Why Isn't the Record Business Doing Better?
Music consumption is shooting upward. Streaming activity is skyrocketing. So why isn't the record business doing better?
By some measures, recorded music is doing great. Overall music volume (counting sales and streaming) is up 14 percent to date in 2015, Nielsen's David Bakula said Tuesday at the Music Biz conference in Nashville. Streaming alone is up 91 percent year-over-year.
But as the RIAA's Josh Friedlander noted, the record industry has been flat at about $7 billion for five straight years. Wholesale revenue has actually risen slightly. The IFPI puts the 2014 trade value at $4.9 billion, up from $4.5 billion in 2010.
This disconnect between engagement and revenue sums up the mood at this year's Music Biz conference. People see potential. They can see a bright future -- but they're not sure exactly how to get there.
The highest expectations are being placed on current streaming models. Russ Crupnick of MusicWatch gave a presentation that helped explain what could reasonably be expected from services in the U.S.
Crupnick says 120 million Americans use free audio streaming sites, including video sites like YouTube and Vevo. Now, some people simply won't pay for music. Crupnick puts the number at 50 million people. "I really believe them -- I think it will be really hard to convert those people."
That leaves 70 million potential subscribers. But a decade of market research in music leads Crupnick to believe half of them are not telling the truth. So that leaves 35 million potential subscribers.
There's good news here, however: An additional 35 million subscribers would increase the number of subscribers to any music service by about 300 percent.
The problem is figuring out how to reach these potential subscribers. Crupnick's survey results say content won't do it. Few people are interested in exclusive content or early access to releases. A complete degradation of free services would have only slightly better results. Sound quality doesn't matter much. Price wouldn't even be much of a factor; Crupnick believes people that wouldn't pay the current $9.99 monthly fee wouldn't pay $4.99 or $1.99 either (although Spotfiy's 99-cent sale seems to have drawn new customers).
So why do people pay? Crupnick thinks there's a subscription ethos. It's the reason why people pay for Netflix, The New York Times and other online services. He believes people like the benefits of the paid subscription, such as access, discovery and unlimited content.
The trick is communicating the value of subscribing to those people not currently subscribing. The task, said Crupnick, is finding the right language to communicate with these consumers.