Why Streaming Doesn’t Really Matter For Adele

The outstanding success of Adele’s single ‘Hello’ has stoked up the already eager debate around whether Adele’s forthcoming ‘25’ album is going to be a success.  Indeed some are asking whether it is going to ‘save the industry’. One of the aspects that is getting a lot of attention is whether the album is going to be held back from some or all of the streaming services.  The parallels with Taylor Swift’s ‘1989’ are clear, especially because both Swift and Adele are strong album artists, which is an increasingly rare commodity these days. But the similarities do not go much further.  In fact the two artists have dramatically different audience profiles which is why streaming plays a very different role for Adele than it does for Swift.

Lapsed Music Buyers Were Key To the Success Of ‘21’

Adele’s ’21’ was a stand out success, selling 30 million copies globally.  Core to ‘21’s commercial success was that the album touched so many people and in doing so pulled lapsed and infrequent music buyers out of the woodwork.  The question is whether the feat can be repeated? In many respects it looks a tall ask.  We’re 4 years on since the launch of ‘21’ and the music world has changed.  Music sales revenue (downloads and CDs) have fallen by a quarter while streaming revenues have tripled.  And the problem with pulling lapsed and infrequent buyers out of the woodwork is that they have receded even further 4 years on.  In fact a chunk of them are gone for good as buyers.

buyer streamer overlap

But beneath the headline numbers the picture is more nuanced (see graphic).  Looking at mid-year 2015 consumer data from the US we can see that music buyers (i.e. CD buyers and download buyers) are still a largely distinct group from free streamers (excluding YouTube).  While this may seem counter intuitive it is in fact evidence of the twin speed music consumer landscape that is emerging.  This is why ‘Hello’ was both a streaming success (the 2nd fastest Vevo video to reach 100m views) and a sales success (the first ever song to sell a million downloads in one week in the US).  These are two largely distinct groups of consumers.

Streaming A Non-Issue?

As a reader of this blog you probably live much or most of your music life digitally, but for vast swathes of the population, including many music buyers, this is simply not the case.  Given that the mainstream audience was so key to ‘21’s success we can make a sensible assumption that many of these will also fall into the 27% of consumers that buy music but do not stream.  The implication is thus that being on streaming really is not that big of a deal for ‘25’ one way or the other.  Whereas Taylor Swift’s audience is young and streams avidly, Adele’s is not.  That is not to say there aren’t young Adele fans, of course there are, but they are a far smaller portion of Adele’s fan base than Swift’s.

60% of 16-24 year olds stream while just 20% buy CDs.  Compare that to 40-50 year olds where 34% stream and 43% buy CDs.  These are dramatically different audiences which require dramatically different strategies.  Audio streaming is unlikely to be a major factor either way for Adele, neither in terms of lost sales nor revenue.  Unless of course she ‘does a Jazy-Z‘ or ‘does a U2’ and takes a big fat cheque from Apple to appear exclusively on Apple Music.  But I’d like to think she’d like to think she’d have the confidence of earning sales the real way.

The Importance Of The Digitally Engaged Super Fan

What unites Swift and Adele is that they are both mass market album artists and as such are something of a historical anomaly.  Swift bucked the trend by making an album targeted at Digital Natives shift more than 8 million units.  Adele will likely also buck the trend.  But paradoxically, considering the above data, in some ways it will be a harder task for Adele.  Swift has a very tightly defined, super engaged fan base that identifies itself with her.  Adele’s fanbase is more amorphous and pragmatic.  You don’t get ‘Adelle-ettes’.  Swift was able to mobilise her fanbase into music buying action like a presidential candidate with a passionate grassroots following and big donors.  The importance of digitally engaged super fans is the secret sauce of success for digital era creators.  It is the exact same dynamic that ensured UK YouTuber Joe Sugg was able to leverage his fanbase to give his debut book ‘Codename Evie’ the biggest 1st week sales for graphic novel EVER in the UK this year.

If Adele and her team do pull off a sales success with ‘25’ they will owe a debt of gratitude to that 27% of consumers.  While the odds are against it being quite as big as ‘21’ (simply because the market is smaller) it still has every chance of being a milestone event that will out perform everything else.  But do not mistake that for this being ‘Adele saves the music industry’.  Album sales are declining.  Success from Taylor Swift and Adele are (welcome) throwbacks and they are most certainly not a glimpse into the future.

The Tale of the CD, the Digital Refusnik and the Charitable Collector

Earlier this year I raised the question of whether the music industry was going the way of the newspaper industry, whether its core audience was aging, stuck on its physical format while the younger generation feasted on free content.  It is becoming increasingly clear to me that this dynamic is arguably the most sizeable challenge facing the recorded music industry.  Product innovation (my hobby horse) is of course crucial, but its remit will be drastically reduced unless the ‘CD Problem’ is fixed in tandem.  Indeed, the two are intertwined.

