The future of digital music distribution
and online music marketing
Following years of doom and gloom surrounding the rise of internet piracy
and the death of physical formats, we’re finally hearing some good news from the UK
music industry.
In May the British Phonographic Industry (BPI) announced that UK digital music
revenues overtook those from physical formats. It means that the UK music industry is
finally catching up with the US and China who were already earning the lion’s share of
their revenue from online digital music distribution.
The BPI report states that consumers spent a total of £155.8m on music in the first
quarter of 2012, with 55.5%, or £86.5m coming from digital music revenues. This trend
is set to continue with the growth of music downloads as well as subscription and adfunded music services.
So has the music industry’s winter of discontent finally ended?
According to an IFPI report digital music revenues received by record companies
grew by 8% in 2011 to $5.2bn, as new global markets were tapped into.
In 2011 there were 3.6bn paid music downloads, up 17% on 2010. Music distribution is
relatively well-established online, compared to other entertainment industries, and there
are two distinct ways that music is marketed and distributed online.
The main divide in online music distribution is between access and ownership, and
there are important developments on both sides.
Music access
Access refers to services which offer consumers the ability to listen to music without
owning it. This includes streaming services, which are either treated as promotional
content or paid for through advertising revenues, and subscription services such as
Spotify.
Spotify is the biggest player in the music subscription market. Since its launch in 2008 it
has gone from strength-to-strength, and last year moved into the USA, the biggest
music market of all. It is paid for through paid subscriptions and advertising which is
played between tracks.
Music Ownership
Ownership is the old model of music consumption, pay once and listen forever. Mp3
downloads are growing in popularity, whether it’s mainstream music downloaded on
iTunes or independent artists’ music on sites like Band Camp.
Many consumers still live in the ownership age, and don’t see the value of music
access; they want to own the music.
Consumer demand for music is being driven by the growth in popularity of smartphones
and tablet devices, as well as growing broadband penetration. Increasingly users are
looking to replicate their record collection on iTunes or a mobile device.
Technological developments are changing the way that we manage and store music.
iTunes launched Match in November 2011, a service which allows users to access their
iTunes library across a range of devices without having to manually transfer files.
The service costs $25 per year and is licensed by record labels. Google Music was also
launched in November for the Android platform, which also helps users to access
purchased materials from a cloud to multiple devices.
Ownership vs. access
Access might be the future of online music distribution, but for now ownership is here
to stay. Only a small percentage of the customer base is active in digital music
currently, and many of these are the people who still value the ownership of music as a
physical product.
As the younger generations (who currently use free music access services such as
Spotify, YouTube and Pandora) begin to acquire spending power, they are likely to
heavily influence the development of paid access-based and subscription services.
Until then, the older generations will continue to value ownership of music despite
advancements in music access.
With subscription services and music access, users understand that the content cannot
be accessed when the subscription has ended. They also understand that when they
buy and own music, it is theirs for a lifetime, just like a CD, cassette or LP.
Today the average consumer has numerous devices which they might wish to play
music on, some connected and some not: car stereo, Walkman or mp3 player, phone,
computer.
Music subscription services have made progress in recent years, especially with the
arrival of mobile sites and smartphone apps, but they still don’t offer the same degree of
device ubiquity as an owned Mp3 which can be copied and transferred between devices
whether they are internet-connected or not.
The downside of ownership of music is that size restraints can mean that a whole music
collection can’t be mobile. Music subscription could be seen as the answer, since all
that is needed is network connectivity, but ubiquitous connectivity still hasn’t been
reached.
It’s only when you compare the prices of owned vs. accessed music that you begin to
see why subscription and access services are so appealing. It could cost thousands to
build a significant collection of mp3s going the ownership route, while $10 per month will
buy you “all you can eat” on many subscription services.
Music access and marketing
Allowing access to music online can be a great way of promoting releases, events and
other related products. Not only could users who access the music end up purchasing it
at a later date, they could share it on their social media profile and promote it to their
followers and contacts.
There are several embeddable music players which can help distribute music to
different social networks. Zimbalam, SoundCloud or Bandcamp apps all allow tracks to
be streamed from other sites. Artists also now have a specific ‘listen’ function built into
their Facebook pages, further evidence of the tight integration of music with social
media.
Many music access sites not require users to login via Facebook, with SoundCloud,
Mixcloud and Spotify being built around that platform. It means that activities on these
music sites can translate into visible activities on Facebook which promote the artist,
music, event or product.
Music is an inherently social experience, even more so than any other form of art or
expression, and digital music is no exception. While sharing owned music is technically
illegal, and can involve creating additional physical copies, streaming services are
designed with sharing in mind.
Music ownership and marketing
Giving away free downloads might seem like the wrong way to promote music, but
streaming doesn’t work for some audiences – they are only interested in owning music.
These users are far more likely to buy music and related products if they are given a
free download.
Some marketers giveaway low bitrate mp3s for free in the hope that listeners will end up
paying for a high quality mp3, wav or flac file. This works particularly well for DJs who
need high quality audio to play at high volumes on large sound systems.
When giving away music, it’s advisable to ‘gate’ the content in order to get something
from the downloader, and this could include social actions such as:
• Shares.
• Likes.
• Re-tweets.
• +1s.
A ‘share2download’ Facebook app can gate content and ensure that various social
actions are made before a user can download a track for free. Meanwhile, unsigned and
indie artists use Bandcamp to capture the email address of anyone who wants to
download free music.
These email addresses can come in handy at a later date to promote releases, events
and merchandise.
Music isn’t doomed, it’s just that the way it is being consumed is changing. As the
industry begins to get to grips with new technology we can expect to see musicians and
record labels do a better job of marketing, distributing and monetising digital music
online.
http://econsultancy.com/us/blog/10275-the-future-of-digital-music-distribution-and-online-musicmarketing
Questions:
1. According to the article “How Music Distributors Work”, how many
distributors typically stand between the artist/producer and the retail
seller?
a. 1
b. 2
c. 3
d. 1 or 2
2. Which of the following are responsible for marketing to the consumer –
the producer, the distributor, or the
retailer?________________________________
3. The distributor can be thought of as a ________________________.
4. Describe at least two of the multiples distribution paths an
artist/producer can choose to teach the eventual consumer.
5. The two primary methods of distributing music today are
__________________ and ______________.
6. Can a distributor be successful at both methods?
7. Why would a musical access retailer choose to offer its product only
through a social media site such as Facebook?
8.
What did the author mean with the saying “Winter of Discontent”?