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The evolution of the music industry

3110_musc industry3

The evolution of the music industry

It’s always remarkable to observe changes in entire industries from new technologies and consumer behaviours. The music industry is a great example of this ongoing evolution. The below chart was doing the rounds on Twitter last week, and illustrates the peaks and troughs of the revenue associated with US recorded music over time. As shown, digital downloads displaced CDs, which displaced cassettes and vinyl.

3110_music industry

There is a new trend in the music industry which has only recently started to take hold (and is not shown on the chart above which only goes as far as 2009). Digital music streaming has started to displace digital music downloads. As the younger generations have clearly adopted the ‘rent, don’t buy’ mindset towards most consumption, and are enabled by ever increasing internet speeds – music streaming has become a preferred way to consume music. Popular streaming services include Spotify and Pandora.

Last week, a Wall Street Journal article reported that music sales in Apple’s iTunes Store have fallen 13-14 per cent worldwide since the beginning of the year. Meanwhile, US revenue from streaming music services has jumped by around 28 per cent versus last year. This is summarised by the chart below.

3110_music industry2

We wonder if the video industry (i.e. the consumption of TV shows and movies) is set for similar disruption? Two weeks ago, it was announced that premium content provider HBO is preparing to launch its own online streaming version of its service next year. Such a service is expected to be wildly popular with consumers; though for pay TV cable companies, this trend could potentially spell trouble.


Andrew Macken is the Chief Investment Officer of the Montaka funds and the Montgomery Global funds. He established MGIM in 2015 in partnership with Montgomery.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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  1. Video streaming seems like a logical way to combat illegal downloads. Australia gets to see TV shows a long time after the release in the US and for some popular shows this is only on Foxtel. The result is a bunch of people downloading these shows after the american release so they don’t have to wait to see it in Australia.

    I am also convinced that deep down, people want to legally watch their favourite shows at the time they are initially released in the US so would definitley take up on any such service like the one HBO is offering. The introduction of laws relating to the capturing and storing of metadata and the recent situation where the producers or distributors of “Dallas Buyers Club” were seeking information from ISP’s to find out who downloaded the movie illegally will also only increase the demand for legal services as people start worrying more abotu being caught. I know the government says ASIO and the AFP aren’t too concerned about this area but it is an increased risk to the downloader for sure.

    Streaming makes sense as the next fronteir in entertainment. This is an industry that is in a constant state of evolution due to its heavy links with technology.

    Thanks for the interesting post Andrew.

    • Streaming is a good solution for content creators; computer gaming – an industry that has long faced mass piracy – has already moved substantially in this direction with the massive growth of subscription based-games where if you don’t pay the monthly fee then World of Warcraft or Skyrim or whoever just lock the account.

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