Music Industry: Future Or F****d

mosMinistry Of Sound CEO Lohan Prescencer has issued a strongly worded alternative Christmas message to the music industry criticizing the likes of Apple, Youtube and Spotify as undermining the value of music and damaging the industry. “Companies often fail to move with the times. That’s different from self-harm. But this is exactly what the record industry has done. Not just once, but many times. Imagine a supermarket offered a £100-a-month all-you-can-eat service. Then imagine it offered free food to 75 per cent of its customers as a kicker. This is Spotify. Amazing for customers. A disaster for the music industry. Why? Because when you’re not getting paid, the talent well begins to run dry.

Who’s to blame?

Strike one – When Napster first blew up the industry with free music, record executives panicked. What they should have done was calmly get together and agree a digital platform controlled by the industry. What they did instead was abdicate responsibility for working it out to Apple.

Strike two – YouTube. What an amazing idea! A great opportunity for people to watch music videos, gain critical exposure and break new artists. Except… YouTube was making all the money. In another panic, the industry cobbled together VEVO. Five years on, it has lost a fortune and is up for sale.

Strike three – Spotify. All the music you could ever want. Brilliant! But again there’s a wrinkle. Three quarters of Spotify’s users don’t pay. The more Spotify grows, the more free users – 37.5 million at the last count. This is why it loses so much money – €93 million in 2013. And if Spotify doesn’t get paid, who takes the hit?

43 million streams = $3,000!:

7 royalty cheques that’ll make u lose faith in the music industry:

Why Taylor Swift Pulled Her Music From Spotify:

vinyl animNow for Strike four – the new iTunes subscription service due to launch in 2015. Having acquired Beats, Apple plans to pulverise Spotify by offering subscription at half its price. There will also presumably be a free introductory offer. Again, you don’t need to be a genius to guess how the music industry will respond. The terms are probably already agreed.

Music is a subjective business by definition. Then there are the drugs, the lifestyle and the egos. The industry is a million miles away from the likes of Unilever and its commoditised products. So there’s no prize for guessing the type of person that is attracted to the music business. Keen observers may remember Ministry of Sound sued Spotify over its use of our compilations on its playlists. We settled out of court and some of our music is now on Spotify. But that doesn’t address the root problem. In ten short years, music has gone from being valued and paid for to being commoditised and free. Industry revenues have declined from $30 to $15 billion. Profits have been even harder hit. We in the business only have ourselves to blame. And long-term the trend looks dire. Add Spotifiers to YouTube’s one billion users to countless millions using other free music services, and what do you get? A generation who’ve never paid for music.

love-hurts-wallpaperAround and around we go. Will there be a strike five? Almost certainly. Six and seven? Why not? The answer from the industry’s lacklustre executives is always that ‘we must support progress’. And that ‘progress’ means free music. As Chief Executive of Ministry of Sound, one of the world’s largest independent labels, my Christmas message is short but simple. Stop giving it away! We’re smart enough to work things out between us. To control our own destiny. To stop the rot. More than anywhere else in the world, the UK punches way above its weight in music. We’re home to some amazing talent – Ed Sheeran, Sam Smith, Adele, London Grammar, George Ezra to name a few. Let’s put our numerous suitors on hold, invest in developing our own platforms and routes to market. Let’s seize back the keys to the music kingdom.”

The old cliché of ‘Closing the door once the horse has bolted’ springs to mind, Yet at the current rate of ‘progress there will be ‘No horses left in the stable’ at this rate! The Time Is Now! And Time Is Running Out The Door You Are Running In Through!

Apple has recently introduced a new 14-day no questions asked return policy for iTunes, App Store and iBooks purchases in Europe including the UK, Germany, Italy, France, and many other EU countries. Apple’s terms and conditions for the stores previously stated users had the right to withdraw from a transaction “without charge and without giving any reason until delivery of the product has started.” That meant purchases were all but final apart from some exceptions handled by Apple support. Now, Apple has updated its terms to include a specific no questions asked 14-day return window that includes all purchases apart from gift cards:

Right of cancellation: If you choose to cancel your order, you may do so within 14 days from when you received your receipt without giving any reason, except iTunes Gifts which cannot be refunded once you have redeemed the code.

itm410 Predictions for the Music Business in 2015: These predictions come via Bobby Owsinki writing for Forbes. (With Comment by Alan Cross:

1. Apple launches a new music service. Beats Music doesn’t have a huge number of subscribers so it can be retired without fear of killing a well-liked brand. In its place Apple will launch a new on-demand streaming service that’s cheaper than the competition and features high resolution audio.

