ZEITGUIDE TO MUSIC STREAMING SUCCESS
Drake’s new album, or what he called a “playlist,” “More Life,” is the hottest thing streaming right now. It was played 385 million times in its debut week. That, in a nutshell, is why the record industry has changed its tune on music services like Spotify, Apple Music and Pandora.
On-demand streaming is now the largest share (38%) of audio consumption in the U.S. according to ratings company Nielsen. Paid subscriptions doubled in 2016, and streaming services generated 51.4% of U.S. music industry revenue. Even with big drops in CD and vinyl sales (down 16%) and digital downloads (22%), the music industry overall saw its biggest upward bump since 1998.
In spite of all that good news, the leading streaming businesses are still in some choppy water.
Spotify is the biggest with 50 million paid subscribers. But it has so far failed to turn a profit and may delay its public stock offering until 2018. Still, its huge subscriber base gave it leverage to negotiate lower royalty fees to labels in exchange for restricting the biggest album releases to paying subscribers for a window of time. It’s also acquired a string of startups with strong content recommendation capabilities to beef up its programming and advertising.
The other heavyweight, Apple Music, still has only 20 million paying subscribers. Its deep pockets, however, enable it to land exclusive streaming windows with artists like Grammy-winner Chance the Rapper.
Other major platforms are all struggling too. SoundCloud got a $70 million line of credit to stay afloat. Pandora is gambling on a new $10 on-demand service after a series of financial losses and layoffs. Tidal has been slammed with a slew of lawsuits from artists, users and labels and lost a reported $28 million in 2015.
No matter which services survive, the shift to streaming is already changing the music game. CD sales or song downloads are one-time purchases. Streaming rewards repeat consumption. The more a track is played, the more money it earns—leading to a renewed focus on hit singles, superstar artists and platform “playlists” that steer listeners to new songs.
As The Guardian points out, “The figures now generated by a select few artists also make Sony’s decision to poach Adele from indie label XL for a mammoth £90m … seem like savvy business sense; her hit single ‘Hello’ has been streamed 632 million times and counting.”