Parallels Between the Music Industry and the Telecom Industry

Jim Machi : Industry Insight
Jim Machi

Parallels Between the Music Industry and the Telecom Industry

When I was in Singapore in April for the Telecom Asia Awards and Conference 2011, one of the most interesting talks was given by Sandy Monteiro of Universal Music.   Here is a link to an interview he did with TelecomAsia back in January which is also interesting. 

His talk was mainly about the revenue/ARPU parallels between the music industry and the telecom industry.  Revenue in the music industry has fallen from all time highs from over 10 years ago to half of that revenue today, due mainly to digitized music.
This article from 2010 explains it very well.   As we all know in the telecom industry, ARPU has also declined in this same period, due to changes from how mobile data revenue is derived compared to voice revenue (i.e. all you can eat) to more voice competition.

So what to do?  Sandy’s talk was essentially about changing your business model.  Figure out what the consumers want, and then figure out a way to deliver it.  In music and Sandy’s case, this was forging a partnership with the telecom industry to deliver acts and music to the telecom industry subscribes.  He gave a very funny, but very compelling case, regarding branding and the size of logos in artist ads.  In the end, business, not ego, should rule.  And it’s been successful for Universal Music.

I couldn’t help but think during his talk about our industry.  While ARPUs are going down, at least the overall industry revenues are going up.  But in a few years, as we see
super subscriber saturation, the industry won’t be able to simply survive off of subscriber growth.  Things are going to get very different.  Look at that chart from the 2010 article referenced above – I doubt anyone in 1999 in that industry would have thought that would happen.  But it did. 

Business models are going to have to change or else competition, once we get to super subscriber saturation, will drive revenues down.  I don’t think this is a surprise to readers of this blog, but I think they’re going to change more drastically than we think – partnerships that don’t exist today will need to be forged, and likely today’s vision of a “service provider” or “telco” will not be what they are tomorrow. 

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