(By Tom Moran)
“For the first time in more than a decade, the music industry turned a profit last year, indicating that clearly the music companies are doing something different today. But what? The short answer is selling music in the ways listeners want to consume it, with each new service also reducing the volume of content theft and validity of the often-dubious justifications for it.“
After years of singing about digital distribution in tones of doom and gloom, executives at the major music companies have finally changed their tune.
In a recent NYT article Edgar Berger, chief executive of Sony Music International, said that while “at the beginning of the digital revolution it was common to say that digital was killing music,” digital is now “saving music.”
For the first time in more than a decade, the music industry turned a profit last year, indicating that clearly the music companies are doing something different today. But what? The short answer is selling music in the ways listeners want to consume it, with each new service also reducing the volume of content theft and validity of the often-dubious justifications for it.
Music’s Content Delivery Advantage
The music industry is part of a much larger ecosystem that includes a range of entertainment and technology companies vying for consumers that have a limited amount of bandwidth, in both a technical and philosophical sense.
However, the music industry may have one distinct, long-term advantage over other segments of the entertainment industry: Consumer demand has forced it to learn and embrace how to generate profits in the lower revenue, lower margin world of digital distribution.
Segments such as video gaming, movies, publishing and cable TV see surprisingly low percentages of content distributed on next-generation platforms. This suggests a somewhat slower shift in consumer behavior than was the case with the Napster inspired “revolution” in digital music distribution.
However, the rapid rates of growth in digital distribution indicate it would be a mistake for other media businesses to assume they are somehow insulated from a sudden transition – music history shows us such transformations can and do happen and that the cost of failing to anticipate them can be devastating.
Digital Distribution: Will History Repeat?
If media companies are not actively creating and driving the digital revolution themselves, someone else will do it for them, and not necessarily on the terms they would prefer. Music industry insiders have acknowledged that the universal 99-cents-per-track pricing policy forced on them by Apple was one of the most devastating revenue related consequences of their failure to act quickly enough in response to Napster.
While “TV Anywhere” services like HBO GO and production ventures like Netflix’s House of Cards highlight the opportunities for media companies to be bold, creative and innovative, by and large, many segments of the media business are being overly conservative in focusing on protecting legacy revenue streams rather than deploying new services.
If we think of consumers’ move from pay-per-album to pay-per-track as the foreshadow to cable TV unbundling or mobile magazine reading, it is not difficult to imagine a scenario where a mass migration to digital distribution creates another lost decade of revenue for other segments of the media business.
While the music industry holds the advantage of being forced early adopters of digital delivery modes, the rest of the entertainment sector has a competitive weapon today that music didn’t: access to powerful, advanced technologies like cloud and big data that promote scale, flexibility and product diversity. Now is the time for industry leaders to figure out how to preserve revenue and profits using these new tools, rather than focus on protecting the margins for legacy revenue streams.
“Opinion pieces of this sort published on RISE Networks are those of the original authors and do not in anyway represent the thoughts, beliefs and ideas of RISE Networks.”