A new report shows that access to free streaming music in the past few years has dramatically curbed illegal file sharing. Is it time for the ad supported model to save the music industry?
A survey conducted in January shows that the percentage of teens that have illegally shared music in the previous month was notably lower than in December 2007. In just 14 months, the rate of illegal sharing dropped from 42 percent to just 26 percent of teens aged 14 to 18.
The 26 percent decrease in file sharing nearly cuts the rate of file sharers in half over just over a year. That statistic is music to every industry executive’s ears.
Shift in consumption
However the big wake up call for the industry could be around free streaming music. In fact, almost two thirds (65 percent) of teens regularly stream music from services such as Pandora or Spotify on a regular basis.
What might not be so easy is cozying up to the online radio stations and streaming services that the record companies nearly put out of business. Maybe that was part of the impetus behind reduced royalties for Internet radio stations reached last week.
Forced ‘freemium’ model
This news pushes the music industry into a new model that is not unlike what we’re seeing in the print and television industries. This is one where an ad-supported free model leads into a more premium subscription.
While the ‘freemium’ model is hugely popular with consumers, it puts the squeeze on profits and is shuttering newspapers right and left. However the record labels might not have much choice if they want to monetize the low end of the market.
Hulu for music?
Now that the ad-supported model for music has been proven, it will continue to rise in popularity and support. This means more music companies partnering with YouTube and focusing on their online distribution channels.
This could also mean the rise of an industry-backed outlet to become the music industry’s equivalent of Hulu which cuts out third-party sites such as YouTube altogether. Alternately we could see digital juggernauts like Apple and Amazon offer streaming services in addition to selling albums.
The music industry was forever changed by the Internet and file sharing technologies. Now the music industry has good reason to get on board with new technology.