Demand Creation What’s the Next Big Growth Curve for Music?

The 20,000 Foot View:  Over the past            years the music industry has seen highs and lows, mirroring the careers of many of the legacy artists the industry plays host to. The most spectacular successes in the music business, from the Sony Walkman to MTV, to iTunes and Spotify – have all generated demand for music in entirely new ways. These innovations succeeded because they tapped into latent demand, often opening up new consumption windows for music content or formats that already existed, but were not aggregated or focused towards a particular audience. 

The biggest driver of new demand creation in the music business since the compact disc has been streaming, but as we head into the next decade the music industry is already witnessing a slowdown in streaming growth. With the industry still riding the wave of growth and excited about what’s next – be it new tech applications or next-generation services – we take a brief qualitative, analytical look at the industry’s previous success stories. Can they shed light on the formula for success in unlocking yet more latent demand? Do new opportunities for demand creation in music even exist as we head into the post-peak attention era? We look at which of the current crop of next-wave innovations in music is likely to succeed and how the industry should look to harness these as we head into the next decade. 

Key Insights

• The set            factors associated with previously successful            generation in music are product,            audience, business model, brand, use            and platform 
• Spotify offered            access with a freemium business            initially resonating with a millennial            ready to engage with streaming 
• Spotify benefitted            a flywheel effect once its            was distributed through Apple’s growing            store, and subsequently through Facebook           
• The Sony            success was co-dependent on the            format becoming the mass market            carrier of choice
• In 1989,            Sony Walkman had shipped            million            cumulatively (Sony Corp.) – the            year that cassette sales peaked            at            billion (IFPI)
• The music            (labels and publishers) has responded            previous innovations through cautious licensing            by concentrated promotion via a            partner or format 
• The raft            new innovations suggests a very            multi-faceted approach is required 
• Bytedance is            licensing a new music service            very different use cases driven            the social sharing of songs            mini soundtracks
• In the            attention economy, with competition from            and gaming, new demand creation            music is almost impossible
• The share            ear is finite, with podcasts            audio books also growing. The            industry’s growth must come from            value propositions that monetise fandom
• To drive            the music sector will need            that improve discovery, augment the            or the experience, and add            to the consumption already happening 
• In this            we apply this hypothesis to            analysis on the new innovations            the music sector: smart speakers,            music and high-definition audio, VR            AR music experiences, and social            and music 

Companies and brands mentioned in this report: Amazon Music Unlimited, Apple Music, Bytedance, Facebook, Instagram, MTV, Viacom, Napster, Sirius XM/Pandora, Sony Walkman, Sony Music, Spotify, TikTok, Universal Music, Warner Music, YouTube