Failure to resist change and embrace new distribution models will result in the music industry experiencing another costly, potentially devastating slump, Geiger warned.
“We watched the record and recording industry lose a lot of money over the last twenty years in the digital revolution. And wave two of the drop is coming because [download] files are kind of over and we are transitioning into the [next] version of the system, which is streaming.”
“This year, to me, files are over” he continued, adding -- just in case anyone in the audience had any doubts about his staunch views on file ownership -- that “downloads have always sucked,” typically provided a “a terrible user experience,” lacked “browse-ability” and were stifled by a “limited selection of songs.”
“Most people [now] are streaming most of their content without knowing it,” Geiger continued, citing mass global YouTube and radio consumption. “This is all changing in front of our very eyes. Files are becoming obsolete.”
“Our business is trying to rebuild revenue after that last $20 billion of loss. And it finally, through iTunes mostly and some other stuff -- not as much YouTube yet, but it’s coming -- built back some of that revenue.”
“The big change is when you abolish units and you abolish price and that, if we don’t do it quickly, is going to [lead to] hump number two.”
The only viable solution, Geiger posited, was that the record industry fully embraces what he termed the “supplier-led revolution.”
“If we don’t all yell and push and say: ‘No. Don’t buy the file. Don’t buy the CD, actually sign up to Spotify.’ I think we are dead,” he forcefully stated.
The potential rewards for doing so were gigantic, Geiger said. He estimated that by 2024, the number of paying streaming subscribers could grow to 500 million, with an average spend of $12 per month, resulting in yearly subscription revenues of $72 billion.
Based on subscription services taking 25% of all incomes, that would generate $54 billion per year for labels and publishers, according to Geiger. He also anticipates subscription costs rising to $15 per month within the next 15 years, which would grow the label and publishing share of streaming revenues to well over $100 billion – or “nirvana,” as Geiger called it.
“The history of subscription models is that they start cheap and go upwards -- always,” he told delegates. “Once people have the subscription needle in their arm it’s very hard to come out and prices go up.”