“I’ll take you places that you’ve never, never seen”
The last edition of the Superfan Formula outlined, in some detail, how the largest record companies on the planet have changed. We explained how recent senior hires have been one of the clearest indicators of the business they’re now actually in. But hey… you’re not worried, are you?
I mean, financial analysts shaping your record companies’ strategy isn’t going to affect you?
And anyway, these highly paid experts don’t make mistakes…do they?
Well, the uncomfortable truth is this: Having a talent for predicting movements in capital markets does not mean you can predict, or even understand what happens in creative industries. Especially one like music, with human emotion at its very core.
Still sceptical? Well, let’s look at some real-world, hard financial proof from our beloved industry’s very recent past..
Dropping The Ball… Big Time
For over a decade, the world’s leading financial institutions, including Goldman Sachs, Citigroup and Barclays, built their view of the music industry around the consistent assumption: physical music was in irreversible decline.
Take this extract from Citigroup’s 2018 Putting the Band Back Together report:
“The transition to streaming has resulted in a significant decline in physical and download revenues.”
Clear. Confident. Logical. And, er…wrong.
But what about Goldman Sachs? Well early editions of Music In The Air followed the same logic. They modelled ownership formats - physical and downloads - to decline year-on-year, with streaming replacing them as the dominant economic driver.
Again, neat, coherent…and yet completely misreading what was actually happening.
Their assumptions were explicit:
continued erosion of physical formats
around 20% annual decline in ownership revenues
vinyl positioned as a marginal “collector niche”
Again, neat, coherent…and yet completely misreading what was actually happening.
HOW DID GOLDMAN SACHS, CITIGROUP, BARCLAYS MISS A BILLION DOLLAR OPPORTUNITY?
Because while those prediction models were being built…vinyl didn’t decline. It exploded!
From roughly $90m in US revenue in 2010 to over $1.2bn by 2022
In the UK from around £16m to nearly £200m over the same period
A 10 - 15x expansion
Oh, so not a niche then?
AND YET…THESE HUGELY QUALIFIED FINANCIAL ANALYSTS DIDN’T SEE IT. WHY?
And critically, this wasn’t driven by a single audience. Even data from organisations like our very own BPI (British Phonographic Industry) showed vinyl buyers spanned a vast spread of ages from 15 to 60+. And interestingly, as we’d understood from our own work at Sound Effects, the motivations behind those purchases were wide-ranging:
identity
aesthetics
ritual
nostalgia
connection
So…again, not quite a “collector niche”?
No, far from it, this was a multi-generational behavioural shift. And yet…these hugely qualified financial analysts didn’t see it. Why?
Shhh!!! We missed a billion-dollar opportunity. Don’t tell anyone
Why They Got It Wrong
Well, because they’re not built to see it. The financial models used by Goldman, Citi, Barclays and others assume behaviour is:
rational
utility-driven
based on substitution
In simple terms: streaming replaces physical.
But they didn't understand this: vinyl doesn’t compete with streaming. It actually complements it. In many cases, working in perfect symbiosis, but you’ll only see that if you observe and understand fans. If you explore emotion. If you analyse motivation.
THE HUGE IRONY? THE PEOPLE WHO MISSED THIS BILLION-DOLLAR OPPORTUNITY ARE FINANCIAL ANALYSTS WHO ARE SUPPOSED TO BE FOCUSED ON THE MONEY!?
Streaming delivers access. Vinyl delivers meaning. And because that meaning wasn’t understood:
pressing plants weren’t scaled
manufacturing and management experience was lost
supply chains weren’t rebuilt
lead times stretched to 6, 9, even 12 months
Demand didn’t just grow, it outstripped supply…for years. Which in turn leads to a very uncomfortable conclusion - significant revenue was left on the table because demand wasn’t seen early enough to meet it.
In truth, I’ve often mused that we probably never actually knew how big that demand was. Because we never got close to meeting it.
All that cash…missed.
The Real Problem
This isn’t a small oversight. It’s a structural failure to understand a category where:
emotion drives behaviour
and behaviour drives revenue
And that should genuinely concern you, because these same frameworks, the same assumptions, the same logic, are now increasingly shaping how music companies are run. But remember, that billion-dollar blind spot, didn’t just sit in a report somewhere, it impacted:
how artists were developed
how products were created
how fans were engaged
Of course, the huge irony here is that the people who missed this billion-dollar opportunity are financial analysts, focused on one thing. Money. Yet by failing to understand the human emotional component at the core of our industry, they missed…the moneythey missed…the money.
Yet, this was predictable, if you understood attitudes.
What They Couldn’t See…Was Already There
The most important point in all of this? It wasn’t invisible. The signals were there:
fans re-engaging with physical music
younger audiences buying vinyl for identity, not utility
multi-generational demand building simultaneously
behaviour shifting long before revenue followed
But you don’t see those signals in spreadsheets.
You see them when you understand, motivation, identity and emotional connection. In other words, attitudinal insight.
So Yes, You Should Be Worried
If you want to understand where revenue is going…you don’t start with market data. You start with people. Because fans move first. Revenue follows and the data catches up last.
And here’s the part that should matter most to you. That ability to see what’s coming next, is no longer locked inside major labels or financial institutions. It’s available. It’s accessible. And it’s increasingly the difference between reacting to the market or shaping it.
At Sound Effects, that’s always been the focus. Understanding not just what fans do, but why they do it. Because if you can see that clearly…you don’t miss the next billion-dollar opportunity.
Want to build something fans want to be part of, not just pay into? That’s what we do. Let’s talk.