Radiohead’s recent pay-as-you’d-like strategy represents a much needed leap of faith in today’s shrinking recorded music marketplace. Young consumers are spending 10% of their disposable income on mobile services, that’s $30 less a month to spend on music, fashion etc. Something’s going to give.
So perhaps beyond piracy, Youth’s $130 billion annual spend on mobile (source mobileYouth report) is a major contributing factor to the decline of the industry. The market continues to grow by about 4% (around $5 billion) a year.
Yes, music is available for free out there, but consumers are still willing to pay if the product value offering is right and when the social drivers of peer group reinforcement and significance can be provided by a new product (mobile), the incumbent (music) will suffer.
Recent Emarketer figures show that recorded music sales will decline over the next 4 years by a factor of $5 billion.
In isolation, it’s bad news for the music industry. The bigger picture offers hope. When recorded music reaches near-zero cost of distribution (as it is currently) the break even is relatively low meaning you can target a specific group of low-spending consumers (eg young teens) and generate a small profit from a small outlay.
The real money is in lifetime value and cross-selling. Radiohead will profit from a spike in merchandise and concert ticket sales, product lines that with little interference from numerous distribution stakeholders go straight to the band’s bottom line.
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