The music industry has been through various stages, first with the focus on live music during the Industrial revolution. The power of radio later helped spread the music and recorded music companies received huge investments, enabling them to sign talented artists. In the 21st century, the popularity of the Internet made downloaded music gain more favor than physical records. However, with limits in capacity and copyrights, free downloading was banned and a new form of business model overtook the industry- Streaming!
Nowadays, consumers’ preference shifted from ownership to accessibility of music. In 2016 Billboard recorded the lowest number of album sales since 1991 (Digitalmusicnews, 2013). Artists now have more control over their music compared to the past, where many relied on record contracts to publish music. Digital analytics of streaming help artists gain insights on the popularity of their music. Digital royalties allowed more transparency in collecting digital revenues. Record companies also benefited from increasing profits through the digital royalties provided by artists under their label. One of the most prominent music streaming providers is Spotify. It currently has more than 140 million active users and over 50 million paying subscribers (Forbes, 2017). Four critical factors that led to their success are: first mover advantage, clever differentiation marketing, collaboration to increase reach, and recommended playlists.
The porter’s five forces illustrate the dynamics of the streaming industry. The threat of substitutes is low, due to the dominance streaming has over physical sales and downloads. The bargaining power of suppliers is also low, since streaming services have an immense music library. The industry rivalry is high, since the streaming providers offer similar services. There is also low threat of new entrants, since Spotify and Apple Music take up most of the market share and have strong customer bases. The bargaining power of buyers with streaming industry is low, since the market leaders have control with the fixed prices of accessing music.
The SWOT analysis also offers insights on the streaming industry. Some strengths include the transparency of the business transactions, artists and labels receive traceable amount of digital royalties. Another strength is the wide range of shared music on one platform. One weakness is the restricted profit margins for streaming providers, who needs to attend to both users’ and labels’ needs. One opportunity is the live streaming of concerts and broadcasts that could be available through streaming apps. Although streaming is dominating, possibility of future advanced technology be a threat to overtake streaming.
Future growth is expected in the music industry, with an estimated worth up to $41 billion by 2030 (Billboard, 2017). Spotify and Apple music is predicted to maintain its’ market leadership, mainly through license partnerships with labels and acquisitions of smaller firms. Some limitations lie within the open media platforms, that make restricting copyright infringements more difficult. Some potential advances streaming industry could take upon is the use of block chain technology. It would enable more transparency and speed with tracing transactions and origins of music. (Muziekenrecht, 2017)
References
Veldkamp, T. (2017). Tussen bitcoins en beats: Blockchain als revolutie in de Muziekindustrie. Available: https://www.muziekenrecht.nl/blog/2017/4/tussen-bitcoins-en-beats-blockchain-als-revolutie-in-de-muziekindustrie. Last accessed 21-09-2017
Tiffany, K. (2017). Spotify just struck a crucial deal with Sony Music.Available: https://www.theverge.com/2017/7/11/15953006/sony-music-spotify-agreement-licensing-public-offering. Last accessed 20-09-2017
Christman, E. (2017). Music Industry Will Hit $41 Billion By 2030 According to New Goldman Sachs Report. Available: http://www.billboard.com/articles/business/7949040/music-industry-will-hit-41-billion-by-2030-according-to-new-goldman-sachs. Last accessed 20-09-2017
Resnikoff, P. (2013) Album sales sink to their lowest levels since 1991. Available: https://www.digitalmusicnews.com/2013/11/01/weeklyalbum/ Last accessed: 22-09-2017
McLntyre, H. (2017), Spotify officially hits 50 million paid subscription. Available: https://www.forbes.com/sites/hughmcintyre/2017/03/03/spotify-officially-hits-50-million-paying-subscribers/#1d2054fa29be Last accessed: 22-09-2017
