Why Do Labels Target the Demographic With the Lowest Income Instead of the One With the Highest?

The recorded music industry likes us to cry that piracy via P2P has led to the decline of their business. However “wallet share”, or the proportion of disposable income devoted by people to purchasing recorded music, started declining back in 1994, well before the internet and the onslaught of file sharing. Even by 1994 this “Wallet Share” had still not recovered from the highs of the late 70s, whereupon it declined after the death of disco. And yes, competing interests of the video – and now DVD and games sectors – can be noted as serious competitive constraints, especially games in terms of the younger demographic segments.

Yet many ‘Baby Boomers’ who replaced their old vinyl LPs with CDs have now begun turning their CDs into MP3s for their iPods. But is there not something astray here? Why are these 35 – 55yr olds just replacing their old recordings? Why are they not also regularly purchasing music from new and upcoming artists? Could it be that they have been neglected in terms of their music tastes?

Even when the music industry benefited from this older demographic replacing their old formats, and even when so called “alternative” genres went mainstream and became mass market, the industry did not release artists specifically targeted to the music fan brought up in the 60s and 70s. To a demographic who was always increasing their disposable income. Why?

Well firstly it was clear by the 1990s that the younger demographic were steadily migrating away from purchasing recorded music. In 1988 most music purchased was by people younger than 25, yet 10 years later in 1998 most music purchases were by people older than 30. So why is it that the music industry still obsesses so much about young consumers who have low disposable incomes? I would state that perhaps the dominant sounds and music genres of today are poor substitutes for the interests of an ever-growing aging audience.

THE GRAYING OF THE MUSIC AUDIENCE, 1989-2000

Source: Recording Industry Association of America; SRI Consulting Business Intelligence

As the chart above demonstrates, young teenagers did not wait for the likes of Napster or Kaza to lose interest in buying recorded music. Instead the stats outline the fact that in recent years the music buying audience has consistently been in the 45+ age bracket. Looking more closely at the figures above, the median age for purchasing music was 23 years old and by 2000 this was closer to 32.

But in order for a median age to increase by 9 years over an 11year period, only one conclusion can validly be argued: that the same people who purchased the most records 10 years earlier were still buying the most ten years later. Looking at different industries, a similar trend was experienced by the newspaper industry.

I acknowledge that manufactured pop acts aimed primarily at the tweens are important for the recorded music business in building profits – so that they can invest in new talent. Yet why focus so obsessively on this demographic? And by so doing then neglect the demographic with the highest increase of purchasing power? No argument can provide a satisfactory answer. Today, as an industry, we are currently in a situation where the 40+ segment of the market actually accounts for most of the overall 30+ plus market for recorded music.

This dramatic growth in people older than 45 demonstrates that profitability will be increasingly dependent on ever older audiences during the next decade. The above chart also reinforces the fact that this trend began long before mass markets developed for MP3 players, CD drives or ISPs. On a positive note I will say it is heartening to hear of artists like Adele and Duffy doing so well in the charts if it is the older demographic who are purchasing music from their favorite supermarket chain. Does this mean that the industry is finally getting to grips and re-aligning the targeting of music to an older demographic? One would certainly hope so!

But despite these “supermarket acts”, the majority of new releases today are still aimed at the tween and the 14 – 24 year old market segments whose tastes were developed in the hip hop era. Yet more recorded music is being purchased by an older audience who clearly prefer the artists of the 60s, and 70s (The Beatles, Led Zeppelin and Elton John etc) to those of the alternative rock and hip-hop generation. “With innovations like the iPod and internet music sites, teens used to rule music sales. Now it is their parents who are keeping the music industry in business”.

The fact remains that whether it be the Rolling Stones, Led Zeppelin or the masses of back catalogue record companies own; the recorded music business is reliant on catalogue artists for profitability.

Why then is publishing so important? Going back over five years I analysed one of the major record companies’ annual reports for the previous four-year period as a global group. This had to include all areas of their business and so included music publishing. What struck me was that while publishing at this particular major label made up only 22% of the group’s global turnover, it also made up over 54% of that same company’s profit. I’m sure the situation would read similarly at other majors.

So why do I think this is a concern now? Well on a global level, the major labels have not managed to build significant artists with the longevity of many artists that evolved from the 60s and 70s. Throughout the late 80s (and carrying on through to the current day) there has been a consistent focus on high marketing-cost manufactured artists – with a limited shelf life – to generate a “quick buck” over and above artists with long shelf lives (generally referred to as catalogue artists).

So where are the catalogue artists of the future going to come from to drive company profits? If labels continuer to obsess with marketing to tweens and teens, at the expense of marketing to the demographic with the highest disposable income, will there be strong new catalogue artists in the future catering for this older age group?

Obviously the music industry does need to market and sell music to tweens and young teenagers, as they are the music consumers of the future. However, it is critical that the industry keeps releasing artists that are relevant to their target demographic as that same consumer grows older. There are only so many times you can purchase re-releases of the same recordings. The 45+ age group are currently the largest music purchasing demographic and will continue to grow. So which label will be the first to release a new artist who is over the age of 50?