The Value of a Loyal Customer in the Music Industry

            We all know that in order make a profit in your business you have to make more than what you’re using, but have you thought about how album sales affect the artist? Since the creation of music streaming platforms album sales have dropped exponentially and more listeners are investing in the platform. Streaming platform revenues are at an all-time high with 20.2 billion dollars, while physical albums have reduced to about 5 billion dollars. Now is harder for the artist to sell albums and bring in money to the record labels, but that doesn’t mean there are other ways to make money. A loyal customer is an answer to maintaining long-term artist success. We can estimate the Customer Lifetime Value (CLV) depending on how much the average fan will spend on products offered by their favorite singer multiplied by the probability of success as well as the number of periods the label believes the artist will be active and successful. For example, in a year the average listener will spend about $300 to $400 which we can multiply by an 80% probability of success and a period of 7 years success rate. The average listener would have an estimated value of $1,640 to $2,240. We can get more in-depth into the numbers and the discrepancies of the external variables, but this is just a quick run-down on how record labels determine the success of investment when signing a new artist.