Ask a man or woman off the street how the music industry is faring, and he or she is likely to say “bloody awful.” Ask a marketing strategist, and he or she will say, “that depends on what part of the industry you are talking about.”
Step one in any category analysis is to make sure you are assessing the right thing. Imagine being asked to study the “health care” industry, when what was really meant was hospitals. Then imagine how many months of effort you would waste digging into information around insurance companies, pharmaceutical manufacturers, small physician practices, and the like.
And so it is with music. Yes, the man on the street is right that one part of it is “bloody awful.” According to data from the RIAA, sales of physical CDs dropped 21% in 2010. Hard to believe they still exist, no? You would think after falling at that rate for the past ten years…anyway.
Digital music formats, however, (which the man on the street might think are free based on what he’s been hearing over the past decade) are in fact a healthy part of the music industry, expected to finally overtake CDs this year in dollar value.
Yet, look inside THAT sector, and you will see we still aren’t done analyzing music. There are subscription sales, pay-as-you-go sales for both full “albums” and single tracks, and mobile phone music sales (which come in three flavors).
Per the RIAA, overall digital music sales were up 3% in value in 2010. Pay-as-you go sales rose over 8%. But for those innovators working on “smartphone music,” there was bad news – mobile revenues slumped by nearly 30%. And subscription revenue, a format that is supposed to be the be-all and end-all, dropped 6%.
What does the latter mean for existing or soon-to-be-released "music cloud" offerings from Amazon and Apple and Google and Spotify? And what was Russian gazillionaire Len Blavatnik thinking when he ponied up a cool $1.3 billion last week to buy legacy label Warner Music Group?
There really isn’t much left in the way of cost cutting. WMG, with Blavatnik’s funding, needs to find the subsectors of digital music that can be reenergized in a very big way.
Never mind that vinyl is a rounding error in the music industry. Old-school DJ Blavatnik is ready to rock.