The music industry has been changing with near-lightning speed. Within just a few short years, we’ve been watching the format consumption shift from physical CDs to digital. Nowadays, it’s all about access – and not ownership - and the current music industry mix consists mainly of streaming and subscription services. Companies such as Spotify, Rdio, Amazon Music and Beats are the key players to capitalize on this trend, while more and more consumers are opting for on-demand audio streams instead of downloads and CDs.
This shift, which is presently highly visible in Norway, Sweden and the UK, has also reached the U.S. By the end of June 2014, there were 7.8 million paying subscribers in the United States, which led to a 13% drop in downloaded music when compared to the previous year.
Surprisingly, though, the popularity of streaming doesn’t necessarily go hand-in-hand with the spike in revenues. Spotify may have 60 million accounts, but only 1 in 4 of them is a paying subscriber. One reason for streaming subscription stagnation is the inflexible pricing models that don’t take into account users who are looking for more varied packages. The lesson to be learned from that is that one size doesn’t necessarily fit all.
Also, many streaming services aren’t offering payments in local currencies, which affects their conversions. In addition to that, free music video, especially on YouTube, continues to be one of the primary ways that people discover new music.
Youtube, Vevo and Vessel have been trying to leverage that trend by following on the heels of the Netflix video subscription model, which has more than 57 million paying customers in the U.S.(source: Statista). Nevertheless, time will tell whether their attempt will be successful, since, up until now, the competition has been stiff (even though the artists themselves don't actually earn much due to the high royalties being applied).
As the Guardian states: the streaming music services have a 50/50 chance to become either a model or a nightmare for the music industry: "Sometimes it seems as if everyone is planning a music streaming service, just like a decade ago when everyone down to HMV and Walmart was offering music downloads. Unlike downloads, musicians do not universally love streaming".
Take, for example, Taylor Swift, who removed her new album and back catalogue from Spotify, saying that:
Valuable things should be paid for and that music should not be free.
The Brit Awards live coverage, on the other hand, proves that there may be a faster way for the artists to earn incremental revenues.
Matured successes of sports PPV make music content owners and publishers aware that live performances and merchandise sales have proven to be a reliable source of revenue.
The only challenge for now has been to plug it in online with a reliable and proven monetization solution.
