Friday, February 22, 2008

Please don't tell me to 'do the math'

Hypebot has invited a guest blogger, Bill Houghton, to run his eyes over the likelihood of advertising supporting the music industry online.

He's not encouraging:

A quick analysis of both industries illustrates the point. Including P2P downloads, the online music industry has an estimated value of about $30 Qtraxbillion and rising. That number will only rise as in-store CD sales continue their slide. Free and subsidized distribution models also will increase the percentage of music distributed online.

Meanwhile the total revenue from Internet advertising across all markets and platforms is about $20 billion as reported by MediaPost. Experts are predicting this number is approaching a plateau for various reasons. Online media accounts for only 20% of consumers’ attention – implying that there’s a limit of 20% market share that online advertising can hope for.

That’s a clear shortfall of $10b billion and growing. Obviously the entire ad industry does not produce the revenues sufficient to subsidize the online music industry… and it likely never will.

Bill concludes than an all-advertising model is, thus, impossible.

The other possibility, which Bill doesn't entertain and won't provide any comfort to people running music operations for profit, is that the current 'market value' of music is unsustainable.