Global Music Industry Outlook
Since 1999, the music industry has experienced years of decline and for those who care about the industry, the past decade has been nothing short of a nightmare. With piracy increasing and record sales diminishing, many were worried that the music industry would never recover. However, recent reports from the International Federation of the Phonographic Industry (IFPI) shed rays of hope for the music industry. According to these reports, for the first time in 14 years, the global music industry experienced slight growth in trade revenues—increasing by 0.2 percent in 2012. Perhaps better news is that revenues are on pace to grow yet again this year in 2013. Could this signal that the global music industry has finally turned the corner and is poised to experience a new day & age of growth and profits?
To answer this question, we must look at the current state of key markets within the global music industry. During the past year, the United States remained the world’s largest music market. Despite being the largest music market in the world, US album sales have hit historic lows as total sales continue to decline. To the surprise of many, Japan is set to surpass the United States as the world’s largest music market with growth of 4 percent in 2012. While the United States music market is struggling and fighting for recovery, Japan’s market is booming. Experts have attributed Japan’s success to many reasons.
First, music in Japan is more expensive. With a price conscious mindset, this fact should indicate lower music sales in Japan. However, quite the opposite is true. In Japan, the average song on iTunes is 250 yen ($2.50) while in the United States the highest priced songs are only $1.29. Album prices in CD format are also more expensive in Japan and have been legally protected from discounting. Therefore, consumer perceptions regarding their music purchases differ dramatically in both countries. In Japan, a consumer is more likely to view their music purchases as valuable and significant because of the higher prices required to obtain their music. On the other hand, lower prices in the U.S. have possibly caused consumers to look at music as a mere commodity. Music is much more available to U.S. consumers and the value music provides has slowly diminished as songs are simply a click away. In other words, the easier an object is to obtain the less important and valuable it becomes. The music industry in the U.S. has been haunted by this simple idea.
Another reason why Japan’s music market has grown is the fact that physical music sales outnumber digital sales in Japan because the digital music market is still in its infancy. This has caused some people to wonder if downloading and streaming services cannibalize album sales in developed markets such as the United States. However, research at this point is not conclusive on this matter and lower sales in the U.S. could just be the effects of a dying interest in music or a loss in artist attachment and loyalty by American consumers.
Whatever the case may be, the global music industry has followed a common trend to achieve economic recovery—if growth is stagnant in one market, look abroad for growth. At the start of 2011, international music services were present in 23 markets. Today, these services are present in more than 100 markets worldwide. Brazil’s total recorded music market grew by 11.2 percent while India’s market grew for 3 consecutive years in 2012. Despite dark clouds hovering over the American music industry, the global music industry looks like it has the potential to reclaim its long lost glory thanks to growing international sales.
What we learn from the global music industry is a reoccurring theme in today’s economic climate. Opportunities in developed, conventional markets are becoming scarce as increased opportunities for growth are being found more so in emerging economies. However, this certainly does not mean a business should forgo a developed market completely. After all, just like music itself, these developed markets are rich with history and moments that have invigorated the many changes of today’s business environment. Now, the key for us all is to recognize these changes, as both consumers and business decision makers, and decide how our actions today will affect the economic landscape of a future generation.