Streaming: Just a Phase, or Music Industry Savior?

After a long and sharp decline in revenues over the 2000’s, the music industry has finally begun to rebound thanks to the introduction of streaming. Led by paid subscription music services such as Spotify and Apple Music, the music industry has seen an 11.4% growth to $7.7 billion dollars over the past year. Streaming revenue has grown from capturing only 9% of music revenue in 2011, to over 50% of revenue in 2016.

Screen shot 2017-04-12 at 8.33.08 PM

Within the larger category of streaming services, paid subscription programs have grown 114% over the last year, and now account for ⅓ of music market revenue. Other digital music platforms such as radio streaming services (e.g Sirius XM) and on-demand streaming services (e.g Youtube), while overshadowed by the growth of subscription services, have still exhibited growth. Still, because of the popularity of Spotify, online radio services such as Pandora have scrambled to introduce their own subscription services as to attract demand.

Screen shot 2017-04-12 at 8.35.03 PM

What does the growth of streaming mean for other music platforms? Digital download revenue from sites such as the iTunes have dropped by 22% this year. Physical CD revenue is also down 22%, but surprisingly vinyl sales are up 4% (I guess they are trendy).

Screen shot 2017-04-12 at 8.36.17 PM

There are reasons, however, to be wary of the growth of streaming. Streaming is a very low cost model of music production, and because of the larger profit margins within the industry, artists have felt entitled to larger royalties. While some major music labels have increased their royalty payments to artists, artists still only see 19% of label revenue. This poor ratio may jeopardize artist-producer relations and deter artists from giving subscription services access to their music in the future. In addition, Spotify has begun to show signs of ditching their “freemium” model. Many of Spotify’s original 50 million paid subscribers began listening to Spotify for free (“ad-supported”). Recently Spotify has restricted the release of new albums to paid subscribers. It is yet to be known if this shift from freemium may deter future subscribers.

It is also important to remember that music revenue is still half of what it was in the late 1990’s. The development of streaming has improved music industry revenue by large amounts; will streaming be able to return the music industry back to its old strength, or is it just a phase? Will there be future technological improvements that continue to attract consumers and increase demand for music?

https://www.riaa.com/wp-content/uploads/2017/03/RIAA-2016-Year-End-News-Notes.pdf

https://www.fool.com/investing/2017/04/12/why-meetme-inc-stock-jumped-219-in-march.aspx

http://www.digitalmusicnews.com/2017/04/11/bmg-music-streaming-royalties/

Music Industry’s Success in Streaming Hampers Download Income

http://www.npr.org/sections/therecord/2017/04/05/522762634/are-we-witnessing-the-beginning-of-the-end-for-free-music-streaming

Advertisements

4 thoughts on “Streaming: Just a Phase, or Music Industry Savior?

  1. ersull18

    I’ve definitely noticed changes in my consumption of music due to the introduction of streaming services, and I’ve seen similar changes in many of my peers. In the past, I had been weary of spending $15 on a CD maybe every 3 months, but now happily pay $5 a month for my Spotify subscription. Another change due to streaming services is that I am able to be introduced to a wider variety of artists, especially smaller ones, and am now much more willing to spend money on concerts or merchandise of lesser-known bands. This last phenomenon may have long-term consequences for the music industry, making it easier for smaller artists to become known since music selection is less due to which popular CDs fit on the store shelves.

    Reply
  2. megal018

    I never would have guessed music revenue has halved since the late 90s. It’s interesting to see artists like Taylor Swift pull their music from Spotify for receiving too little compensation from the service. Although, with how much money these artists are making it’s hard to have sympathy for them. More and more of their incoming is coming from sponsorships, licensing, advertisements etc.

    Reply
  3. gleahy19hc

    It is interesting to see that the internet, which caused the original downfall in the music industry due to illegal downloading, is now revitalizing the fiscal aspect of the industry.

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s