The CD is polarizing the music buying marketplace

The importance of the CD is at serious risk of becoming a hindrance to innovation, particularly as its core customer base becomes more entrenched:

  • The CD as fossil fuel. I have often argued that the CD is the record labels’ heroin, a habit which they simply cannot kick and which is hindering their ability to move on in life.  The analogy is probably a little unfair, as it implies the relationship is a purely destructive one.  A fairer metaphor is the world’s dependency on fossil fuels: we all know that they should run out some time in the not so distant future.  But we also know that we have been hearing about their imminent depletion for decades and yet they are still here, thus far at least.
  • Digital is creating a fault line across the music buyer landscape. With all of focus on digital strategy it is sometimes easy to forget that the CD is still the beating heart of music revenues and the most widespread music purchasing behavior, even in the US, that most digital of western music markets (see figure one).  What is of concern is that a very large proportion of those CD buyers only buy CDs and what is more, they buy them offline in high street shops, malls and supermarkets.  The industry used to view these consumers as the next wave of digital customers, the buyers who would naturally transition to digital.  Unfortunately it is becoming increasingly clear that many of these consumers are better viewed as ‘Digital Refusniks’, consumers who have either actively chosen not to go digital (e.g. vinyl junkies) or see no appeal (mass market middle America, Mr Main Street, Mondeo Man etc).  But these consumers are getting older (see figure one) and unless a transition strategy is implemented they will just carry on getting older until they are with us no longer, just as is happening with newspaper readers.
  • CDs work fine while we all still have CD players.  The problem with CDs is that you need somewhere to play them.  That might not feel like a problem now but it is going to become one.  Technology expenditure in the living room has shifted from audio to video.  Our TVs have got bigger, as has the size of the piles of boxes underneath them (which for some reason are still called ‘set-top’ boxes even though most TVs don’t actually have ‘tops’ anymore).  Meanwhile the Hi-Fi has become the second class citizen of the living room. People used to change their Hi-Fi’s simply because manufacturers changed the colour they made them in, now the average living room either has a dusty old midi system or an iPod docking station.  For the Digital Refusniks – most of whom of course don’t have docking stations – there will come a time, not so far from now, when that dusty old Hi-Fi looks just too old and will be put away in storage.  At which point the CD will have disappeared out of the living room and there will be little reason for buying CDs anymore, which will actually mean just not buying music anymore for these consumers.  The TV, radio and the CD player in the car –as long as there still is one – will sate their music appetites instead.

A physical-to-digital transition strategy must start with a keener understanding of what makes CD buyers tick

The Digital Refusniks need bringing into the digital realm with hybrid physical-digital products before they simply fall out of the music buying population.  The case for a physical-to-digital transition product strategy is clear, but it needs basing upon a clear understanding of why people value CDs. Across the music industry, consumer research projects must create a detailed and nuanced picture of CD buyers’ wants and needs.

To this end, but in an entirely non-scientific, not statistically significant and largely subjective manner, I yesterday canvassed my Twitter followers with this question: Do you still buy CDs, and if so why?  The results, as long as they are considered in a purely directional and illustrative sense, present some interesting trends (see figure two):

  • 77% of my tech-savvy music aficionado skewed base of Twitter followers still buy CDs
  • A fifth of those CD buyers also buy vinyl
  • Ownership, supporting favourite artists and artwork are the top three reasons for buying CDs
  • Just over a fifth only buy CDs for ‘special’ albums and just under a fifth only buy CDs rarely
  • 14% said they had either stopped buying CDs altogether or were buying fewer because of streaming music (in most cases they were paying for 9.99 subscriptions)
  • 12% buy CDs because they are scared of their PC and / or cloud services crashing and losing all their music

Say hello to a new music buyer segment: the Charitable Collector

The broad picture is one of the CD as a hybrid of a collector’s item and an honesty box: people buying CDs to support their favourite artists and to own something tangiable and visual.  Perhaps the best label for describing this very specific group of conscientious CD Buyers is Charitable Collectors. Of course the music industry cannot afford for the CD to become relegated to a role as the picture disc of the 21st century.  Also artists should be working out ways to deliver much greater value to their dedicated fans than just a plastic disc which they often don’t even see much income from.  But challenges aside, there is a rich seam of value for music product strategy to tap and to test.

It is important to consider that my Twitter followers skew towards tech-savvy music aficionados so this is more of an insight into the minds of digital music fans who also still value CDs rather than the Digital Refusniks.  Nonetheless there are some key learnings here which translate across both groups and which, if nothing else, provide some solid foundations for exploring just what the industry should be asking about to truly understand the diverse priorities of CD buyers.

Without fixing the CD problem revenues will decline in the long run

Finally, the revenue case for a physical-to-digital transition product strategy is simple: unless it happens music revenues will decline.  Figure three shows a scenario forecast for global music sales that assumes that things stay the same as they are now i.e. that digital growth remains around the 7 to 8 percent mark and that CD revenue decline slows, as sales consolidate around the hardcore of Digital Refusniks and Charitable Collectors.  In this scenario we will most likely see some modest growth by 2012 and 2013 but after that the market will enter steady decline despite continued digital growth.  The reason for this is twofold:

  • Digital needs a new generation of music formats to drive stronger growth (see my D.I.S.C. post for more on this)
  • CD revenues will start to decline at a steady CAGR of 5% or so due to natural wastage among the remaining CD buyers due to all the various reasons highlighted above

The CD remains one of the music industry’s most valuable assets, second only to those consumers who are still its loyal buyers.  Now those consumers need a new generation of music products that meet their needs in a way that downloads and streams clearly do not.