Streaming: The Key to the Music Industry’s Survival

beggers December 12, 2017 0
Streaming: The Key to the Music Industry’s Survival

The digital age has been both boon and bane to the music industry. While piracy and peer-to-peer file-sharing sent the income of music companies into a downward spiral, the Internet has also provided a much more level playing ground for all kinds of artists.

But there is one aspect of the digital revolution that has proven to be the saving grace of this once-ailing sector: music streaming. Where before, services like Pandora, Spotify, and Tidal were mere postscripts in a musician’s marketing strategy, today the world’s biggest artists are releasing new singles and albums in these streaming platforms first.

How Streaming Changed the Game

Convenience is the primary advantage of music streaming that made it so popular with music lovers. Fans who wanted to listen to different artists suddenly didn’t have to pay for individual albums that can cost an average of $13 per CD or $10 per complete download. All they needed was to download a mobile app (for FREE) or visit a website to access a vast library of songs from all over the world, which they can curate to their heart’s content. One also doesn’t have to worry about running out of storage with streaming services, since these apps individually take less than 60MB of space in mobile devices, , unless of course, the customer decides to download the songs for offline playability.

Many music artists and industry experts used to say that free streaming will spell the death of the industry. However, as the digitization of music quickly became the norm and streaming apps continued to gain popularity, record labels and musicians themselves learned to adapt to the new ways of consumption and are now the ones who are actually driving the growth in this sector.

Today, there are more than 112 million paying subscribers to services like Apple Music and Spotify, two of the biggest names in the music industry that use the subscription and recurring billing model. These services themselves have 27 million and 60 million paying subscribers in 2017, respectively. Streaming is now also being hailed as the savior of the industry. As whole, according to the International Federation of the Phonographic Industry, streaming revenues now account for 59% of the total $7.8 dollars in digital revenues by the music industry. This translates to around $4.6 billion dollars in streaming revenue.

Why Customers Pay to Stream Music

Most music streaming services usually have two operating models: an ad-supported scheme and a subscription-based one. The primary differences between free and paid subscriptions in music streaming platforms are offline streaming options and, of course, an ad-free experience. However, these two rather basic incentives are much more appealing than you might think. Indeed, paid subscriptions has seen the fastest growth in music streaming services, with reported revenues of up to $1.7 billion in the first six months of 2016. Compare this to the $273 million generated from ad-supported options in the same period, and you’ll see just how much people love listening to their favorite tracks without interruption.

Another factor that may have influenced the rise in paid streaming subscriptions is the concept of FOMO or fear of missing out. Spotify, for example, provides the same library of over 40 million songs to both its free and premium account holders; however, if a new release is coming up, those using the free platform may have to wait for up to two weeks to be able to listen to the latest content.

What Artists Stand to Gain from Streaming

Contrary to the popular belief that artists don’t get anything from music streaming services, these companies actually pay the creators for the right to stream their content. In fact, licensing fees and royalties cost a streaming service about 70% of its total revenue—that’s more than what a typical record store pays artists and their labels.

This means that the more subscriptions that these services have, the more is also paid out to these artists. At an average of $10 a month with more than 100 million paying subscribers (more than 30 million in the U.S. alone) globally, it’s no wonder that recording artists and companies are now more welcoming of streaming services than ever before.

Music streaming has completely changed the face of the industry. Even the Recording Academy has recognized the power and influence of this technological development. Last year, it implemented amendments to its awarding and selection process that makes an exclusive music release on a streaming platform, provided that the service operates on a subscription billing model, eligible for a Grammy Award. This just means that all players—from streaming services and record labels to artists and fans— must always be ready to face the music, literally and figuratively.



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