Martin Dimartino Marriott

Tag: economist

The Predicament of the Music Industry – Can Spotify save it?

by Martin on Aug.08, 2009, under Articles by Martin, Blog

I was pleased to see an article in the Economist about Spotify and music downloads. I decided to leave a considered comment and I’m glad to see my comment is still top-rated of all the comments on said article.

The case of downloaded music making huge inroads to the profitability of the music industry is a clear case in point of what Levitt (1960) talked about decades ago in the now iconic ‘Marketing Myopia’ paper. This is my favourite paper of all time.
The music industry is a classic example of Levitt’s prophecy when he talked about ‘Myopia‘ of companies who become complacent with their dominant position.
They assume that they’ll always be in a growth market and then, inevitably, strategic drift occurs; and this has occurred profoundly with the music industry.

The new on-line environment has changed such that it no longer supports the delivery model of music.But these technological changes — and the subsequent changes in the paradigm of consumer consciousness — occur in most industries, and it’s up to all firms and industries to pre-empt this, even instigate it, one might say. Companies should not be thinking in terms of making and selling products to a static market, rather in terms of buying customers; ie. innovating and adjusting the product in line with the actual needs. Almost to make promotional marketing obsolete if you will (as per the topic of my most recent essay), but that’s another matter.
The business model of the music industry has caused complacency and has totally ignored (until too late) the huge trend of file-sharing. Of course music was going to go digital! Did the music industry think it was immune to the impending messiah of the internet?

The music industry is a case in point, and it hasn’t rolled with the punches; it’s still clinging relentlessly and noisily to the old delivery model without innovating its way out of it. And now look – it’s too late!

Sure, there’s been a much higher profile and availability of legal downloads now, but it’s all come too late and with too little added-value; after all, they’re now competing with the pricing model of ‘free’.
A whole generation of music-fans have now grown up on the assumption that music is commodity and only very recently have legal downloads become widespread and more accessible. Commoditisation is something which again can threaten most products, especially those which are easily transferred and replicated digitally, like MUSIC!

Spotify is certainly one way the music industry can give the consumers what they want, while still monetising their product, but as was said in the Economist article, it’s only part of the solution.
If we go back to what Levitt said 50 years ago in that paper, companies need to seek to bring about their own obsolescence essentially, otherwise competitors will do it for you, and you’re done for!
“…there is no guarantee against product obsolescence. If a company’s own research does not make it obsolete, another’s will”.
Did the music industry always just assume it wouldn’t come under threat, and that their product would never become a commodity? Dream on.

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