the future of music industry
music revenues are declining
Over a decade of decline in revenues Global revenue of music industry (billion $US)
Global revenue (billion $US)
30
28.5 28.6 28.1 27.7 27.4
24 18
26.2
24.3 24.2 23.5 22.7
21.2
19.8
18.3
17.1 16.6 15.7 15.0
12 6 0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: IFPI Recording industry in numbers 2014
but we are not listening less music
it is changed how we listen music
How we listen music is changed A roadmap of Innovative Music Services
napster
iTunes
YouTube
Spotify
1999
2003
2005
2008
iTunes provided a legal and convenient way to download music. It became the top music vendor in US in 2008 and the top music vendor in the world in 2010. The successful business model is built around a simple yet compelling value proposition: a comprehensive digital world’s music catalogue available in an convenient and simple way.
YouTube is quickly becoming the most popular music streaming service. It is a free and easy way to share and access the largest collection of videos. The “free� quality of the video streaming platform has led it to gain an impressive volume of consumers, thus making it an extremely attractive platform for advertisers.
Spotify is quickly becoming the most popular on-demand and download music streaming service. The key driver of its business model is similar to both the iTunes Store and Youtube: it offers a breadth of music at the touch of the fingertips, either for free supported by advertising or with added benefits available through subscription plans.
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With Napster Consumers began experiencing digital music for free. Record labels were not able to provide an attractive legal alternative. By then, illegal file sharing begun and consumers became accustomed to accessing music for free. iPod in 2011 was the first widespread successful portable media player. It further encouraged appetite for digital music.
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Digital Music continue to rise Global digital revenues of music industry to $5.9 billion
Globale revenue (billion $US)
6 4.8 3.6 2.4
4.0
1.2 0
2.2 0.4 2002
2003
Source: IFPI Recording industry in numbers 2014
2004
4.4
4.6
2009
2010
5.1
5.6
5.9
2012
2013
2.9
1.2 2005
2006
2007
2008
2011
Revenues from Digital Music account for 39% of industry Global revenue of music industry (billion $US)
2005 5%
2009 25%
39% 61%
75%
95%
Physical
Source: IFPI Digital Music Report 2014
2013
Digital
streaming is the fastest growing media
Streaming services drive the digital growth Streaming revenues more than tripling to US$1.1 billion in the last 3 years Digital download
Digital streaming
Global revenue (billion $US)
6 0.7
1.1
4.7
4.9
4.8
2011
2012
2013
0.5
4.8
0.3
3.6 2.4
4.0
1.2 0
2.2 0.4 2002
2003
Source: IFPI Recording industry in numbers 2014
2004
4.4
4.3
2009
2010
2.9
1.2 2005
2006
2007
2008
and it is changed the perceived value
revenues are challenged because of dominant methods consumers use to access music, such as Streaming, Torrents / P2P file sharing and YouTube, are either natively free or have a free option.
“There’s a new generation of people who’ve been conditioned to expect their music for free, either through piracy or YouTube. We’re connecting powerfully with that generation, giving them a far superior way to enjoy music while magnetizing them by the millions. We convert their investment of time into real revenues by magnetizing the free service with advertising. Crucially we’re also seeing them move to Spotify’s paid service in their millions by offering mobility and convenience.” Ken Parks, Chief Content Officer, Spotify
A different monetization model
Buy CD / LP
Download Song
Stream a Song
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End User Price $15.99
End User Price $0.99
End Price FREE
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Artist Royalties est. $1.90
Artist Royalties est. $0.60
Artist Royalties est. $0.008
Source: Almighty Institute of Music Retail market research. Spotify doesn’t pay on a “per song stream” model, exactly: the total royalty pie is split among all rights holders based on the percentage of total streams and the company estimates that the average song generates between $0.006 and $0.0084 per stream in royalties.
each market is different
Different performance across the world Revenue by Market (million $US)
5,389 3,616
4,897
521 Overall music revenues declined by 3.9% in 2013, heavily influenced by - 16.7% in Japan, a market at the start of its digital transition, and almost flat revenues in most of the other countries. Source: IFPI Recording industry in numbers 2014
North America is the biggest market Global share of Sales of Recorded Music (million $US)
2,825 4,474 239 424 431
TOT 15,029
956 1,304
1,365
United States
Japan
Germany
UK
3,012
France
Australia
Canada
Italy
Other
And digital music consumption changes by country share of revenues 10%
30%
6% 21%
44% 44%
73%
60%
11% 21%
13%
18% 27%
11%
55%
34%
53% 68%
Physical
Digital
Other
business model is key to monetization
“There are two real revolutions taking place in digital music: first, value today is in ubiquitous access rather than ownership. Second, the focus of development in the worldwide music industry is no longer as concentrated, as it used to be, on the US.� !
Axel Dauchez, CEO, Deezer
1
Easy and Free for Customers
In a world where Consumers have access to free services at the touch of their fingertips and are overwhelmed by the abundance of choices Music services should be: !
Convenient and Easy to access !
Improved musical Experience !
Free (or “feels like free�)
Source: based on customer surveys available online
2
Satisfy all the Industry with a Sustainable model A complex challenge is for music market is to find business models that satisfy all the chain, from Artist to Publishers to Distributors: !
Monetize asymmetric revenue streams (such as Advertising or Mobile data fees) !
Distribute revenues fairly among the players !
Enable economies of scale, to increase competition on Services Source: based on customer surveys available online