NPD Group SVP/Industry Analysis Russ Crupnick sees the music industry headed towards another cliff -- and thinks streaming audio and capturing the favor of the 100 million "casual music fans" may be the keys to averting it. Crupnick presented recent research findings at RAIN Summit West last month in Las Vegas.
"We desperately need streaming radio to succeed," Crupnick told attendees. "We need to get the lawyers, guns, and money out of the way, and start having a better understanding of how to get consumers on to the next model."
Back in the '90s, 90% of adult Americans regularly bought CDs. NPD research shows it's now 35%, and that's not being replaced by paid downloads. Just about 23% of people have purchased a music download in the last year, which means 3 of 4 haven't! And, as much as CD purchasing has dwindled, it's still more prevalent than downloading! And the amount of time people spend listening to these legacy formats (CDs, MP3 files, and even radio a bit) is down too.
Here's the bright spot: online radio usage is up 6% among young people (see the chart) -- and up 23% among baby boomers -- in the past year. Online radio is even the "way number-one" reason people are quitting P2P downloading: "It's just so much easier to use a streaming service," Crupnick paraphrased.
And, Crupnick adds, "these are really valuable customers" to the music industry. While the average American spends $24 on music in a year, Pandora listeners spend $40, and Spotify users $52. Streaming audio listeners also strongly out-index average Americans buying concert tickets.
But the real opportunity for streaming radio to succeed, and the music industry to avoid another cliff, Crupnick argues, is not going after the "core" music fans (the 30% of the population that accounts for 80% of the money spent on music). Radio and streaming services are already "serving them really well." The opportunity lies with attracting the other 70% of people -- the "casual" music fan.
Consider: Nearly all "core" music fans listen to AM/FM, and 77% listen to non-subscription online radio, according to NPD figures. And while a good majority of casual fans also listen to music on AM/FM (74%), just 25% listen to free online radio. That's the 100 million people market opportunity. That's the potential audience gain for Internet radio, if it can reach beyond the hard core music fans and get to everyone else who listens to AM/FM.
And to do that, Crupnick advises, it's necessary to understand the mentality of that casual listener. He stresses that the research shows these people aren't at all focused on those things broadcasters and webcasters obssess over. NPD found, as he put it, "98% of people don't know what 'an Rdio' or MOG is!" Most casual listeners don't really have any interest at all in mobile apps (though he suggested an Apple streaming radio entrance might change the game).
The lack of interest in mobile apps notwithstanding, Crupnick says "this battle is going to be won in the car," as that's where the vast majority of casual music fans' listening takes place.
And casual listeners aren't interested in subscribing for music either. "We've gotta figure out a way to help these services thrive outside of subscription," he concluded. "We can work together, labels, artists, services, to grow the pie."
RAIN Summit West was April 7 in Las Vegas. You can listen to audio from Crupnick's presentation, and all the RAIN Summit West content, on our website. Look for the SoundCloud links in the right-hand margin of kurthanson.com.
Our next event is RAIN Summit Europe, May 23 at the Hotel Bloom in Brussels. Limited space is still available. Information and registration links are available on the RAIN Summit Europe website here.