The ‘hyper-fragmented’ state of the music industry: Where to from here?

The digital, online revolution has had a profound effect on almost every industry you can think of. But perhaps the hardest hit of all has been the music industry, where the model that worked for generations has collapsed and new ways of making people pay for music are being tried and tested every month.

A comprehensive report into the “Hyper-Fragmented World of Music” by research company Nielsen reveals a complex picture of the massive music industry that could provide a road map for engaging with fans during the digital era.

The “watch habit”

Conducted over 53 countries in conjunction with Midem, the study found that the most popular form of consumption is watching videos online, which is dubbed the “watch habit”. 57% of online respondents watched music videos on computers in the three months prior to questioning. This corresponds closely with the measured audiences for YouTube and Vevo, revealing the popularity of these channels for music lovers.

Downloading music illegally still seems to be a popular thing to do for many people, but there are also a number of monetisable channels, including the use of mobile music apps, which have found an audience.

The report sums up the state of the industry, saying “No single monetisable online consumption channel is being used by over 60% of the global online audience. Consumption habits are diverse. This hyper-fragmentation poses a significant challenge for identifying where demand is, which is essential for best capitalising upon the broad opportunities presented by the new ecosystem.”

People between the ages of 20-24 are the primary consumers of music and this age groups watches more music on a computer and on a mobile phone than any other. As the age groups go up, so too does the gap between the number of users watching on phone and computer.

Legal downloads

While still not the most common form of accessing music, paying for downloads is still prevalent and still growing, which is an encouraging sign for the industry. The popularity of legal downloads is strongest in the Asia Pacific region, where 30% of consumers have legally downloaded music during the last three months, which explains “by the fact that Asia Pacific consumers are more accustomed to purchasing products via their mobiles”.

Streaming audio

There has been a lot of attention on streaming services, such as Grooveshark and Spotify, in recent months. They are generally accessed via a free, ad-funded model or a monthly subscription model, and are proving slightly more popular than legally downloads of music. But there needs to be a significant increase in consumer awareness of streaming audio if it is to become the mainstream, stalwart of the music industry.

Analysing the figures, Nielsen reports “Whilst the correlation between awareness and usage may be encouraging, it appears that global consumers need significantly more persuasion to adopt the more profitable subscription models. When asked about the ways in which they would listen to streaming services, only 22% of global online respondents who had streamed music in the three months prior to questioning said they would definitely or probably pay for a monthly subscription. This compares with 57% who would listen for free in
exchange for viewing or listening to advertising.”

Mobile music apps

One area of real encouragement for the industry has come in the form of mobile apps. Consumers have a strong awareness of what they are (83% know what a mobile app is), and interest in using them is high amongst owners of smartphones.

“Especially among digital music’s early adopter 20-24yr segment, the mobile phone is fast becoming the mainstay of how they stay connected to the world (via internet) and how they listen to and increasingly buy music. More promisingly, nearly one in four (24%) of the 20-24yr old segment globally indicated they would be prepared to pay to download music videos on their mobile phone.”


It’s a complex, challenging time for the music industry with very few certainties to bank on. The one encouraging aspect of the survey though is that, across all channels, it is the 20-24 year old age group who are pointing the way towards the future of the industry. They are the “premier consumers across every monetisable consumption channel” and while the generation who has been longest exposed to the concept of free, always-on music, they seem to be open to the idea of paying for content.

“Consumers are certainly willing to pay for something… as long as they cannot get it for free. The tangibility and permanence of the old formats is still valued by many. The access to personal (or broader) media collections in the cloud – what is widely regarded as being the next step for the music industry – will rekindle ideas of permanence.

The real issue to solve is that the channel or source of music is often regarded as much as a marketing tool (audio-video sites, apps) than as a revenue generation channel.”



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