3 Music Industry Predictions That Flopped In 2016 – Forbes

Daniel Ek, CEO of Swedish music streaming service Spotify, gestures as he makes a speech at a press conference in Tokyo on September 29, 2016. Spotify kicked off its services in Japan on September 29. (Photo credit: TORU YAMANAKA/AFP/Getty Images)

For such an erratic industry, music loves its predictions. From pondering the Grammys to calling the next big hit or the next technological innovation roadmap, music business executives, artists and commentators are eager to sidestep their own surprises—with mixed success.

Some predictions for the music industry in 2016 stayed strong. Yes, touring is still a cash cow. Yes, curation is ever more important for music discovery, with an estimated 1 in 5 streams occurring on a playlist. Yes, streaming services are aggressively creating original content (and collaborating with labels in the process).

Other issues remain more ambiguous, particularly with regard to emerging technologies. How many people will actually cash into virtual reality music experiences? What impact, if any, will autonomous vehicles, chatbots and alternative advertising have on music companies’ bottom lines?

Finally, a handful of industry predictions, many of which revolved around streaming, fell flat this year. Here’s where we missed, and why:

1. The industry didn’t kill freemium. In May 2015, rumors began to spread that Spotify would limit its free, ad-supported tier to a three-month trial, facing financial pressures from major labels and following in the footsteps of competitors like Apple Music. While the rumor has since been debunked, publications such as Rolling Stone and Hypebot posited that free streaming would take its “last breath” in 2016.

In fact, freemium models not only remain alive and well, but are also arguably benefiting the music industry at large. Warner Music Group recently reported the highest annual revenue figures in eight years, driven by a 23.1% increase in streaming dollars—a significant rise considering that most users on multi-tier services like Spotify, Deezer and Pandora still stream for free.

Perhaps the largest burden lies not on the artists and labels, but rather on the freemium services themselves: to date, no such service has turned a profit.

2. Albums didn’t die. Ever since iTunes launched in 2001, music industry professionals and commentators alike have prognosticated the death of the album. Unbundling otherwise premium-priced CDs into individual tracks that could be bought for 99 cents rendered physical album formats essentially irrelevant, undermining one of the industry’s key revenue streams at the time.

Streaming was expected to take this effect one step further, eliminating altogether the need for listeners to “shop” for songs to purchase, embracing a buffet-style consumption model instead. Several electronic artists like Flume and The Chainsmokers have taken note, abandoning the traditional album format for a singles- and EP-oriented approach to music releases. More regularity allows not just for more experimentation with individual works, but also for more visibility; as radio personality Nic Harcourt told Billboard, “releasing singles every month or two keeps them constantly engaged with their fans.”

Yet, 2016 also gave us some of the longest, boldest albums in recent music history, all of which became successful because of streaming, not despite it. Beyoncé’s Lemonade, a Tidal exclusive, featured a whopping 60 writers and 22 producers. Frank Ocean’s Blonde, The Weeknd’s Starboy and Drake’s VIEWS clocked in at 60, 69 and 81 minutes respectively, and each nailed multiple songs onto the Billboard Hot 100.

Indeed, in the streaming era, longer albums not only usher in a new “playlist aesthetic” catered to digitally-native listeners, but also make economic sense. More tracks lead to more streams overall, which helps performances on the charts. Some have criticized this strategy for giving mainstream artists an unfair economic advantage, working against the theory that streaming is more beneficial for artists in the long tail.

3. Hi-res audio didn’t catch on. The past few years have seen a growth in the number of high-resolution streaming options from the likes of Tidal and Qobuz, offering a lossless listening experience for $19.99 a month as opposed to the standard $9.99. In January 2015, Neil Young famously launched his hi-res Pono Player, which went on the market for $400 apiece. The assumption was that audiophiles—the consumer segment willing to invest hundreds of even thousands of dollars in high-quality headphones and audio systems—were a particularly important type of “superfan,” and would be willing to jump in masses on the opportunity to experience lossless music online.

As of May 2016, however, Tidal has only around 4.2 million subscribers, dwarfed by Spotify and Apple Music’s subscription numbers, and likely a small fraction of these subscribers are paying a premium for hi-fi. French-orientated Qobuz went into receivership in late 2015, and has yet to enter the U.S. market. The Pono Player is still not a household name, and the accompanying PonoMusic online store has been out of commission since July 2016. Signaling an even more competitive hi-res streaming market, Young recently revealed in an interview with Rolling Stone that he was working with a company in Singapore to pivot his company from a hardware player to a streaming service.

Hi-res evangelism has seen a bit more success in the form of artist and B2B services. LANDR—a freemium algorithmic mastering tool that charges anywhere from $0 a month for two lo-fi Mp3s to $25 a month for unlimited WAV files—syncs with SoundCloud, while Aftermaster Audio Labs has a partnership with independent distributor TuneCore starting at $75 per song. The 2017 installment of the Consumer Electronics Show will feature the first-ever Hi-Res Audio Pavilion, featuring product demonstrations sponsored by the Digital Entertainment Group, a trade organization that includes all three major record labels. The biggest challenge for these organizations may be to convince the average music consumer to join their cause.


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