The Question: How to Make the Music Recording Industry Profitable?

December 13, 2016

 

 

 

 

This is the first in a series we’re calling The Question. We asked a half dozen leaders in the music and technology field: 

 

How can we make the music recording industry profitable?

 

 

 

 

 

Jim Griffin, Co-Founder of Pho and Managing Director of OneHouse:

 

Music is profitable today, but the path forward is to unite our fragmented interests into a price for music, making it faster, easier and simpler to pay, in hope that when it is, more people will pay. In addition, the voice of music before the law-makers of the world is often discordant. With one group advocating the interests of song writers, another the views of sound recording companies, and others in-between; all to the confused ears of policy makers bewildered by our interests and needs.

 

Sharky Laguana, Founder/CEO of Bandago:

 

Getting streaming music working: Getting the royalties paid properly and fairly, getting rid of "market share" distributions, adjusting pricing so that the artists who are driving subscriptions are the ones getting paid. Yes,  I believe it will come to pass (although it will never be perfect). I am very bullish on the music industry's long-range prospects.

 

Tom Silverman, Founder of Tommy Boy and New Music Seminar:

 

Subscription music will double or triple the value of the music industry in 2019.  I predict 100 million US music subscribers (in addition to the SiriusXM 31 million) by 2020. It could eventually reach 150 - 200 million by 2030.  Worldwide it will grow to 300 million in the established music markets and 700 million in developing markets at lower rates by 2030.

 

Vickie Nauman, Founder/Owner of CrossBorderWorks:

 

The broad music industry needs a common foundation for disseminating its recorded work to fans. For many decades, it was one basic model of terrestrial radio + one-off purchased products (CD/vinyl/cassette/8track).  Now streaming has emerged as this modern foundation - and is often seen as today's version of both radio and purchased products. However, in order for streaming to truly be a new foundation for the entire value chain from artists/songwriters to label/publishers to consumers, we need to revise business models, adjust overhead for high complexity/low revenue models, shore up everything in the chain for maximum efficiency, and explore more segmentation. I think we are 5-10 years away from that.

 

Stephen White, CEO of Dubset Media:

 

There is much discussion in the public about what is wrong or not working in the music business and there are definitely many areas where the industry can do better.  That said let's not forget it is a $15B business worldwide that is already "profitable."  Yes the industry has been cut by more than 50% from its high of $40B in 1998.  The industry has lost much of its value in the transition from physical distribution to digital downloads, to digital streaming and the bursting of the product bundle us old farts know as the album. The industry has definitely been slow to respond appropriately to the changes in consumer behavior and the rapid changes that technology has enabled.

 

I am a strong believer that the industry has hit its low point and that the advent of technology, combined with the ubiquitous love of music, and new models for monetization will bring the industry new revenue opportunities. Will it ever get back to $40B? That is hard to predict, but I have no doubt that there is growth in the industry’s future.  One thing we can say for sure is that the industry MUST move faster to embrace new models, and support technology developments that will help generate revenue.

 

Paul Wiltshire, Founder/CEO of Songtradr:

 

The music industry is already profitable; I think the question is for whom it is and isn’t? We are in the middle of a metamorphosis, which may take some time to complete. However, I do think the future will be more about independence and DIY careers. Major record companies will continue to seek to de-risk their investment choices (artist signings) by acquiring successful and established artists. What I find really exciting about the business we find ourselves in today is that any artist can begin a career whenever they want. The caveat is: the sum of their efforts as self-promoters, team-builders and technology users combined with their talents will ultimately determine their success. Just being talented is not enough!


If we isolate the example of the streaming services, we see a clear correlation between the costs they incur in acquiring rights from the major record companies and their struggle for profitability. How can they increase how much they pay per stream if they cannot operate in the black as it is? Perhaps streaming businesses could explore a model that does away with the upfront costs and pays a higher rate per stream to rights owners. This would be very rewarding for independents. However, I struggle to see how they could make this happen while their heads are in the noose of yesterday’s model. 

 

 

MusicTectonics is published by music tech PR firm rock paper scissors. To find out more about how rps can help you with publicity for your music company, contact us here: www.rockpaperscissors.biz

 

 

 

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