The famed English philosopher Thomas Hobbes would have approved of the music streaming industry even if he died in 1679 at the ripe age of 91.
It is the commercial manifestation of his famous though slightly depressing insight that “life is the permanent war of everyone against everyone”. And this year it is the streaming music providers who will measure success and failure in figurative body bags, according to analyst outfit Ovum.
The company is warning of consolidation in the sector this year. “Casualties in the race to become the music streaming service of choice are unavoidable. Given the amount of services offering what is essentially the same product to a limited number of customers, company closures and acquisitions are inevitable.”
Its report, 2016 Trends to Watch: Music in 2016 argues that “The shift in consumer spending towards accessing music rather than owning it is an unstoppable trend that has resulted in the one of the biggest shake-ups in recorded music distribution for a century.
That’s a big call about the sector that gave rise to iTunes, and before that Napster… and CD Roms, and cassette tapes, and vinyl.
Ovum notes that no music subscription service is anywhere near breaking even and the early participants chase scale at the expense of red ink on the balance sheet ink.
According to Simon Dyson, head of music practice and author of the report, “The recorded music sector of yesterday is quite simply that, a bygone era that is being swept away by shiny new industry players.
“Music retailers will never sell as many CDs or downloads as they did last year and so services along the music value chain that want to be part of this rapid evolution in recorded music must simply embrace the change and make access work for their business,” Dyson says.
The report flags the key trends in 2016 as:
- Streaming will drive digital music growth in 2016, but will not offset the fall in sales of CDs and downloads.
- Intense competition in the music streaming sector will result in more service casualties.
- Controversy over who benefits most from music streaming will continue to make headline news and remain a divisive issue.
Ovum also predicts that despite the increasing consumer preference for music subscriptions, there will be no growth in overall consumer spending on recorded music in 2016.
Instead it is forecasting that figures for global retail sales of recorded music will have edged down 0.5 per cent in 2015 and will fall a further 0.2 per cent in 2016.
“In 2015, subscriptions alone will account for 28 per cent of digital spending and 15 per cent of the combined digital and physical spending total. Five years ago, barely three per cent of retail spending on recorded music came from subscriptions,” according to the report.
The report also considers the impact of streaming in what are still relatively greenfield markets (in revenue terms) for the sector.
“Countries such as China and India that have long been dominated by music piracy but are so often thought of as emerging markets will start to live up to that tag. Streaming services in India are already reporting high user metrics and the early results elsewhere suggest streaming is not only guiding the recorded music industry’s future in Western countries, but is also opening doors to the less developed markets.”
“The shift from music ownership to access is not an overnight proposition and consumers will take their time to change the habits of generations. But it remains the recorded music industry’s best bet for returning consumer spending to levels not seen for more than 15 years,” says Dyson.
* This article originally appeared on B&T’s business site www.which-50.com