From Mashable: 2010 Predictions for the Music Industry

5 Predictions for the Music Industry in 2010

December 25th, 2009 | by Nick Crocker

Nick Crocker is MD of Native Digital and co-founder of We Are Hunted.

It seems as though the first era of digital music may have come to an end. Napster died, P2P lived in some black market twilight zone, streaming services on ad-supported revenue were suffocated by unsustainably high licensing fees, and subscription services sputtered along, never quite capturing the imaginations of music fans. 2009 ended in a flurry of acquisitions (LaLa, iLike), launches (Vevo) and shutdowns (iMeem), which dramatically rearranged the digital music landscape. When the dust finally settles, expect digital music to begin anew.

With that in mind, here are my five predictions for music in 2010.

1. Labels Will Get Smart

It’s been coming for more than a decade, but major labels are starting to grasp the digital opportunity. They’re licensing music on more sustainable terms, diversifying their business model, investing in new technology and, most critically, understanding more than ever what it means to be truly consumer-led.

As market leaders, major labels have the resources and the networks to profit most from the changes currently taking place. The move from physical to digital hasn’t been as fast as many people might have wished, but that’s because digital still doesn’t pay like physical does.

CDs, when they sell well, still mean big money. Digital isn’t like that. But that’s changing, and as major labels have shrunk, their capacity for change has increased. Expect 2010 to be the year that the bad press on the major labels starts becoming more favorable.

The promises of the digital age — deeper understanding of the music consumer, integrated ticketing and merchandise, direct-to-consumer sales, and fans as marketing teams — are all about to become a reality, and major labels will lead the charge.

2. Physical CD Sales Will Continue to Decline

To ensure at least one of my predictions comes true, I’m going to forecast that globally, sales of physical CDs will decline in 2010. That’s one thing you can definitely count on.

3. Release Strategies Will Evolve

The traditional model of building buzz through radio singles followed by a carefully timed album launch will still be the norm for commercial pop music. But at the edges, we’re going to start seeing a new model for releasing music that’s more attuned to the diverse community of music consumers.

The new model, pioneered by Topspin Media, will be the multi-tiered, staggered release. Artists will offer free, full streams and selected downloads early to the curious and the devoted, building their fanbase as they grow. Traditional release schedules will follow, in tandem with more innovative products, at more diverse prices, to more accurately segmented groups of fans.

Rather than just a plastic CD, we’ll start seeing multiple tiers of music product: free streams and low quality mp3s, simple digital and physical packages, enhanced audio and packaging on digital and physical releases, and then levels of premium products including vinyl, merchandise, and increased access to the artist.

We still think of music in its physical form as a CD on the shelf. Increasingly, we’re going to understand it as a suite of music products — T-Shirts, mugs, books, framed art, signed lyric sheets, USBs, and once-in-a-lifetime music experiences.

4. Music Will Live Legitimately in the Cloud

It’s been talked about for a number of years, but 2010 could be the year we start thinking of music less as a finite product and more as an infinite, on-demand reservoir to be accessed at any time for a fee.

This process will roll out in tandem with the evolution of music “products.” Even if music is universally accessible, it’s still key to people’s idenity. We still need something to put on a coffee table, something to pass to friends, something to put under the Christmas tree and something to signal to the world that “this music is part of me and I want you to know it.”

iTunes, as ever, is in the driver’s seat to make the most of this change. Its acquisition of LaLa could see them own the streaming market as it currently owns digital music.

Spotify’s buzz seems to have cooled, but it’s still the best-placed streaming service to take advantage of the cloud’s potential.

Grooveshark’s growth, if it continues, is going to make it a serious player in the streaming game.

MySpace, with iMeem and iLike in its back pocket may also consolidate its place in the land of the streaming.

And finally, Google –- who owns the bridge over the moat, digitally speaking –- could pull the rug from everyone and facilitate properly integrated music streaming into its search platform.

Whoever emerges at the front of this pack will be in new territory, providing access to the world’s music, anytime, anywhere on any device.

5. Who Knows?

There’s some as-yet untested consumer models building momentum.

Guvera is promising the world, not just to the music industry, but to advertisers as well. Whether consumers buy into its advertisement for content exchange remains to be seen.

Rdio, with serious pedigree and some big money backing it, hasn’t poked its head up completely yet, but you can be assured that whatever it offers isn’t going to be lightweight.

Lost in all the buzz is the fact that some legacy digital music companies — Last.FM, Pandora and MySpace to name a few — still have the established brands, the existing customer base, and the revenue streams that preserve their lives beyond the froth of the tech/music blogosphere.

And of course, there’s Facebook. The biggest country in the world (or soon to be), Facebook and music have always been awkward bedfellows. If Zuckerberg and Co. can figure a way to integrate music with the Facebook platform, the existing user base would guarantee a big chunk of the market overnight.

It all adds up to create a big void of uncertainty, one that will be filled in the way the web knows best — by its end-users. What those end-users decide they love will ultimately determine the winners and losers in the digital music economy. As a passionate music fan, I can’t wait for the competition to heat up. For those on the digital frontier, music really is better than it’s ever been.