A View into Music Windows
The music industry has been a favorite of academics and professionals predicting a foreboding era of digital disruption. Catalogs of case studies have been dedicated to the issue, describing the blindness of record label executives in the face of new digital trends.
To give record labels' some credit, an early 2000s music executive advocating to jettison their largest revenue generator probably would have been laughed out of the room. Physical music sales were by far their largest revenue driver just as they were becoming the compliment of streaming and file sharing platforms.
Yet, for all that digital disruption, labels are here to stay. Most interesting is how unlimited music access has shifted revenue drivers in the industry. While overall revenue has decreased with loss of physical album sales, live event revenues grew by 33% and artists are actually making more money than they were previously.
The reason: greater distribution and access to music drive demand for live events, artist bookings, and merchandise. Free music has ironically become the most powerful marketing tool for the music industry.
Proliferation of music streaming has also given labels new levers to pull, incorporating other entertainment models to augment their own business. Most fascinating for me is their co-opting of a movie model known as windowing.
If you are unfamiliar, windowing is a movie model dating back to times of the VHS and still prevalent today. Windowing is a staggered movie release across different platforms over a period of time, progressing down a value chain.
Put simply, a movie first goes to theaters. It remain there until box office revenue tails off. It is then released on DVD/Blue Ray to major retailers nationwide. Once retail slows, syndication on Television stations and HBO kicks in. The asset generates revenue for the studio and distribution partners at each stage.
A sample theatrical film release windowing schedule.
Much like movies, music has become an asset for digital distribution vehicles. As a result, Sony, UMG, and others have mimicked the film windowing model to benefit their bottom line.
Record Labels would first release albums to premium distribution partners, ie. Spotify Premium or Apple Music, for a designated time period. After several weeks, the album would then become available on free streaming platforms, then radio, then physical and live events.
The result is a fascinating case of a disrupted industry adopting old media models in response to digital trends. It is also a poignant example of entertainment companies using price discrimination to generate top dollar from their most fervent fans.
Time will tell if windowing is a winning strategy, but my bet is super fans will pay premium dollar to get their favorite music first. Undoubtedly, music to the record industries ears.