Aram points out that my math on subs was off: 25mm subs x $10/month is actually $3b per year, not $250mm. Which is a pretty nice chunk o’ change. And 100mm people at $20/month (which I believe is an unfeasible price) would actually deliver $24B in annual revenues.
What I did wrong was that I didn’t multiply monthly revenues by 12 to get annual revenues, so my numbers are a 12th of what they should have been.
And *even so* the basic picture doesn’t change. In the most wildly optimistic scenario subscriptions are still no better than half the size of the old record business.
More Aram:
I think there’s still a substantial potential customer base for them, especially if they include (a) unlimited DRM-free downloads (which UMG has already gotten behind), and (b) streaming to mobile devices, with caching, a la Spotify. Obviously, the market size won’t be anywhere near $40B global (record retail at its peak), especially in the early years of deployment, so they need to be integrated with other revenue models, from ad-based to licensing, and supported by 360 artist management.
I do not yet know whether the ultimate delivery model is subscription, ad-based, unit-sale based or otherwise. I have my theories, which are no better than, and perhaps worse than, anyone else’s.
I do know that down-sizing in sales revenue from CDs is a
huge problem for the corporations that profited from those sales. Yet I remain convinced that the consumer will find herself/himself with more choices in this newer world than in the old way.
I remember when digital watches moved from 200 dollars/unit to less than 20/unit. Yet watchmaking corporations stayed in business by offering marquee products and added features. We see a very similar evolution of the business model now in digital cameras and other consumer electronics. The issue for unit-sale or subscription sellers is “what value will we add to get buyers to pay the fees we wish?”. The “value” of shelf hegemony and distribution control, which was adverse to the consumer, proved inadequate. This is not a tragedy. It’s a refreshing example of technology destroying a market hegemony
using free market principles.
The question now is what a wide-open market will let more innovative
companies and individuals do to get more music released.