are attempting to innovate. One way we see this is through exclusive releases. This is where an artist agrees to release their album exclusively on one streaming service, encouraging fans to subscribe to that service in order to listen to the new music. In addition to exclusive releases, we also see things such as 50% student discounts, which is a great way to get younger people on board with streaming. As we continue into the coming years, competition between the streaming services is going to be a driving force in making the music industry more profitable.
If I had to give my own personal prediction, I believe that we could see music labels taking a page out of television’s playbook. Nowadays, if you want to stream a new episode of a particular show, you would have to download that network’s app in order to watch it. I could very easily see customers having to pay Universal a subscription to a UMG streaming app in order to listen to Drake and Rihanna. Of course, this would only happen if popular artists decide to pull their catalogs from streaming services. Taylor Swift, for instance, doesn’t have their catalog available for streaming. If other artists follow suit, than we can see the downfall of streaming. If streaming can bring in enough money for an artist, however, than I predict streaming will only become stronger.
Christman, Ed. "Warner Music Group 2016 Earnings See First Post-Blavatnik Profit." Billboard. N.p., n.d. Web. 28 Mar. 2017.
Levine, Robert. "Is the Record Business Really Back? How Streaming Is (And Isn't) Turning a Profit." Billboard. N.p., n.d. Web. 28 Mar. 2017.
Nicolaou, Anna. "How Streaming Saved the Music Industry." Financial Times. N.p., 16 Jan. 2017. Web. 28 Mar. 2017.
I think that the music industry has really found its gold mine through streaming. It took the industry well over three years to comprehend that consumers just don’t buy CDs anymore. The era of paying for music let alone downloading it came to an end with the disappearing of the iPod. CDs were already on the downfall, but downloading also became unpopular when songs started taking up space in computers, phones and other devices. This was around the time when YouTube became a vital instrument in the music industry as it allowed consumers to listen to music without having to pay or download, hence the visual component of the music industry became more prominent. Through 2011 to 2014, music videos gained vitality because of YouTube’s domination of the music industry and the declining sales for iTunes and CDs. This is when we see artists like Macklemore, Sia, Lorde coming out with memorable music videos.
ReplyDeleteAround 2014, the music industry finally discovered what has carried it back to the top: streaming. Pandora was one of the first services to take on streaming, and it succeeded greatly. It was not only convenient, but it was free! Consumers loved the idea of having access to free streaming and the fact that it was just audio gave them the sense that they didn’t have to watch the video, it was just about music.
Picking up on Pandora’s success, Spotify maximized on the concept of streaming. They took on big artists and streamed their songs. But I think what gives them leverage is the convenience of their app and the customization functions of their service. While they’ve become the biggest market player, they’ve chosen their battles and while capitalizing on certain aspects, they have taken a step back on other ones such as exclusive albums, unlike Tidal. Spotify’s successful strategy has carried the service to the top, with over 50,000,000 subscribers worldwide.
I think that overall, sales in the music industry will continue to increase at least until an even more convenient way of listening to music sparks up.
According to Stu Bergen, Warner Music Group CEO of ¬international and global -commercial services, streaming doesn’t look as promising as to be stable for the next few years, unless tech companies start showing profits. “However fast -streaming grows, it won’t become a stable, ¬sustainable business until it's profitable for those tech ¬companies. [and] so far, that hasn’t been the case.” I agree with this, but depending on the willingness of consumers to pay for the services, the industry might go on a steady or even an inclining trend. The future users of streaming services are millennials ad the late-adopters who make up the 40-60 age range. This range is the same that is using Facebook heavily today, and generally has more disposable income and is willing to spend an extra few dollars to get their favorite artists’ records at their convenience. Millennials on the other hand, are not such big fans of paying for music, and are likely to demand a more convenient service for lower cost.
"Spotify Officially Hits 50 Million Paid Subscribers." Billboard. N.p., 02 Mar. 2017. Web. 28 Mar. 2017.
Delete"Shirley Halperin." Billboard. N.p., 23 Oct. 2012. Web. 28 Mar. 2017.
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