The cruel math behind why streaming will never save the music industry

The recorded music business has had a pretty lousy 15 years, shrinking by half from its peak of $40 billion in 1999. And the past year hasn’t exactly been much better, according to the International Federation for the Phonographic Industry (IFPI). Revenues slipped another 4% overall and even digital downloads, dominated by Apple’s iTunes, fell by 2%. That’s the first time they’ve ever seen a decline. There is some good news, though, in that paid streaming services crossed the $1 billion threshold, with an estimated 28 million customers worldwide. The IFPI says that’s up from just 20 million a year before and a lot of industry people believe that revenue from streaming could eventually lead the music business to new heights. But when you look deeper, you’ll see that there’s a fundamental disconnect between what the experts believe it will take to get there. And unless that gap is bridged, streaming services might be the golden goose that turns into a lead balloon. David Pakman, a venture capitalist with Venrock and the former CEO of eMusic, has a very thoughtful blog post titled “The Price of Music” in which he runs through the history of how much people spent on music back at the peak of the CD era. It turns out that the $40 billion was spent by around 600 million people who each shelled out about $64 a year. Today, the total dollars spent on music is about half, but interestingly enough per-customer outlays haven’t changed dramatically. Apple’s figures for iTunes are around $48 a year, for example. Most of the streaming services, though, cost about $10 a month here in the U.S., including Spotify and the recently launched Beats Music. At the music industry’s annual Midem conference, Marc Geiger, the global head of music for William Morris Endeavor, gave a bullish presentation on the potential of streaming services. He suggested that the record labels should embrace them fully, make all their music available, and not fear the low price the services would charge because, well, “they start cheap, and they go up.” Read the entire article here:

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