The music industry reacted slowly to the digital world, but piracy groups had no such problems in the late 1990s. Various applications, websites and groups offered MP3 downloads, but the significant industry impact resulted from the introduction of Napster in 1999. Consumers no longer had to seek out private IRC channels or avoid virus-laden websites for their downloads. Napster's easy-to-use P2P interface opened up music piracy to the general audience, with UNC research reporting a peak user count of 25 million people.
The music industry's record revenue peaked in 1999 at $26.6 billion, according to Music Business Worldwide, with decreases reported every year afterward. The rapid drops in the early 2000s slowed over the past five years, primarily due to the role of live events. While record sales, whether physical or digital, continue to drop in number, the in-person music experience has an important position as the savior of the music industry. Pirates can't replicate the energy of the crowd or the feel of the ground vibrating from the bass.
The only record sales format showing positive growth is vinyl, with The Atlantic reporting a 51 percent growth rate. Digital downloads suffer from the popularity of streaming services and CD sales continue to fall. Live events, on the other hand, sit at $7.02 billion and Statista reports an increase to $8.73 billion by 2019. Live is where it's at today, but what influenced this shift outside of piracy?
The Experience Generation
Music is an integral part of most people's lives, with Nielsen reporting 93 percent of the US population spends 25 hours or more on music consumption per year. The 18-to-40-year-old demographic, which encompasses the millennial generation and the youngest of Generation X, gravitate towards experiences instead of possessions. Forbes reports 78 percent of millennials favor experiences and 72 percent plan on increasing live event spending. Radio and streaming services guide their music discovery and help them pick out the tours and concerts most relevant to their interests.
The 2008 economic crash played a significant role in shaping this generation's focus on experiences instead of ownership. Record foreclosures, unemployment and other economic instability shifted their focus to spending on things that couldn't be taken away. They might lose their cars, but they won't lose the memories of a life-changing concert. The economy may have recovered from that crash, but it created a long-term impact on this generation.
Band accessibility and engagement via social media channels also create a strong emotional attachment between fans and musicians. Earlier generations lacked frequent opportunities to brush shoulders with their favorite music celebrities, but millennials can participate in a wide range of interest-generating discussions. Even if they don't engage directly with the bands, forums and other discussion groups let them interact with other fans. Their loyalty and passion for particular music genres or specific bands help drive the desire to see live performances. Plus, they spend time talking about the concert after the show.
Social media also drives FOMO - Fear of Missing Out. Highly connected social networking mavens on Facebook, Snapchat, Instagram, Twitter and other sites want to show off the fun time they're having. They show off their active lives through experiences. If they don't make it to every event that pops up on their notifications, they start stressing about everything they're missing.
The Revenue Opportunities in Live Music Events
The increasing importance of live music events shores up the music industry through other revenue streams beyond ticket sales. Recorded music sales aren't all that hot at live events, but fans love merchandising. Band shirts, limited edition posters, jewelry, water bottles and countless other branded products make their way home from the concert venue. Billboard reports Taylor Swift earns $17 in merch sales per person at her concerts, which adds up quickly.
The competitive marketing and advertising industry looks for every chance it can get to reach millennials. Festivals, concerts and other live music events provide access to this sought-after audience. Corporate sponsorships offer an additional revenue stream for companies trying to find ways to remain profitable when they can't sell CDs and downloads.
Unique experiences attract plenty of attention, from backstage VIP access to hangout opportunities with band members. Super fans want every opportunity possible to engage with their favorite musicians and they're willing to pay for them. Not only does the band gain an additional revenue stream by offering these opportunities, they also build good will in their fan base. Highly engaged fans share their adventures on social media and generate more hype for the band, for a profitable impact overall.
Internet music piracy caused a meaningful upheaval in the music industry, but the influence of live events has worked to stabilize revenue. Event promoters and organizers should explore ways to attract the experience generation, as they drive significant ticket sales and crave memories they'll never forget. Today's music business landscape looks far different than it did 30 years ago, but savvy and adaptable companies have many opportunities to thrive in the current environment.