Tuesday, January 5, 2016

5 Bold Music Business Predictions For 2016

Written by Bobby Owsinski — The new year is upon us, which means it’s time to look into the crystal ball to foresee what might happen in the music business in 2016. Here are 5 predictions that may not be very popular, but might end coming to pass.

Prediction #1: Pandora goes global

One of the most significant and generally overlooked moves of 2015 was Pandora’s bid on some of Rdio’s streaming assets out of bankruptcy. While this move is still contingent on the court, acquiring this infrastructure will allow Pandora to become an interactive service like Spotify, and allow it to begin servicing other markets besides the United States as a result. With a solid 80 million user base in the US alone (which is what Spotify has globally), setting up shop worldwide will allow Pandora to become a true rival to Spotify.

Prediction #2: Vinyl shows its last big growth spurt

Vinyl sales have seen double digit growth for about 5 years and that will continue in 2016 as well, thanks to increased pressing plant capacity brought about by newly manufactured presses (the first in over 30 years) and widespread availability of turntables so buyers can actually listen to their purchases. Although sales will continue to increase beyond 2016, they’ll be much more modest as the number of new buyers diminishes due to saturation of the market. 2016 will be the last year of the true vinyl “revival.”

Prediction #3: Amazon Prime Music makes a move

Amazon Prime Music has been a minor add-on to a Prime subscription until now, but that doesn’t mean that Amazon isn’t taking music streaming seriously. The company has all the infrastructure it needs to launch a mainstream music-only service, and 2016 will be the year it does so. Amazon has also been dipping its toe in the water of becoming a full-fledged record label with its occasional offerings from Amazon Acoustics, which could potentially signal what might be a major part of the service and could be a differentiator in a crowded market.

Prediction #4: Conversion to the streaming premium tier remains slow

Most music prognosticators predicted that 2015 would be the year that either hordes of free tier streaming subscribers would convert to the paid premium tiers of their various services, or a bevy of new customers would pay the nominal $9.95 per month to sign on. Even with the entry of Apple Music (and its huge customer list) and the introduction of the premium YouTube Red into the market, the number of new paying subscribers was still far less than expected.

While many will argue that the market is now mature enough to see a real bump in paid subscriber numbers this year, the fact of the matter is that most streaming users are happy with what they’re getting in their free tiers. While we may see a big jump in overall users, 2016 won’t be the year that the streaming services see the big increase in paid subscribers that’s expected.

This is subject to change however, if services like Spotify acquiesce to music industry pressure and decide to make the two tiers decidedly different. For instance, an opportunity was just missed in the cases of Adele (who chose not to stream on interactive services) and The Beatles. If either or both of these artists mandated that their music would only be available on the premium tier, it might have been the final incentive required to push a free subscriber over the fence to actually pay.

Prediction #5: Facebook institutes its version of Content ID

Although content creators and copyright holders have constantly railed against the low royalty rates from YouTube, the fact of the matter is that they do get paid. The reason is because of YouTube’s fingerprinting feature called Content ID, which flags a user-generated video using copyrighted material. That means that if someone posts a popular song in their cat video, Content ID sniffs it out and alerts the owner of the copyright, who then has the right to include an ad in the video and see some revenue as a result.

Facebook may be catching up to YouTube in terms of video viewership, but it’s not able to monetize those videos for copyright owners yet because it doesn’t have anything similar to Content ID. Look for Facebook to introduce its own fingerprinting feature in the new year so all the videos can finally be monetized. Then it truly is game-on with YouTube for dominance of the online video world.

As always, it will be interesting to look back at these predictions next year at this time to see just how many came to pass, and in what form. It’s also pretty cool to look back at the unpredictable events that no one foresaw that helped shape both music and the music business in a new way. Have a great 2016!

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