U2 Embraced Change And Won - Why Can't You?
Ask anyone what the most popular thing in the world is, and one of the answers you often hear, is “music”. Music has been around for a long time, and it’s transformed over the years. From shifts in taste, to the creation of new genres, to how business is conducted. The music industry has seen a lot of change, especially in the past 40 years. These changes have claimed some victims. Others have survived, and opportunists have coasted through them.
How music has been sold since the 1970s
Rewind to the 70s: Music was sold in on a vinyl, and consumers had to buy an entire album of songs, even if they only wanted 1 or 2 of them. Sure, there were singles that were sold, but not for every artist, and certainly not for every song.
This continued when the cassette tape era took over, and again when the CD era took over.
Then along came Apple, and iTunes. Consumers could now buy their favorite song for just $0.99. They no longer had to pay $20 for an entire album just to get their 1-2 favorite songs.
The chart below shows how music sales (by volume) has changed over the years. Note the surge in volume of digital downloads starting in 2004, which were largely driven by iTunes.
Music Sales (by volume)
At first glance, one would think that the music industry is booming and that artists are getting paid more than ever before. There’s some truth in that. The top artists are getting paid more now, but the pie is shrinking. Take a look at the chart below:
Music Sales ($ value)
While music sales (by volume) have increased, revenue generated from music sales has dipped below that of the 1970s.
Single downloads from iTunes (and other competitors) has chewed away revenue, and bar the top-performers, artists are getting a smaller bite of the pie compared to what they’d been accustomed to in the past.
Worse yet, the introduction of online streaming by Spotify, SoundCloud, Apple music, etc. has stagnated revenue from iTunes’ single downloads. This explains the lack of revenue growth from single downloads in the past 5 years. The pie for artists just keeps getting smaller…
What we can learn from the music industry
1. You can’t fight change.
Vinyls were great, but they were expensive, cumbersome, and would become distorted if they weren’t stored properly. So, people found an alternative in cassette tapes. But people soon found them to be easily damaged and too short in length.
For CDs, revenue had been increasing at a solid pace up until 2000, with CD sales driving contributing to the biggest spike in the past 40 years (remember how you could find a 2-floor HMV in every city you visited?).
You don’t quite see HMV around anymore…
2. Change doesn’t happen overnight.
It happens over time, as demonstrated in both graphs. User adoption determines how quickly a shift in any industry happens, but it certainly doesn’t happen overnight.
Some don’t realize till much later, and are left to play catch-up. It’s okay if you have the resources to do so, but this is often how victims are claimed.
Hence, you want to be at the forefront of shifts and establish yourself as a disruptor. All eyes will be on you. Apple was quick to establish Apple Music as a direct competitor to Spotify for those who only wanted the online streaming of music (vs. owning the MP3 files).
3. Be at the forefront of shifts.
When rock band U2 partnered with Apple back in 2004, it came as a surprise to many artists, who were still focused on selling CDs at HMV.
When U2’s sales diminished again by the end of the decade, they took a bold move to give away their next album for free for all iTunes users.
The result? A big, attention-grabbing media event that helped advertise the album, create online conversations, and drive sales via other avenues (i.e. other downloads, concerts, advertising, etc.). For the ‘older guys’ in the music industry, they’re faring very well against the younger, up-and-coming artists.
How the next 10 years will look for the music industry, or any industry, is anyone’s bet. One thing’s for sure: it’ll be different.
By Alan Chu