Universal Music took a very interesting strategic step last week when it announced that Apple would no longer have guaranteed access to its coming releases. The move may impact the Oligopolisitc Music Industry where the Big-Four comprising of Universal, Sony-BMG, Warner Music Group and EMI music control nearly 80% of the world market.
2005 U.S. music market share - Nielsen SoundScan. Image source: Wikipedia
The Music Industry has been undergoing a lean phase - falling physical sales and increasing piracy has put tremendous pressure on the Big-Four to find new ways of monetizing their assets. The Music industry has been undergoing constant transformation - the unbundling of the album, flexibility in what consumers can buy, the vast array of music-based products - ring tones, SMS-tones, ringbacks, music videos, song clusters - all this to identify and exploit content monetization oppourtunities.
According to figures recently released by Nielsen SoundScan, physical album sales fell by 15 percent (from Jan. 1 to July 1 this year), while sales of digital tracks rose 49 percent! Clearly, the future is digital for the Music companies. Apple iTunes has a virtual monopoly in the Online Music Sales market and only a market leader like Universal could have challenged its pricing strategies. The move is clearly being seen as a bargaining tactic to get a bigger cut of the 99¢ that Apple charges per download.
Also, it could help Universal adopt alternative business models like Ad supported downloads and dynamic pricing (charging more for the newer/hot selling titles and charging less for the not-so-hot songs). It remains to be seen whether Universal will emulate EMI or not - which recently decided to sell DRM free songs on iTunes (by charging a 30% premium on the DRM free songs). Also interesting would be to see how the other players react to these developments. Let's hope that the Music companies would soon re-invent their business models and earn enough money to survive - we all love our music, don't we?
Cheers!
Anurag
