While riding to SXSW with Finn Riggins, I quizzed them about where the money was in the music business nowadays, since album sales are dwindling. My theory was T-shirts were the new albums. But they told me it now comes from a plurality of sources.
And they weren't kidding. In addition to selling CDs, T-shirts, vinyl and downloads on the road, the band was contacted by a sports equipment company that wanted to license their song "Benchwarmers" for a compilation.
During a panel at SXSW on what is and what is not working right now in the music business, it was made pretty clear where the bulk of the money is and will likely remain: radio.
According to Jim Cady, the panel leader and the founder of Slacker Radio, the U.S. music market is a $27 billion industry, $21 billion of which is in radio. And though it's a fast-growing industry, Internet radio only accounts for a small portion of that business.
Cady said that for the 93 percent of Americans who report listening to music, 80 percent of their listening is done via radio. Before starting Slacker Radio, Cady created the Rio, the precursor to the iPod. He said passive listening dominates the market because it takes a lot of time and effort to create playlists. He shared data from a survey he did of iPod owners, who said that the majority of them spent the first 90 days ripping CDs and transferring them to their device before deciding it was too much work. That's why Cady said Internet radio is projected to grow at 125 percent a year for the next five years.
And while Pandora-style algorithms can learn quite a bit about your musical tastes, Cady said they do so slowly and often inaccurately because people's musical preferences are wrapped into emotional experiences tied to life experiences.
For those looking to make money in the industry, Cady offered these major market factors to consider:
-Connectivity is constantly improving and the ubiquity of smartphone technology is birthing a wide variety of Internet-connected devices. The most important of them is the automobile because 78 percent of all listening is done in the car.
-Revenue will now come from a blend of sources, such as subscriptions, advertising and physical sales.
-And finally, the increase in consumer choice that the Internet has brought has also brought an increase in demand. More music is being heard by more people now than ever before.
Now it is just up to you to figure out an innovative way to make money off it.