In the early-2000s, the music industry was on its knees. Peer-to-peer file-sharing platforms such as Napster, LimeWire and Kazaa were offering a huge catalogue of songs to millions of users for free.
The big record labels were in despair and launched a series of high-profile lawsuits to tackle the huge copyright infringement being committed by these platforms. Whilst they succeeded in seeing Napster and a number of other P2P players shut down, the music industry was the first to truly realise the immense power wielded by the online generation. Just as their legal challenges forced one P2P network to shut down, another ten started up. It seemed there was nothing they could do to stop this tidal wave of disruption.
Despite the prophecies of doom at the turn of the millennium, the industry is in a very different shape nearly two decades later. Last year, the music industry bucked most economic trends and grew by nearly 6 per cent. Just this week, Sony Music announced double-digit growth.
How did this happen? Whilst some industries facing disruption spend a huge amount of time and energy fighting the tide (taxis vs Uber, retailers vs Amazon), the music industry simply accepted they needed to change their broken model. The labels showed great nimbleness in recognising they couldn’t rely on physical music sales much longer. Instead, they pivoted their revenue priorities toward live music, brand partnerships and yes, the thing that nearly brought them down in the first place, digital music distribution.
The music industry’s ability to adapt should be a shining example to the array of sectors that are currently experiencing disruption with no sign of light at the end of the tunnel. Unbelievably, the music industry has managed to ensure paid-for streaming has become the number one method of music delivery; overtaking CDs, downloads, and even piracy.
More than anything, the music industry held an unwavering faith in the belief that music was worth paying for. This is stark contrast to the publishing community which, faced with digital disruption, entered a race to the bottom to give content away for free and now find themselves in fierce competition for dwindling advertising budgets.
Clearly, that faith is beginning to pay off. The notion of paying for music no longer seems alien. A modest monthly subscription to Apple Music or Spotify seems like a fair price to pay for unlimited access to music (and a clean conscience!).
Beyond streaming income, artists and labels have become savvy to the commercial value of social media audiences and are able to charge a premium for brand partnerships, exploiting yet another alternative revenue stream. By collaborating with a musician, not only do brands benefit from endorsement and association, they are also able to tap into distribution networks of tens of millions via stars’ Instagram, YouTube, Facebook and Twitter pages.
The example set by the music industry is one that executives in industries that are susceptible for disruption should look to emulate when faced with the full force of the digital revolution. It might not have seemed likely back in the early-2000s, but the music industry hasn’t just survived, it has thrived.