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

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