Why Digital Music Service Consolidation Is Set To Continue

From The Music Void:

TMV’s Wayne Rosso recently reported on the acquisition of US based streaming music service MOG to HTC owned Beats. Was this a one off or more a signal that consumers are inundated with numerous digital music services and that perhaps there are just too many services fighting for a limited amount of consumers?

Business analysts state consolidation is inevitable, and whilst TMV tends to agree with such an assessment we want to drill down and examine the facts that may have led to this state of affairs. As after all, is not consolidation the enemy of competition? Consumer choice is king in this scenario of competition. Could it potentially be that oversupply of digital music service’s has led to in some instances lame user experiences, and in turn that this has turned off consumers?

Yet the question then needs to be asked, is why labels have licensed their music to services that quite frankly are not up to standard in terms of delivering a seamless iTunes al-la-carte experience or in the case of Spotify a seamless streaming experience?

Could it be the allure of catalogue licensing advances, which go straight to labels ‘black box’ of non-attributable income? Or is it out of a genuine willingness to take a punt? I would hazard a guess that it is somewhere in the middle and dependent on the major label. We all know in the case of WMG, that it is primarily only interested in accruing as much non-attributable income as possible – as witnessed by its continued demanding UMG level advances despite the fact Warner represents less than 13% of global record sales market share.

Best Buy Purchased Napster and then sold it onto Rhapsody. The current market share breakdowns between al-la-carte and streaming music services looks something like the below:

The graphs above detail the very real fact that there are two separately massively dominant players in each digital music service category (TMV excluded streaming video and radio type services from the extrapolations made).

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