The success of streaming services such as Spotify in Sweden and Norway, as well as WiMP in Norway and the attention of Mog and Rdio etc in the USA, proves that music streaming services has a great potential to liberate music consumption, as well as drive traffic from illegal music sites. Economically this is an important shift in music consumption habits and many market analysts are arguing that music-streaming services may be the record industry’s economic salvation in a downhill market situation. Streaming services therefore seem to be the most obvious place for the music industry to now reach its audience. A major challenge is however that one cannot take a product that sells for dollars and replace it with one that “sells” for cents and then expect the industry to remain healthy. At least not if the overall marketing and operations strategy remains the same. This way it is possible to argue that future expenses needs to be lower in order to realize the return on investment.

Illustraion photo: Arnbjørn Marklund

So as a one time stream of an album generate less income compared to a sale of the same album on a CD (or download for that matter), the music industry is facing some important challenges when it comes to gaining considerable profit from music streaming. As the business of music is transforming from an industry driven to a fan driven culture, it is important to build a community of fans and to have these music fans engage in an economic relationship in order to consume music. As far as traditional music consumption goes, this means that the strategic operations are changing from being all about selling units until obtaining as many streams as possible for every artist and music track represented by the company. This is significant in order to increase royalty payments. As a bonus, music streaming also has the potential to boost the popularity of artists represented by the music company. The more popular an artist becomes, the more money one may also expect to earn from licensing the artist’s songs to a film or video game, and the more income you may also earn from the sales of merchandise and/or sponsorship agreements.

But as it is becoming more and more important for consumers to have access to the specific content rather than actually own it, it is a bit more challenging for the music industry to position themselves towards the consumer. The amount of money the consumer spends on music streaming is not necessarily out of loyalty to an artist or a music company. It is because the consumer has access to millions of tracks. One may actually argue that the liberation of music consumption in a world of access is about individual music discovery and social sharing within taste communities. The consumers are still music fans, and might therefore have several favorite artists they prefer listening to, but as the consumers already have access to everything, it is no longer about having ownership of the “right” content. For the music industry it is therefore crucial to make sure the consumer discover, listen to, enjoy – and therefore “come back to” the right content. This is how music fans enter into an economic relationship in order to consume (more) music. Access to everything is quite simply more important than ownership of something, and future marketing of music might just be about filtering relevant content for music fans.

Music companies therefore need to be on the forefront of these new market developments in order to future prosper. The following months I will research further on this subject as I finish up my master thesis at the IT-University / CBS here in Copenhagen. I will keep you guys updated as much as I can. My main goal is to to explore how the music industry might reach the music consumers and gain profitable market share through the marketing of music streams, as well as how one may build and maintain a community of music fans in a world of access.