The state of the music industry

You would be forgiven for thinking that there was no problem with the music industry, at least in Australia.

With annual revenue of over 1.2 billion dollars, and employing over 15,000 people, it looked like the industry was doing better than ever, as opposed to suffering from digital disruption.

Here’s the thing – much of the 1.2 billion was generated through live performances. However, digital technology has disrupted the way people consume music. During the 1980s, 84 albums were released throughout the decade and each one sold more than 10 million copies. By 2011, only 3 albums managed to surpass 2 million sales. The industry was hit by reduced profits, combined with the fact that their revenue models were suddenly outdated.

Fortunately, it’s not all doom and gloom, the industry has been slowly clawing its way back from obscurity as it has come to terms with online downloading and streaming. Now, big data analytics will give the industry the edge it needs to thrive once again.

How does data analytics change the music industry?

Accurate answers to complex questions

The music industry thrives on stars and their hit songs, but who is going to be the next star? How can established names make sure they don’t fall into obscurity? What is the next hit going to sound like? What is the next big trend that will change the industry? In the past, executives would rely on consumer reports and producers with a distinct keenness to answer those questions.

Record firms can use performance analytics to see how people respond to songs. Measurements include audience engagement, resemblance to other hits and more. Analytics is also used to effectively market to the right audience, survey artist’s popularity, find out why some artists are more popular than others and more. Machine learning algorithms can anticipate a billboard chart topper before the song becomes a chart topper. For example, data analytics predicted that the OutKast single ‘Hey Ya’ would be a Billboard #1 hit before the song was released. Given how much data there is on successful songs, and how accurate the technology is, it’s no surprise that business and creative decisions in music will be data-driven.

Support new business models

Technology is always changing the game. The first was Napster, where its illegal file-sharing cost the industry millions in valuable revenue. Then, iTunes offered a legal solution catering to both consumers and producers (ironically, this played a part in plunging album sales. Why pay for an entire album when you can pay for one song?) Now, Spotify and Deezer are changing the game once again by letting people stream an unlimited amount of music in return for a monthly fee. Finally, Soundcloud and YouTube allow artists like Lindsey Stirling to upload their own songs, garnering a fanbase numbering in the millions.

Technology is always changing the game. The first was Napster, where its illegal file-sharing cost the industry millions in valuable revenue. Then, iTunes offered a legal solution catering to both consumers and producers (ironically, this played a part in plunging album sales. Why pay for an entire album when you can pay for one song?) Now, Spotify and Deezer are changing the game once again by letting people stream an unlimited amount of music in return for a monthly fee. Finally, Soundcloud and YouTube allow artists like Lindsey Stirling to upload their own songs, garnering a fanbase numbering in the millions.

With big data analytics, record companies can find songs that will be a big hit, acquire the rights, and market the song to the right audience. Therefore, many record companies will be focused on curating the right music, and they will rely on data analytics to find in it.

Order management

If you are not aware, order management is the management of business processes. Data analytics enhances order management because it delivers more detail on smaller business functions and most importantly, consumer behaviours, like listening history, preferences and more. Record companies can use the information to make better investment decisions and market the right songs. Spotify is already using an order management platform to get a better understanding of their customers – they can see each person’s streaming and download preferences, refine their business processes and help publishers understand what the next hit is going to be.

Key takeaways

While there is no replacing the money-generating machine that is live performances, data analytics is addressing many of the problems the industry faces, by helping executives anticipate trends and understand their consumers better. With analytics, it’s possible to predict hits before a song becomes big, anticipate the next big star and more. It’s safe to say that data analytics is no longer for the exclusive realm of tech, business and health because of its use in entertainment.

Interested in learning more? We also talk about data analytics and its role in the video game and sports industry.