Streaming Wars And The Future Of Internet Music

As the  popularity of streaming services soars, traditional TV and music consumption is declining. Here’s the skinny on the streaming wars.

A long list of streaming services are working to wean people from traditional media habits and convert them into streaming addicts. And it’s working. Major pay TV providers in the US lost hundreds of thousands of subscribers in 2015, while music streaming doubled in the same period.

Such a shift is part of a trend that has been going on for some time now. According to the figures by Nielsen Soundscan, in the first six months of 2014:

  • On-demand audio-streaming revenue was up 52%
  • 70% of music listened to was downloaded or streamed
  • Digital music track sale fell 13%
  • CD sales fell 20%

2015 saw a doubling of video streams from 2014 (164 billion) to 317 billion, while traditional digital sales (downloads to music libraries) declined about 6%.  Revenue from streaming increased to account for about about 33% of the US market.

Interestingly, vinyl sales rose about 30% in 2015, though it still represents a small slice of the overall music marketplace.

Streaming Wars Today

Streaming business models come in several varieties: on-demand streaming, exemplified by optional-subscription service Spotify, is designed to replace your music library, while Internet radio streaming services like Pandora Media aim to replace broadcast radio.

And so far, it’s working: Spotify has 10 million paid subscribers and was valued at $14 million last year, and Pandora has just about 77 million users and is one of the most downloaded free mobile apps.

One problem: they aren’t making any money. Or not much, anyway, and not yet.

Why not? Streaming service must either pay for blanket licences from the government, like Pandora and broadcast radios do, or negotiate with content owners, like Spotify does.

Pandora paid out about 50% of its revenue for rights and actually lost money, while Spotify paid 70% and has turned very little profit.

Musicians aren’t making money off of it either; their streaming royalties are miniscule, which may leave up-and-coming artists broke and unheard.

Streaming Tomorrow

All things considered, the way we stream music now may not be sustainable. As Quartz puts it, Internet industries usually become winner-takes-all markets – and in most cases it’s established tech giants that can afford establish that dominance.

Contenders include:

  • Apple, which acquired Beats by Dre and its emerging streaming and playlist curation service.
  • Google has bought music curation service Songza, and already owns the video-streaming YouTube, which is rumored to be launching an audio-based project
  • Amazon, which recently launched stream-based Amazon Prime Music
  • T-Mobile has recently partnered with Seattle-based streaming service Rhapsody UnRadio

Because content companies will likely have to pay ISPs for non-lag streaming, like Netflix does, the survival of smaller streaming services will depend greatly on if they are able to pull through and expand, or get bought out.

The takeaway

It seems likely that as streaming becomes the normal, individual players in the game will keep playing their hardest – but as with everything, winners and losers will emerge with time.

For you, that means a great possibility of being seduced by new platforms, and if free streaming fails to turn a profit, paying for services. For artists, it’s still unclear.

Regardless, music as object may be fading fast, but its new-fangled experiential replacement holds a lot of potential in its diversity, convenience, and reach, with fierce competition ensuring that only the best will cut it.


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Photo courtesy of Official Leweb Photos via Flickr.

Jennifer Markert