How varied are our music tastes?
A model for how consumers derive utility from music
Everyone has that friend. The one who is always on top of the newest tunes. Who garners satisfaction from discovering a song before anyone else. Who spends hours combing through playlists and blogs to find the perfect song for the moment.
If you asked that friend, he or she would definitely say their music interests are unique. That friend prides him or herself on being unique.
But looking at music consumption on the whole, are people’s preferences truly unique? Or are most people content with listening to the Top 40 hits?
The music industry is grappling to understand this question. With more music being created than ever before and distribution equally available to everyone, one would expect the playing field to be even for new artists. Usage of terrestrial radio, however, remains high and top artists like Adele, Taylor Swift, and Kanye overwhelmingly dominate the market.
How can consumer preferences help to explain this phenomenon? My hypothesis is that there are two primary dimensions of utility that people derive from listening to music — utility derived from a shared experience and utility derived from an individual experience. The tradeoff between these two types of utilities yields three kinds of preferences:
1. Universal preferences >>> mass market
This type of person likes to experience music as a universal good. Satisfaction stems from sharing in an experience with as many others as possible. Thus, these people gravitate towards the most popular hits, whether it be Today’s Top 40 or the 80s Top Hits. People with universal preferences derive more utility out of having a shared experience than from finding a song that more closely aligns with their personal tastes.
Supporting evidence: Next Big Sound reports that the “Mega” artists, which accounts for 0.2% of all artists, drives almost 50% of all music video traffic watched on YouTube and Vevo.
2. Community preferences >>> niche market
People in this category appreciate the shared experience aspect of music, but also demonstrate more narrow preferences for a particular type or types of music. They likely align themselves to multiple mini-communities, whether that community be centered on a sub-genre or around a tastemaker or celebrity. They are willing to put in some effort to curate their music libraries, because they derive some utility from matching music to their unique, individual preferences.
Supporting evidence: Pandora’s new Browse feature, intends to highlight genre-based, mood-based, or other curated stations personalized to the tastes of the listener. Even though listeners can create ANY station they want based on a specific song or artist, listeners still express a desire to opt in to broader stations based on broader themes rather than unique preferences.
3. Unique preferences >>> personalized market
People in this category are primarily focused on the individual satisfaction they receive from listening to or engaging with music. Their maximum utility is reached by finding a song that perfectly matches their own individual tastes and the unique context of the moment. These people also enjoy experiencing music as a community, but derive less value from that part of their music experience.
Supporting evidence: Following Spotify’s acquisition of Echonest, the development of the Discovery Weekly playlist, which has streamed 1.7 billion songs since its inception in June, is targeted at meeting the needs of this category of music listeners. As the product owner of this playlist explains, technology is enabling Spotify to “ensure that if you’re the smallest, strangest musician in the world, doing something that only 20 people in the world will dig, we can now find those 20 people and connect the dots.”
All three of these types of preferences co-exist in the market. The challenge is identifying which type of preference drives the majority of consumer behavior. Entire businesses, such as Pandora and Spotify, have been built on the premise that many people exhibiting universal preferences tendencies actually have community or unique preferences. The hunch is that these people have previously been unable to easily find and access music that is more closely aligned to their preferences, and.
Some aspects of these digital music businesses, however, cater to those in the mass market. Beats One, Spotify’s Top Charts, and Pandora’s Today’s Hits stations are a few examples.
As competition continues to heat up in the music industry, businesses will need to identify what proportion of their user base falls into each of these preference categories, as underlying consumer preferences will drive both the evolution of the product as well as each company’s monetization strategy and potential.
Libby Koerbel loves to analyze ambiguous questions, listen to live music, and meet new people. She is an expert strategist with experience at the Boston Consulting Group, Pandora, Universal Music Group, Muzooka, and Pritzker Group Venture Capital. She is currently a MBA student at the Kellogg School of Management.
