Digital Transformation in the Music and Event Industry
Marlon Klann
Co-Founder @ Tshakka / Student & 2023 Scholarship recipient of Unknown University
The Symphony of Change
The digital transformation has significantly impacted the music and event industries, reshaping how content is created, distributed, and consumed. This market analysis explores the growth potential of the digital music and event market, shifting consumer behavior towards live events, and the emergence of innovative digital live concert concepts. By understanding these trends, entrepreneurs can identify opportunities to develop solutions that cater to the evolving needs of this dynamic sector.
Digital Music Market Growth
The digital music market is experiencing a boom, driven by the increasing popularity of streaming services. In Germany, for instance, revenue is currently experiencing double-digit growth year to year. Digital formats reached nearly 80% in the first half of 2021 (Drücke & Schlinger, 2021). Streaming platforms are not only gaining traction in Germany but across the D-A-CH region (Germany, Austria, and Switzerland). This trend is evident in Austria, where the music market has grown for five consecutive years, with digital and physical music sales reaching €190.4 million in 2021 (IFPI Austria, 2022). As reported by the Federal Association of the Music Industry (BVMI) on March 3, 2022, in Berlin, sales of recorded music and streaming revenues totaled 1.96 billion euros (Drücke & Schlinger, 2022). The current increase in sales is based on ongoing successes in streaming. The digital music market is as potent as ever. While in 2004, 99 percent of revenues came from the sale of physical records, today it is the digital product sales that could take over this market share (Weissenberger,
2022). The shift is clear: consumers are increasingly opting for subscription models and the convenience of digital music services like Spotify and Apple Music have witnessed exponential growth (Brandt, 2021).
Evolving Consumer Behavior in Live Events
The COVID-19 pandemic significantly impacted live events, forcing the industry to adapt. Consumers, wary of large gatherings, turned to digital alternatives. This period witnessed a surge in the consumption of live-streamed concerts and festivals. Studies by the University of Hamburg (Clement & Kandziora, 2021) indicate a growing acceptance of digital concerts, suggesting a potential long-term shift in consumer behavior. In total, music fans in Austria spent 190.4 million euros on digital and physical music and concert formats in 2021 – an increase of 11% compared to 2020.
Thus, the Austrian music market has grown for the fifth consecutive year (Austrian Music Market, 2021)
Furthermore, research suggests a change in consumer willingness to pay for digital content. While the traditional live event experience remains irreplaceable for many, some consumers are willing to pay for the convenience and safety offered by virtual concerts (Wingen, 2019). This trend presents opportunities for platforms that can deliver high-quality, interactive live-streamed experiences.
In summary, the current figures underscore the potential of the music industry on the one hand. On the other hand, they also highlight the importance of developments in the digital market and the fragility of an entire sector in the entertainment industry: "The half-year figures once again demonstrate the industry's innovative strength and the strategic foresight of our members, who continuously expand the digital value creation possibilities as partners of artists," says Florian Drücke (Chairman of the Federal Association of the Music Industry, BVMI). "Especially the dramatic effects of the Corona pandemic on the entire live sector highlight the importance of the digital business to many, but also show how deeply certain sub-sectors of the music industry are currently affected by the pandemic."
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Rise of Digital Live Concert Concepts
The demand for digital live experiences has spurred the emergence of innovative concert concepts. Virtual concerts and festivals, pioneered by artists like Duran Duran (BBC News, 2006), have become increasingly sophisticated. Platforms like Wacken World Wide, which hosted the most-viewed live stream across genres in 2020 (Krovatin, 2020), demonstrate the potential of this format.
These digital concerts often integrate e-commerce features, allowing viewers to purchase merchandise or virtual goods directly within the platform (Basbas, 2021). This not only enhances the consumer experience but also creates new revenue streams for artists and event organizers.
BTS sets a new Guinness World Record with a live stream: BTS is a K-Pop band from Seoul, South Korea. They broke the record for the highest paid viewership at a streaming concert three times in a row between 2020 and 2021. At their last online concert "Muster Sowoozoo" in 2021, they had over 1.33 million viewers and generated over 71 million US dollars in ticket sales and merch. Tickets were sold in all 195 countries of the world, setting another record. The tickets were sold for between 21 and 28 euros (Basbas, 2021)( IQ Magazine, 2022).
However, some argue that streaming concerts cannot fully replicate the in-person experience (Schwarz, 2022). The emotional connection and energy of a live performance remain unmatched. Nevertheless, digital concerts offer a valuable alternative, reaching a wider audience and providing a safe and convenient option for those unable to attend physical events.
The Crescendo of Digital Transformation
The digital transformation has revolutionized the music and event industries, presenting both challenges and opportunities. The growth of the digital music market, coupled with evolving consumer behavior towards live events, has paved the way for innovative digital concert concepts. To forecast the market potential of the music and events industry's, the development, potential, and payment willingness were studied. The analysis focused on digital live concerts, assessing their strengths and weaknesses. The music market in the D-A-CH region is growing for the first time in nearly two decades, with the German music industry's revenue increasing by 32% from €1.478 billion in 2018 to €1.960 billion in 2021, driven by digital format sales (Schwarz, 2022). Despite the COVID-19 pandemic, demand and willingness to pay for concerts rose by 9% and 21%, respectively, with online and streaming concepts showing resilience in revenue (Wingen, 2019). Proof of concept is demonstrated by scalable, sustainable, and profitable models like Wacken World Wide and BTS. By understanding these trends, entrepreneurs can develop solutions that cater to the needs of this evolving entertainment landscape. The future holds promise for a hybrid model where physical and digital experiences coexist, enriching the global cultural fabric.
Written by Marlon Klann
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Let's embrace the opportunities that digital transformation brings! 🙌