Technology and the Competitive Landscape

When I purchased my first iPod during middle school, I knew my music experience would change forever. No longer was I confined to the case of CDs for my music library, no longer was I constrained to sitting still while listening out of fear of skipping CD playback. Now as I sit down writing this post, I have barely noticeable headphones in and access to a seemingly limitless library of music through my Spotify Premium subscription. From LimeWire and iTunes, the changing technology of music has consistently shaped the music industry and pushed the competitive landscape of music entertainment to places that might not have been imaginable before the advent of the iPod only 14 short years ago.

Within the music industry, there have been some surprising trends in the revenue model of music, constantly adapting to new technologies, and even giving rise to some old technologies. A recent Forbes article titled New Music Industry Revenue Figures Show an Illusion of Stability breaks down the different sources of revenues for recorded music. Their analysis is best summarized by the graph (below) and their conclusion:

The trend is clear: a certain segment of the population still likes owning music, but those people are finding that they like owning a physical object more, particularly one available in packaging that acts as a canvas for art, photos, lyrics, and liner notes...

From an era in 2003 where seemingly none of the recorded music revenue came from downloads or streaming music services to a current era that is dominated by these segments has coincided with the increasing availability of these technologies. The use of flash hard drives in mobile devices has allowed music consumers maximize the size of their music library while minimizing the need for storage/transportation of the physical copies of music. However, the download service has begun to give way to the prevalence of on-demand or streaming music services which once again allow consumers to expand their music libraries while virtually eliminating the need for any individual's need for physical storage space.

However, it is interesting to note that there has been a recent resurgence in vinyl technology, which as the article revealed is the fastest growing segment of revenue for the recorded music industry. The explanation that the article gives for the rise of this once almost extinct technology is one that pervades within the music industry: consumers care about the "art" of music and vinyl allows them to have not only physical album art, lyric tracks, etc., but also gets them closer to the "true" sound of the music.

At the intersection of the rising on-demand music streaming service and the "art" of music is the new streaming service called Tidal. Launched last week, Tidal has the backing of several big named artists such as Jay-Z, Kanye West, Madonna, and Taylor Swift. The service pushes an image of art and the artist:

Alicia Keys, who spoke for the group, described Tidal as "the first ever artist-owned global music and entertainment platform. We want to create a better service and better experience. Our mission goes beyond commerce and technology."

With the artists themselves standing behind the music, potentially making the music experience greater than an individual consumer would be able to achieve on their own, this service could appeal to both the vinyl, art seeking and streaming segments. The ability to capture this market successfully could once again push the music industry to new fronts, competing not only on the volume of music available, but the quality and exclusivity of this music.