Follow the Money
What do TVs and music sales have in common? They are both big businesses, and both markets are rapidly shifting the money from Old Business companies and business models to New Business companies and business models. And some major players are getting left behind.
Let’s consider TVs. Back in the day, the very best TVs sported the bold SONY logo on front. You just weren’t happening unless you had a Trinitron. I mean, seriously, a Trinitron TV was essential. On many a night: “Hey baby, want to come back to my pad?” “What kind of TV do you have?” “A sweet 27-inch Trinitron.” “Wow. You are so cool. I want to have your baby.”
Alas, the basic Trinitron patents expired in 1996 and it’s been downhill for Sony ever since. Low-cost competitors moved in, and then plasma and LCD seismically altered the landscape forever. Recently, Sony announced that it had lost money from TV manufacturing for the seventh consecutive year. The company shares its pain with Japanese rivals Panasonic and Toshiba, which have also suffered major losses. Vizio, Samsung, and to a lesser extent LG (which is still losing money on mobile phones) are taking big bites out of the market, sales are flat in developed companies, and 3D has yet to prove itself in the market.
Meanwhile, the music industry continues to morph itself into a new and unrecognizable life form. The good news is that in 2011 worldwide online music sales apparently rose about 7% to $6.3B. As expected, iTunes is a major force behind this growth.
The bad news, especially if you are still into plastic, is that CD’s numbers are tanking. It’s expected that by 2015, CD sales will fall from $15B to $10B – a mighty steep decline. In the same period, online sales will increase to $7.7B. If you do the numbers, you’ll see that the increase in online music sales will not offset the falloff in CD sales. The possible silver lining is that subscription and streaming services like Spotify, Pandora, and Last.fm might conceivably provide new revenue. By 2015, they may be worth $2.2B in income and represent almost 30% of all online buying. Maybe the needed growth will come from there.
We can draw two important conclusions from this analysis: First, a Sony TV is not the deal closer it used to be. Second, a Simon & Garfunkel record probably won’t help much either.