Let's continue on with this idea.

It's not about disrupting industries. It's about disrupting customer behaviour. By exploring what happened to Sony and the music industry since the dot-com crash.

We'll begin with the disruption of music. It's been a while since our last investigation but essentially the story in America over the past 13 years looks like this.

Basically consumer spending on music has collapsed

This graphic created a couple of years back by Michael DeGusta puts it into a wider historical perspective.

The point being consumer revenues have collapse before. The trigger being Audio cassettes. Consumers would record their music onto tape so they could listen to it in the car or on their Walkman.

So the "pirated" digital crunch isn't a new phenomenon. What triggered the revival was the CD. Consumers loved the new sound and the convenience so much they went out and bought their back catalogue all over again.

The question being of course, if the industry can introduce a new, improved audio format, will they do it all over again?

The answer being probably not. As with audio cassettes, MP3 digital music is of a significantly poorer quality that the incumbent being disrupted. Quality or range of product isn't the disruptor. The trigger for the Walkman revolution was mobility. This trigger was pulled again when the iPod and Nokia's Media Phones disrupted the Sony Walkman in the Mid-2000's

Consumers already had a preference for music on the run. This next generation product was smaller and held more songs. Why run around with one cassette tied to your waist when you could carry your whole music collection in your shirt pocket?

It was just a product upgrade when your Walkman ran out of legs.

But the gadget doesn't explain the disruption in full. You see this time there has also been a seismic shift in consumer behaviour.

Today consumers spend money on mobile data. Not mobile music.

Share of wallet, just has it has with Magazines and Newspapers, has shifted from Music Publishers to Telecoms.

Consumers pay a premium for network access. Nothing, or at least next to nothing, for content on the network. The reason? Consumers are in the business of paying for mobility, not content. Have been for at least 4 decades. And with the disruptor being mobility. Connecting to the network simply fuels mobility. In this context the network effect is simply the shadow being cast by that consumer behaviour.

All of which is to say the digital disruption would have happened without the internet. It's the gadget that is portable. Not the network. It was the gadget that facilitated the shift in consumer discretionary spending from Music to Telecoms. Telecoms disrupted the Music Industry simply by allowing consumers to do what they were already doing. Taking their music with them.

The device was the game changer. Not the network.

That's why the Telcos subsidised the device. the smartphone. Still do. Simply because, without it, the network is superfluous.

All of which is to say this is what Rupert Murdoch got wrong when he said "Content was the emperor of all things electronic". Truth is mobility is the emperor of all things content. Because, if you can't access it on the move, on demand, in real time. It is superfluous to the mobile experience.

The key being of course consumers believe network access and content to be one and the same thing. The network is the channel. And this is what old media, be it print, music, radio or TV appear to have misunderstood in their attempts to establish new business models on the network.

The network isn't free. In historical terms it's actually very expensive. it's just that the revenues are now flowing into the coffers of the Telcos and not traditional media.

Free and the disruptive network is just the cover story. The PR mythology behind the real disruption in consumer behaviour.

For old media to reinstate itself as the media monopoly it simply need to wrestle back ownership of the next generation of mobility. Control the access points and ultimately the network. Because only the gatekeeper of the network makes the digital dollars. Everybody else scrapes around for pennies.

But I think we have been here before... many times. So I wont bore you with the details.

The challenge is for old media is to disrupt telecoms. Or more accurately the consumers of telecommunications. Anything else is simply missing the point. The wood for the trees.

So have a think about that... at least until next time.

Postscript Spring 2020

The fate of the music insdustry was a constant theme of the old excapite blog. Each year we would update the trendline

It's now 2020... what's changed? If anything?

Below is a 40 year, inflation adjusted, trendline of music sales.

Today, as predicted, streaming is the dominant distribution channel... and yes, music consumers continue to pay digital pennies and telcos, the network owners, continue to harvest the digital dollars

For the record advertising revenue from streaming services accounts for $2.85 Billion (see Rolling Stone) i.e. about 30% of streaming revenues

Meanwhile YouTube continues to dominate the sector with music video clip advertising

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