Music industry in the clouds

The music industry continues to experiment with new models for digital consumption, and the latest shift from traditional formats such as vinyl and CDs to digital files consists of a rental model with tracks stored not on PCs or iPods but up in the Internet cloud.  ABI Research have forecast that by 2016 cloud-based (or ‘streaming’) services will become a more important form of access to music than owning albums, songs or tracks . This shift will primarily be driven by the growing use of smartphones as listening devices, and

Juniper Research forecasts that music consumed on mobile handsets will generate $5.5 billion annually in 2015, a rise of $3.1billion from 2010 .
This year has witnessed new cloud music services from Apple, Amazon (Cloud Drive) and Google (Music – still in beta format).  Apple’s new (as yet unlaunched) iTunes Match service announced in June has been described as a “gateway drug” to move users from music ownership into a legal access model with a regular revenue stream.  If consumers get used to the idea of spending $25 a year on iTunes Match, then – so the logic goes – it will be easier to sell them a $10 monthly subscription to services such as Rhapsody, Spotify or Sony’s Qriocity, which offer unlimited access to millions of tracks.

A recent survey of 1,000 UK adults conducted by Lightspeed Research revealed that whilst 21% have used music subscription services like Spotify, Last.fm and We7, only 3% paid for their premium offerings.   Some industry experts think the music industry needs to educate late adopters about the benefits of cloud-based services, and make music streaming a mainstream activity.  Earlier this year, Spotify announced it would be limiting its free service to 10 hours per month and allowing users to listen to tracks no more than 5 times, prompting a backlash amongst Spotify fans, and sparking fears that this move would drive people back to pirate music sources.  However, figures from the IFPI trade body showing that Spotify is now the second biggest earner of digital revenues for the music industry, and its recent long-awaited launch in the US has resulted in reports that the company’s overall valuation has increased to $1.1 billion in the last month.

  Mobile Cloud Music Services – ABI Research, March 2011
  Mobile Music Opportunities: Market Size, Strategic Analysis & Forecasts 2011-2015 – Juniper Research, February 2011
  http://www.nma.co.uk/news/cover-story-online-music-too-expensive-for-most-people/3025998.article
  http://paidcontent.org/article/419-confirmed-spotify-valued-at-1.1-billion-for-global-push/