AC: A certainty.  Apple knows that they can’t rely on selling downloads through iTunes for much longer (see point 4) and iTunes Radio hasn’t exactly taken off.  But will they be able to take on Spotify and Rdio in a meaningful way?

2. High resolution audio becomes a standard streaming feature. TIDAL and Deezer set the precedent, and soon all streaming services will offer at least one tier of hi-res audio. Of course, the definition of high resolution will continue to be a moving target, as some services equate the term with CD quality while others offer higher sampling rates and/or 24 bit depth.

AC: I certainly hope so. I’ve long despaired about how so many people settle for awful sounding MP3s and are content to consume music through cheap ear buds and (gasp!) laptop speakers.

3. The digital pie gets larger. As consumers become more comfortable with on-demand streaming, larger numbers of them register for the various platforms. More of them than ever are willing to pay for their service of choice than ever before.

AC: Streaming is the future. It’ll just take time for people to get used to accessing music instead of possessing it.  A lot of this new adoption will have to do with the evolution of the connected car.

4. Downloads continue to slide. Downloads fall below $1 billion in total revenue as music consumers find that having access to millions of songs is a lot better than owning just a few.

AC:  Yep. See point 3.

5. Vinyl soars again. Once only a blip on the radar of the industry, vinyl sales continue to grow to the point where they make a very small but significant contribution to the bottom line of many record labels. For the first time in 40 years, new vinyl production gear is produced to meet the demand.

AC:  Vinyl sales are still only a blip, but growth shows no sign of slowing down.  But I’m not sure existing pressing plants will be able to keep up with demand.

6. Artists find the right villain. Numerous artists see the various streaming platforms as the ones responsible for their tiny royalty payments, but many begin to see the light that it’s really the record label middle man that enjoys the majority of that income. As a result, artist’s attorneys negotiate new agreements with record labels to make the split a bit more equitable, but the record labels still continue to be favoured.

AC:  I hope so.  Streaming music isn’t the same as selling music. Instead, it’s more akin to listening to music on the radio. Do NOT confuse streaming royalties with sales royalties. Got a problem with how much you’re being paid for streaming? Take it up with your record label and your collective organization. They’re the ones who set the fees.

7. Google’s YouTube Music Key initial acceptance is subdued, but gradually gains marketshare.Consumers used to getting their music for free on YouTube don’t initially see a reason for changing to the payed tier offered by Music Key when it’s initially launched, but begin to see the benefits of the service over time. The platform may take a full year to hit its stride, but it will eventually get there.

AC:  Probably.  YouTube is the biggest source of online music discovery in this arm of the galaxy. But after years of being accustomed to get all kinds of YouTube music for free, I think it’ll take longer than a year for consumers to catch on to any kind of paid model.

8. Spotify and Pandora take a hit. With the new entrants from Google and Apple in the marketplace, the growth of both Spotify and Pandora is stunted. Pandora is especially hurt, as consumers find they’d much rather pay for on-demand streaming than just a digital radio.

AC:  Maybe, but their positions as incumbents is pretty strong.

9. Revenue from traditional music distribution channels decays, but still continues to roll.Terrestrial radio still plays a major role in breaking acts, and listenership remains high despite the increase in streaming music consumption. Likewise, CD sales continue to fall, but at a slower pace than predicted. They’ll die eventually – it just won’t be this year.

AC:  Totally agree on all counts.

10. The next new trend in music finally surfaces. The charts have been dominated by EDM-flavored dance music and country music for too long as consumers begin to tire of the genres. A new trend emerges that sets the music world on its ear. This is one that I predicted last year, but missed on. Hopefully it was just a year too early.

AC: PLEASE let there be an upswing in guitar-based rock. Please?


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