Streaming is the best method of music delivery and there is no other alternative. We just have to stop running around town naked and beg to get screwed.
My definition of current music streaming services is blunt: “portable, fully loaded Napsters”.
It took RIAA a few years to gain the Supreme Court ruling in 2001 and legally kill the original Napster.
Exactly ten years later, Napster founder and shareholder of Spotify, Sean Parker used major Facebook endorsements to convince devastated and desperate for new ideas record labels to swallow some “wonder pill” and allow it in America.
An improved, discovery loaded Turbo-Napster came back to life!
Today everyone wants to catch up and enter this new music wonderland. Warner Music’s sole owner is investing in Deezer, Google All Access which rolled out in May, and Sony just introduced its own super discounted music streaming service. Amazon and Apple are ready to abandon their own music stores and jump in to same inferno!
So, with so many of these big name entrants in the market, do we have a Trojan horse inside of the music industry, or am I in need of medication?
Looking from my perspective, the industry is in deep trouble. If left alone in their current state, these big name streaming service rollouts, in addition to personalized internet radio, will finish and deplete music sales within five years. This trend will not even spare iTunes! More or less, music as merchandise will cease to exist! We will enter an era of subscription and advertisement supported income. Is this good? I don’t think so! Let’s check some facts:
- Just take a look at Sweden, the home of Spotify. Some will see the Swedish numbers (top national revenue growth in 2012) as the best argument FOR total streaming. Sweden now has 91% of digital revenues coming from streaming, and almost all of it comes from the propaganda effort made by Spotify! The reality is that Sweden is just moments away from total nirvana of streaming, and in 2012 the Swedish music industry made just half of the record in year in 2001. The once 1.9 Krona market will plateau at one billion in afew years. Expect the same in the US and similar markets.
- RIAA, IFPI and the labels are all excited with the first growth numbers in the last 14 years in 2012. I agree that streaming generated double digit growth, but this growth has choked all other sources of monetization! Therefore, .3% growth should be the subject of concern, not childish optimism. Counting inflation, 2012 was another tragic event with total happiness inside of Spotify infested IFPI.
- The last and probably the most devastating fact for streaming hopes is the satellite XM radio case. It took XM almost 12 years to gain 25 million subscribers. All of this was accomplished with heavy promotion, free start with almost any new car delivery, and discounts for multiple users. We have to remember that the new car buyer segment covers the most influential part of the society. Regarding streaming, most of the subscribers will come from the 13 to 33 age demographic – good luck!
To summarize music streaming; it’s a classical Trojan horse for the music industry. It will not kill it, but it will keep over $100 billion of crisp and clear goodwill in a sad maximum $25 billion retardation! The total success scenario would be 250 million premium, half-premium, and discount subscribers. The revenues generated with average subscription at $7 per month or $85 per year would max out the streaming at $20 billion. Such a success and saturation would not deliver more than $10 billion from all other sources. Net result: The $40 billion dollar industry in 1999 has a chance to grow back to a $30 billion dollar industry by 2020! (Best case scenario).
The most unfortunate outcome of this “green light” for streaming is the fact that the “toothpaste” is already out of the tube and putting it back inside is not possible, especially with current mindset of the industry leaders. We have to introduce new sources of revenue that will also include streaming.
Spotify with FREE Shazam and FREE similar playlist integration means prostitution for FREE, making the original Napster primitive. Actually, very primitive!
In order to start making money, the industry has to put new conditions on the table. Above all, music is the property of the artists and their representatives, and the goodwill of the creators should have a higher priority than the endless demands of well financed and properly endorsed startups.
