In this recent post Bob Lefsetz argues that music ownership is history and that streaming will rule the music world.
There are not absolutes in this world.
Remember all of those who predicted the demise of the vinyl record? well, Best Buy is going to start selling vinyl records in 2009! Same thing with CDs, the decline of CDs sales will eventually slow down and level off, but they will not disappear.
The whole idea that *everyone* and their mother is going to listen to commercials along with their favorite music through Pandora and their iphone and stop buying music is silly. There are plenty of people out there who don’t want to listen to commercials, no matter how targeted, and want to be active participants and decide WHAT music they want to listen to and WHEN instead of being passive musical couch potatoes.
What will happen is the following:
1-Pandora (who will turn a profit next year, thanks to its iphone app) will dominate the music streaming landscape and will become the biggest COMMERCIAL radio station in the planet,
2-The music streaming competition (last.fm, etc) will have to adapt the same business model as Pandora (airing commercials) just to turn a profit and the competition will be fierce.
3-CDs, vinyl records and digital files will still be sold once people realize that pandora, last.fm etc. are nothing more than glorified computerized commercial radio stations and like their physical counterparts they will eventually have the same problems once the big labels start to put pressure and start demanding more money from streaming, start demanding more control over playlists etc.
4-The “free” music streaming model doesn’t work. MySpace is bleeding cash every quarter.If they don’t get a great deal from google when they resign their contract with them, they will start losing money.
Myspace membership is in decline and so are its advertising revenues. Pandora will survive because they will turn a profit the old fashion way: by becoming a commercial radio station. Every other player will eventually have to follow the same model or go under when their cash runs out and the VCs get tired of losing their money.
5-How about the Napster subscription model?
Once the big labels realize the future of music promotion lies in internet music streaming, they will lobby to pass laws to get substancial revenues from streaming. This will put tremendous pressure on all music streaming companies and will kill the subscription model.
For popular music, only the commercial streaming model will survive
If you want to see the future, just look at the past.
The invention of the radio didn’t put performance artists and musicians out of business, it just created more opportunities. Same thing with internet music streaming: it will not kill music ownership, just like FM radio didn’t kill vinyl sales.
P.S. Spotify is not available in the USA, and it has NO HOPE of ever turning a profit, unless they start following the Pandora model which is to air commercials. More here
See this related post can artists giving free music away ever make it?