Image: the Economist
I often argue that we can learn a lot from the music industry. Namely, I see it as an indicator as to what to expect in a few years’ time.
That’s why I was intrigued by a recent article in the Economist, detailing the state of today’s music.
CDs vs Digital
Once upon a time, record-industry executives could all but weigh their profits on scales. Literally: each pallet of compact discs (CDs) they sold translated into predictable quantities of cash for them and, second, for singers and songwriters.
In 1999, the year the music-sharing service Napster was founded, wholesale revenues in the industry peaked at $23.7 billion. Then they began a slide that has since continued almost without interruption.
Until now. Growth in the digital streaming of music helped industry revenues to expand by 3.2%, to $15 billion, last year. That was the fastest rate since 1998. The largest piece of the market was digital, with 45% of the total, whereas demand for those CDs continued to fall: physical goods accounted for just 39% of sales.
Image: The Economist
This is similar to what the trend has been with publishing: sales of printed books are constantly declining, whereas the digital market, ruled by Amazon, has continued to grow.
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What stopped this inexorable decline is subscription-based streaming services like Spotify, Deezer, and Apple Music. These proved especially successful, as the fastest-growing category: last year revenues from these rose by 59%, to more than $2.3 billion. Digital downloads on services like iTunes (which slice up albums into 99-cent individual tracks) accounted for $3 billion of sales, though that represented a decline of 10.5% on the year before. The music industry looks increasingly likely to be defined by services like Spotify, weightless but not cashless.
In regards to books, Amazon seems destined to rule this market as well, much like it has with eBooks. Kindle Unlimited, for all its faults, has a lot going for it. It is built on Amazon’s robust platform. It builds on its existing reader and, more importantly perhaps, author base—much of which is Indies. And it is competitively priced.
The bad news
This recent uptick in sales doesn’t mean we’re back to the halcyon days just yet, as there is still a lot of catching-up to do. The total market remains 36% smaller than it was at its pre-Napster peak.
Much like with publishing, there are two things that concern the music industry: piracy and a culture of free.
The good news is that illegal downloads have declined, at least in America, but piracy takes various forms, such as when people rip music from digital sources like YouTube videos.
Even when punters aren’t ripping music, they can easily create a playlist on YouTube and listen to their favorite songs for free, all day long. Licensed clips often come bundled with an advert, but their popularity does not yet produce big revenues. 900m people got music from ad-supported user-upload services like YouTube last year, but that these generated only $634m in revenues globally—barely 4% of the total.
That is why some complain about the culture of free and would like YouTube to stop offering the latest releases. If this debate sounds familiar, that’s because it is. I remember plugging a tape recorder to my radio so I could tape my favorite shows—and songs. Later on, I’d videotape MTV.
The good news
YouTube has made fortunes for a few Indie performers who got started on the platform, and the site’s defenders say there is great potential for established artists to earn more by getting their products to the masses for free. They can then earn more through live performances and related swag. Megadeth, an American metal band, recently worked with PledgeMusic, a London-based crowdfunding site, to record their 15th album: fans who pledge can pre-order the album, get signed guitars, have a guitar lesson with the band, spend a day with them in the studio, and participate in a jam session.
Besides, the paying portion of users is growing rapidly. Streaming services had 68m paid subscribers in 2015, up from 41m a year earlier. Spotify alone has 30m paying customers.
That suggests that revenues from such subscribers and from advertisers will grow sufficiently to let ever more bands and firms prosper, even in an era of digital music. But none of them will earn $2 a record, as in the days when music could be sold by the pallet, and no executives will get the other $8.
Much like it will be with books, then.
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This is a less doomsaying post than most, Nick. This doesn’t bode well. On a less punny note, I wonder if cuts in royalties and other contract degradations for both musicians and authors which occurred during the decline will be reversed in the recovery. My guess is a big fat no.
Thank you for restoring balance with the gloomy -if accurate- forecast :b
Thanks for sharing your always wise insights. 🙂
Lol – don’t know about wise, but you’re too sweet 🙂
You’re much too humble. 🙂
Lol – yes. Yes I am. It’s my only vice, you see :b
🙂
I see it heading in that direction already, Nicholas. Print book sales are minimal, digital sales are second, and Kindle-Unlimited accounts for most of my readers (other than during promotions). Because my books tend to top 300 pages, the revenue is about the same as a digital download. An interesting comparison and relevant as authors decide on how to retail their book.
Thank you for sharing your experience! I agree; KU accounts for the majority of my sales 🙂
As an Indie musician I can tell you that you can’t be in it for the money. Streaming brings in something $.00002362 or sometimes nothing at all.
Leslie
As an Indie author, I hear you 😀
I have to pay a distributor and at the rate of streaming I might never cover the costs.
Leslie
I, too, often spend more money than I make as an Indie author 🙂
Something isn’t right about that.
Leslie
True. I’ll let you know if I find a way to break that pattern 🙂
I think there is a whole reset in the economic forces. At the moment it is focus too much on unpaid input and the top layer walking away with all the goodies.
Leslie
It’s an unbalanced state of affairs, therefore it won’t last long. We will soon reach a new equilibrium. We’ll see what it is, but I expect something similar to the music industry.
I think you are right about that. The present situation is unsustainable to the author and the artist.
Leslie
Hmm…interesting. I do think the book industry mirrors the music industry in many respects. I also think YouTube is a great platform for authors. Maybe not to sell but certainly to pique interest. Readers, I think, want that “live” personal approach, which is also why FB Live is booming.
That’s a good point, and one I should explore in future posts 🙂
Good post, thanks. I’m a fan of your blog and The Economist. I think the book industry is still stabilizing. Now that a study(s) has revealed backlit electronic readers disrupt sleep patterns some readers may return in whole or part to print books. In the end, it may be that there is room for both in the same way that there are DVDs, BlueRay, stream and in theater movies.
I enjoyed the post, thanks. I think the book market is still stabilizing. Now that studies indicate backlit electronic readers and devices alter sleep patterns some readers may return in part or whole to print books. Perhaps there is room for digital and print books in the market, just like there is room for DVDs, BlueRay, streaming and in theater movies.
Good point. I should point out that tablets have an adverse effect, whereas e-ink-based ebook readers (Kindle, Kobo etc) don’t.
Interesting. Think I missed something through my migraine. What would be the YouTube equivalent for authors?
Amazon. Like YouTube, it allows you to reach for free a far wider market than a stand-alone website would.
Got it. I think I missed the connection because Amazon seems to have more rules and control over things you put up there than YouTube.
True. It’s a big cause for author gripes 🙂
And we authors sure like to gripe. 😀
I often wonder if we can consider the recent increase in the popularity of vinyl albums to be an indication that ‘real’ books might start to become fashionable again?
Interesting stats, Nicholas. Thanks for posting.
Best wishes, Pete.
I’m sure that’s the case. Plus, old books and first editions are an investment in art, aren’t they?
The similarities are definitely there. Thanks, Nicholas. 😀
🙂