So the music industry is under pressure. Sure it is, the world is (still) readjusting to digital and the music industry top line is being hammered.
This isn’t new news, not in the least.
However what makes us raise an eyebrow is that everyone focuses exclusively on revenue when the truth is:
the global music industry is big
it generates a lot of revenue
Our point – there’s a lot of revenue out there, even whilst under pressure in the digital world, so if perhaps (unfashionably?) industry particpants were to focus on their margin rather than their revenue then perhaps a lot of cash could be unlocked to be used to great avail……
Why so? Well basically because the existence of digital, downloads, streaming etc…. isn’t really the biggest problem the industry faces. We believe it is the fact that business practises (physical ones) haven’t changed that is a greater issue which is being exacerbated by the revenue decline. In other words it is the margins that are the challenge first and the revenue is a secondary issue that is bringing this into stark focus. There are still a huge number of participants in the overall music eco-system, all wanting their ‘slice of the action’ or ‘commission’ for doing what they do. The more slices taken, the more margin is under pressure particularly in an environment of falling revenue.
Our view is that it is fundamental business practises that need to change as a priority. By looking at business practises, consolidating roles, applying technology and looking for incremental revenue opportunities – margin can be enhanced (per earlier there’s a lot of it available given the size of the industry) and through enhancing margin – cash can be free’d to start tackling the revenue problems on the front foot.
It’s all about priority. We believe the industry needs to sort its’ margin/profit first and then to tackle revenue rather than what appears to be happening which is people worrying more about the revenue and ignoring the effect that existing practises have on the bottom line. As long as too many people have percentage particpations in everything, it doesn’t matter which direction your revenue is heading as a percentage is independent > 10% is 10% whether you’re making $1, $100 or $1,000,000 – go figure.
