On a regular basis, music industry experts, associations and research institutions predict the future of the music industry – how it may evolve, how big the “next big thing” will be, how spectacular the digital innovations are going to have an impact on the music industry.
Just now, MIDia Research published their latest forecast for the development of streaming subscribers for the next three years, which shows the positive but slowly saturating development of people becoming premium users of streaming services. The music industry blog by MIDia founder Mark Mulligan published an analysis for this forecast: https://musicindustryblog.wordpress.com/2017/02/07/streaming-music-pricing-inelastic-stretching/
Without any doubt, such outlook always provide a trend view, based on what happened in the past years and analysing the potential of the market. The combination of the numbers of the last years and expected numbers for the upcoming years makes such analyses interesting for the people and companies of the industry.
However, a view on the analyses of the German music market by the German music industry association “Bundesverband Musikindustrie” in collaboration with GfK panel services shows how the yearly analyses may vary and, therefore, why you shouldn’t put the full trust in these predictions:
Let’s take a look on the numbers of the market forecast between 2012 and 2015 for the years 2016 until 2020.
Yearbook 2012 (forecast for 2016): 53,6 % physical records, 33,4 % downloads, 10,9 % streaming services.
Back in 2012, the forecast of the streaming market hasn’t been as enthusiastic as they are today, yet. Actually, the strength of the download market was expected to be the main reasons of the growth of the market and decline of physical sales.
Yearbook 2013 (forecast for 2018): 49,4 % physical records, 14,4 % downloads (- 19 %), 35,1 % streaming services (+ 24,2 %)
2013 saw a massive hype around streaming due to a huge growth of 91,2 % in just one year and a stagnating download market. Therefore, downloads and streaming switched their roles of who is pushing the market growth.
Yearbook 2014 (forecast for 2019): 61,2 % physical records (+11,8 %), 13,6 % downloads, 24,1 % streaming services (- 11 %)
In 2014, the industry recognised that the consumer in Germany do not change their consumption as fast as expected, which was displayed by a lower decline of CD sales and massive growth of vinyl sales. This has a major impact on the forecast, which predicted a strong market share of physical records in the future, against the expectations of the previous years.
Yearbook 2015 (forecast for 2020): 46 % physical records (- 15,2 %), 8,7 % downloads, 45,3 % streaming services (+21,2 %)
In the report for 2015, the German music industry association admitted that the real life of music consumption showed a different picture to the research of the previous year and a strong growth (stronger than expected) of streaming income. Therefore, the predictions of the streaming market is more positive than in the past years. The report accurately cites the Danish physicist Nils Bohr: “Predictions are difficult; especially when they concern the future”.
You can see massive jumps between the years regarding the expectations how the revenue shares of physical record sales, download sales and streaming services income are expected to evolve. Another insight is the expectations of the absolute size of the market. The yearbooks 2012 and 2014 expected a market without significant growth. The yearbooks 2013 and 2015, however, provided a clearly more positive development of the whole market. So, how reliable are such forecasts?
In my opinion (and the German music industry association admits this at some point), it is nearly impossible to predict the future of the shares for the market. The industry has become very dynamic, as the digitalisation completely changes the structures of the market. Additionally, the global economy (e.g. credit crunch, dot.com bubble in the 2000s), technological progress and innovation (streaming, virtual reality?) as well as the advent of new content (e.g. new genres, artists) and channels (e.g. Apple and Amazon as new streaming players) have significant impact on the development of the music industries.
The following graphics shows the development of the US music market from the 1980s until today, including commentaries which aspects moved the growth or decline of the industry:
So, whenever reading forecast for the development of the music industries, you are advised not to put too much trust in the result of the outlook. As mentioned above, it is very difficult to predict what is happening in the next years, especially in a such dynamic environment.