There is only one thing that sells music. That’s music retail. File trading is an easy scapegoat for industry ills, but the lack of legal outlets that are in front of casual music fans is clearly the primary culprit.

Looking at digital statistics in the US, only 5% of internet users visit a music retail site monthly according to Comscore. Surprisingly, while the number is higher, about 9% of US internet users visit illegal music sites monthly according to Big Champagne.

If you think this number is wrong, consider that Businessweek recently profiled China’s Baidu search engine where, despite a history of piracy, they are currently seeing only 5% of their traffic going to illegal music searches. The true problem emerges with these stats.

If 5% of internet users download legally and 9% of internet users download illegally:

Over 85% of US internet users do not download music legally or otherwise.

The figure of approximately 15% market penetration for downloaders is significant. In the book Perfecting Sound Forever, Greg Milner points out that in 1949, during another famed record sales downturn, the number of people actively purchasing records shrunk to…15%.

Despite many claims to recent success of music in the overall marketplace, the data actually points to low ownership engagement concurrent with previous industry declines.

Accepting that the issue is actually to engage in encouraging overall downloading behaviour, there’s three relatively simple tactics the industry must embrace that actually have overlapping philosophies.

– ENCOURAGE MORE RETAIL OUTLETS – iTunes may own the market, but the way to grow the market is just like it used to be: foster independent retail. The success of niche sites like Beatport shows that these sites can be profitable. But as long as label groups demand onerous terms of startups, these indie outlets will never see the light of day. Ask for reasonable terms and watch sales increase with volume.

– ENCOURAGE MORE STREAMING OUTLETS – While only 15% of the internet is currently downloading, at least 40% are streaming music regularly and legally. The music business still appears to be in the CD to download transition while the consumer is clearly in the download to streaming transition. Streaming may be low dollars, but there’s massive potential in high volume. Spotify’s difficulty in launching in the US highlights the same problem as above. Onerous terms are preventing new revenue streams. Ask for reasonable terms and watch royalties increase with volume.

– MARKET MUSIC AGAIN – The music biz got out of the 1949 funk by marketing “High-fidelity”. Rallying behind a legal marketing concept and properly funding it should pay dividends. Marketing clearly drives sales. As an example, while download sales have flattened this year, the sales slowdown has more to do with the diversification of products in iTunes than anything else. Space devoted to music is now focused on apps, movies and TV shows. Less marketing equals less sales. Marketing does drive sales and can’t be left in the dust.

Find out more about Frank and his book, “Futurehit.DNA: How the digital revolution is changing top 10 songs”, here.


About Author

James Martin

James Martin is Head of Social Media for Midem organisers Reed MIDEM. This includes defining and rolling out Midem's social media strategy, editing midemblog, influencer outreach, developing Midem's fanbase of 75,000+ music professionals and more.


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    I have worked with Jay for a decade and respect him immensely, but these ideas are already in practice and are salves rather than cures. To whit…

    ENCOURAGE MORE RETAIL OUTLETS – as an independent digital distributor, DashGo is FAST to license new retail outlets. But most of those result in a financial loss for us. Not a big one – maybe $250 – $300 tops, but because of the costs of delivering a catalog of digital files (bandwidth) and accommodating stores metadata requirements, it costs money. Since we pass the vast majority of revenue back to artists, that costs is absorbed by our already thin margin, meaning that literally thousands of dollars of music must be sold to recoup. That takes hours on iTunes, but we’ve never gotten whole from ThinkIndie (shutting down), Shockhound, Limewire (now shut), Lala or even innovative sites like Popcuts.com and genre-focused WaxPoetics. I love supporting them, but consumers seem to think otherwise – what’s the solution?

    – ENCOURAGE MORE STREAMING OUTLETS – Again, DashGo is very aggressive and open to licensing here. Only one streaming service is really competitive – YouTube. In fact, it’s on the heels of iTunes in total revenue. The rest are deep tier 2, despite their omnipresence and press. And it comes with a significant cost. The metrics work if and only if a) streaming attracts the vast majority of consumers to pay-in and listen to music. Something on the order of 100 million – 150 million households in the US I would estimate need to put dollars towards music monthly to make that model sustainable (at a reasonable price of between $0.25 – $0.50) per month per household to come remotely close to making it financially competitive with sales. Even then, mobile limits would have to be constructed by service providers and business partners to prop up revenues and prevent inevitable cheating by label groups who use computers to skew consumption rates towards their catalogs artificially.

    – MARKET MUSIC AGAIN – Let’s return to the above scenarios. In a streaming scenario – only gross consumption matters in payouts. To earn $1 on Spotify your song needs to be streamed around 100 times or more. On YouTube that number is closer to 1000. That is a TREMENDOUS amount of listeners to acquire when ad rates must be competitive with companies selling cars, movies, teeth whitening and everything else with much higher margins online. So artists are left with what they’ve always had and done – innovative free marketing. Which is extremely hard to sustain when they are also recording, touring and managing social media. Meanwhile a label partner is now incentivized only for volume based on streams, so to invest in a new artist becomes doubly risky as they must attract 100x as many fans (listens) than in today’s download market and closer to 1000x as many as in the old album market.

    There are good ideas out there, but we need more implementers and partners on the retail and fan side. It’s not enough to point to problems, it’s neccessary to address the path to correction, as DashGo + other indies are by standardizing metadata; building replicable advertising strategies that are revenue-positive and developing truly innovative marketing campaigns for clients.


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    totally agree.
    one industry wide API to source songs from labels’ databases, one industry wide set of reporting specs and removal of those ridiculous advances every music label wants to have from start ups – that’s what’s needed. instead the labels make it incredibly tough for new ideas to prove themselves on the market and then end up complaining that the market is so concentrated and how unfair Apple’s dominance is to them.
    but I don’t think I’ll live to see the day when selling music will be easier (btw: I’m 33 years old)

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