The music industry may be enjoying its return to growth fuelled by streaming subscriptions, but it should not get carried away.
That warning came from Pete Downton, deputy CEO at 7digital, speaking at Music Ally and Music Biz’s NY:LON Connect conference in London yesterday.
“Whilst it may feel like a wonderful time in the music industry – we are in a period of growth – but everything is relative,” he said, showing a chart that emphasised how recorded-music revenues are still a long way from their peak in the mid-1990s.
@petedownton71: “It may feel like a wonderful time in the music industry – we are in a period of growth – but everything is relative” – his slide certainly shows that… #nylonconnect pic.twitter.com/Ap4oUVZq9N
— NYLONConnect (@NYLONConnect) January 22, 2019
“At the peak of the music industry there were about 500 million consumers globally, in mature markets, buying CDs,” he added, before talking about the recent trends in streaming.
“The opportunity of streaming has been driven by connectivity, by ease of use,” continued Downton. “It’s access to music: the ability to get access to music at the touch of a button. And largely it’s been about personal experiences.”
The title of Downton’s speech was ‘the rise of the super-aggregator’ – companies that operate across the spectrum from content to distribution.
“The most important theme of my presentation is that the opportunities now are global, and the kinds of players we see coming into the marketplace are bigger and better in terms of the experiences they’re able to deliver,” he said.
“The speed with which these new experiences can be adopted have changed dramatically. Yet the music industry is having a lot of the same conversations we had 18 years ago: about how we organise to seize on the opportunity.”
He noted that 40% of smartphones shipped in 2017 were made in China – up from 0% in 2007. On the pace of device innovation: “The music industry sees it, and I think understands that it’s coming, but still struggles to adapt the way that it works in order to realise that opportunity.”
About those super-aggregators: Downton said that they own the customer experience and the user data, but also have growing activities around the content itself.
He cited Alibaba Group and Amazon as two examples. They have online marketplaces, payments, cloud infrastructure and even physical retail outlets. but they also have “huge content plays” in terms of music, video, games and e-sports.
“When music’s looking at the opportunities presented by changes in technology, changes in retail, changes in telecoms, it has to realise there is huge competition for every dollar that’s being spent, and huge competition to deliver those experiences to consumers,” said Downton.
Recent headlines that fall in to this trend include Amazon bidding for sports networks owned by Disney; Tencent and Riot Games creating an e-sports venture; Verizon testing a Netflix-style cloud gaming service; and Liberty Media continuing to acquire stakes in music companies.
“We can’t change or make it simpler to license overnight… but my point is when these businesses think about music, we have to go in with consumer insight and data, to explain why music is so important in people’s lives,” said Downton.
“We’re going to go from a personal music experience to a social music experience,” he added. “Music is incredibly well positioned to benefit from that, provided that it remains paranoid about its role in people’s lives.”