technology

More Consumers Streaming Music (And Paying For It)

After years of disappointment, things are looking up for the music industry, at least in terms of streaming music services. 

According to new research from Parks Associates, the number of users of major music streaming services (such as Pandora or Spotify) has increased by more than 200% since 2011. What’s more, the growth in users willing to pay for those services has increased more than 80%. 

“One of the things we’ve noticed is these [streaming companies’] business models have changed, and as they’ve moved to a ‘freemium’-type model, adoption has gone up,” Brett Sappington, director of research at Parks Associates, tells Marketing Daily. “As the penetration of mobile devices has increased, consumers have used their smartphones and tablets to access those services, which has also spread awareness.”

advertisement

advertisement

According to Parks, worldwide unit sales of network-capable audio products has increased 170% to more than 24 million in 2012. Of those who own connected music systems, 14% have paid for music services, compared to 6% of households without connected music systems. By the year 2017, Parks predicts the number of connected audiences will double, and the number of people using the services will increase to 15 million worldwide. 

As use of music streaming services grows, it’s likely there will be more partnerships to make them available on more platforms, Sappington says. Recent partnerships have included Google’s inclusion of Pandora on its new Chromecast product and Rdio’s partnership to stream Live Nation events. 

“A device without services to work on it isn’t [very useful],” Sappington says. “These partnerships have made a lot of sense to both hardware manufacturers and the services.”

In fact, the one service that may be hurt the most by the growth in streaming is the one that revolutionized the music industry: iTunes. Because it’s so closely tied with Apple’s iOS operating system, the proliferation of devices on other platforms could cut into iTunes’ growth, Sappington says. “As [Android-based] systems increase in penetration, the use of iTunes might be less,” he says. 

2 comments about "More Consumers Streaming Music (And Paying For It)".
Check to receive email when comments are posted.
  1. Mary Beth Garber from Katz Media Group, August 1, 2013 at 9:32 a.m.

    Before you panic and go on a stock-buying binge based on this study, facts first. The people these music streaming services pay to measure their progress (Triton) show nothing like a 200% growth rate in the past 2 years. The newest YOY growth rate for music streamers is 19%. Even factoring in Spotify, which Pew figures to be 1/3 of Pandora's size, growth would not top about 25%. And 200% of very little is still very little. Based on feedback from a 1.2 million plus global panel of music lovers, EMI thinks "streaming and other new dynamics have huge potential, but it’s still very early." Edison Research (the ones that do the Presidential election exit polls for all the networks and news outlets) has been tracking online audio usage for 10 years. They say monthly use of any form of it (including AM/FM streaming) has increased by 50% since 2011. Almost all of that growth is for free usage. Between Pandora, Spotify and XM/Sirius there are maybe 35 million paying subscribers and it has taken 12 years to attract them. The past 2 years show about 40-45% growth in paid subscribers. Make no mistake, online audio usage is growing at a weed-like rate. But paid audio usage is and will always be a limited market. Ask Spotify -- which is building a sales team to put ads on their free service since the free service is now 400% bigger than the paid user base. Don't lose perspective. Or you will likely lose your shirt.

  2. Kurt Scherf from Telecorn Consulting, August 1, 2013 at 12:30 p.m.

    Since I'm the analyst who wrote the report, I thought that it would be helpful to respond to these comments.

    1. The press release should be clearer to reflect that the average growth in users experienced by services such as Rhapsody, Spotify, Deezer, TuneIn Radio, iHeart Radio, Slacker, and Pandora has averaged 200% between the time I examined the numbers in 2011 and this update in 2013. Total registered users for these services has gone from 183 million to 342 million, a growth of 87%.

    2. You're absolutely right that paying users compared to all users is an extremely small subset. For example, the forecast that Parks Associates has estimates that - among all listeners to streaming music - only 2% actually pay anything to listen to the music. There is a huge base of online music streamers, but I agree that the paying customers will be limited.

    Please feel free to respond.

    Thanks,

    Kurt

Next story loading loading..