Nielsen released its report looking at the first 6 months of 2014 vs the first 6 months of 2013 in physical sales, digital sales, on demand streaming, and vinyl. Like we saw earlier this year, music streaming continues to grow while every other format (except vinyl) shrunk.
It’s worth noting though that the streaming number is actual on-demand streams while the other numbers are for purchases. While directionally correct, we can’t compare both numbers. Also worth noting that, although the growth of vinyl is impressive and I personally love it, it’s still 4M units sold while CD is 63M and digital 54M.
A year ago we saw how digital subscriptions started to feel like the white knight of the music industry. Now we see how that trends continues.
In the IFPI 2014 Music Report, we can see that subscriptions increased by over 50% while most other formats shrunk. I found this quote by Sony’s CEO, Edgar Berger, like a great description of the current moment in the market:
“Music has always been at the forefront of the digital revolution, leading the way for other creative industries and defining the future of digital entertainment. Today music’s digital revolution is moving to the next phase as consumers embrace streaming and subscription models in markets around the world.”
The digital revolution comes from the likes of Spotify and Pandora, though.
I am delighted to announce that I have joined charity : water as VP of Product. I’m incredibly thankful for joining such a talented team. In 2012 alone, charity : water raised $33 million and funded more than 2,000 water projects, giving more than 700,000 people clean water around the world. I can’t wait to help bring clean water to 800 million more people. If you haven’t done so already, you can still join my birthday campaign for a few more days and also be part of this!
Thanks to my managers Steve Parkis, Cadir Lee, John Osvald and Roy Sehgal for their guidance and support during these years. Thanks to all my incredibly talented colleagues who made every day, even the challenging ones, enjoyable. Thanks to Mark Pincus for creating a company from a unique vision with meritocracy at its heart. I can’t think of a better company to have developed my career, it has been an amazing professional and personal experience. Thank you.
Just as messaging apps are starting to get traction in the US, a couple of interesting data points have been shared recently:
- The CTIA, a wireless industry trade association, announced that the number of sent messages went down for the first time ever in the US.
- Informa recently published a research note stating that the number of IP-based messages had overtaken traditional text messages worldwide
Services like Kik, Viber or WhatsApp are definitely gaining users popularity in the US. The question is whether or not they can survive in the long run. While their engagement is very high, the difficulty of utility apps is finding ways to monetize.
In Asian markets, Kakao Talk and Line have monetized by becoming a distribution platform and selling stickers. Will that work in the US market? Even if it does, it looks like Facebook Messenger has a clear advantage since it does not necessarily need to be ROI positive as a standalone app, just as a way to keep users on Facebook.
About five years ago I asked Reed Hastings, Netflix’s CEO, why they didn’t also rent videogames. His answer was very clear: Netflix was in the movie business, not the DVD mailing business. While in the short term they could be missing some revenue, focus was clearly the right strategy in the long-term.
In July 2011, the company announced a new pricing model that caused a major uproar. After a couple of years, it seems that Reed Hastings was right again.
Yesterday I listened to a pretty unique sermon at my local Church. John Ortberg, the pastor at Menlo Park Presbyterian Church, chose to show a video of him running on a treadmill to represent our relentless, neverending pursuit of “it”. “It” are those targets that we expect will solve our lives and fill us with happiness. e.g. a house, $1M, a partner, a new job, a sports car. Unfortunately, once we reach “it” we immediately discover another new target. He used many quotes of Ecclesiastes, one of my favorite books. I encourage you to spend the next 15 minutes watching the video.
Unfortunately life sounds too much like a social game sometimes. Having worked on them for a while I can tell you that most games have an infinite number of levels. Choose the one you play wisely and enjoy it.
The International Federation of the Phonographic Industry (IFPI) just published its annual Digital Music report. In 2012 the industry saw its first year of growth (+0.3%) since 1999. There are a couple of other interesting data points:
- Digital revenues increased by an estimated 9 per cent to US$5.6 billion in 2012, now accounting for around 34 per cent of global industry revenues.
- Download sales increased in volume by 12 per cent globally in 2012 and represent around 70 per cent of overall digital music revenues.
- The number of people paying to use subscription services leapt 44 per cent in 2012 to 20 million. Subscription revenues are expected to account for more than 10 per cent of digital revenues for the first time in 2012.
- Digital channels account for the majority of record companies’ income in an increasing number of markets including India, Norway, Sweden and the US.
The report also keeps calling out piracy as the main barrier to growth, yet there hasn’t been a significant milestone in this area that could explain the growth in the industry in 2012. What has been driving the growth is companies getting closer to a value proposition for users that is better and more convenient than piracy at an acceptable cost: digital subscriptions with unlimited streaming and a gigantic music catalog. In Sweden, home of Spotify and the Pirate Bay, almost 50% of internet users used a subscription service in 2012. Subscriptions are disrupting piracy.
What this industry needs is more carrots, less sticks.