GLOBAL MUSIC STREAMING MARKET
- Strong brand presence, attractive offerings, presence in more than 90 countries, continuous product improvisation and focus on podcasts have helped Spotify retain its No.1 spot in the market among its contemporaries. In Q3, Spotify entered Russia, which gives it an opportunity to tap more than 250 million music fans there. Also, its family plan continues to attract users.
- Spotify Technology SA beat Wall Street estimates for fourth-quarter revenue for the year 2020, as the music streaming company hit 155 million paid subscribers for its premium service. Total monthly active users rose 27% to 345 million.
- Apple Music’s free six-month subscription offering in 52 countries helped maintain its market share in 2020.
- India’s largest platform, Gaana, grew 19% Q-o-Q to reach more than 180 million monthly listeners. Alternatively, while the listening hours plunged for global platforms, they grew for regional brands due to the presence of local content.
- Alibaba Group announced that it will close down its streaming platform Xiami music on February 5, 2021.Xiami was once one of China’s most popular and taste-making music streamers, but it has fallen to the wayside since it was acquired by Alibaba in 2013. Alibaba acquired the music service to compete in China’s online music market, which is dominated by Tencent Holdings.
- Shamrock Capital, the private equity firm that has acquired the Swift master recordings from Carlyle and Braun, closed a $400 million fund in June, 2020 dedicated to acquiring film, television, music and gaming content amidst the ongoing pandemic to capitalise on the current market scenario.
- Apple One, the bundle of Apple Inc’s paid online services launched in the 4th quarter of 2020.The bundle varies by geography but generally combines Apple’s news, music, video and cloud storage offerings, putting it in fiercer competition with music rivals such as Spotify Technology SA and television content rivals Netflix Inc , Walt Disney Co and AT&T Inc’s HBO.
- Global online music streaming revenues in subsequent quarters of the pandemic declined nearly two per cent quarter-over-quarter (Q-o-Q) driven by sequential slump in both paid and ad-based revenues. In terms of monthly active users (MAUs), Tencent Music (with its subsidiaries QQ Music, Kuwo and Kugou) led the chart in Q2 with 26 per cent share, followed by Spotify and YouTube Music with 12 per cent and 10 per cent shares, respectively.
- Due to the lockdown, artists are quickly turning to online shows but the concept of online concerts are still at a nascent stage making survival difficult for many. A bunch of independent musicians livestreamed their performances on Instagram and Facebook for an online event called Kerplunk, with an appeal to the audience to donate.
- Music streaming app Gaana, the largest in terms of market share in India, is eyeing to turn operationally profitable in three years, riding on new user acquisitions. The platform, which has a 45 million strong library, now has 152 million monthly active users (MAUs).
- Kuku FM, a vernacular podcasts app, has raised $5.5 million led by Vertex Ventures, a fund owned by the Singaporean government, in an indication of increasing popularity of internet audio platforms in India. Existing investors Shunwei Capital, India Quotient and 3one4 Capital also participated in the round.
Music streaming services include platforms that allow users to listen to audio, podcasts, and watch music videos. The growing popularity of digital platforms and the increasing adoption of smart devices has contributed greatly in accelerating the growth prospects of this market with enhanced focus on the personalised streaming of an endless collection of music, curated to the user’s preference and taste.
Moreover, Music streaming platforms now offer features such as song recommendations, auto customization of the playlist, and hassle-free accessibility on apps as well as browsers, which is also expected to gain the attention of end-users and is expected to positively impact industry growth during the forecast period. An upsurge in podcast genres on these platforms is further driving the market.
The rise in the number of service providers and the wide scale penetration of smartphones across all the globe are positively impacting market growth. Furthermore, key market participants are focusing on the integration of advanced technologies, such as 5G for streaming, Augmented Reality (AR), Virtual Reality (VR), hologram, and Artificial Intelligence (AI), into their music streaming platforms to gain a competitive edge over others.
For instance, MelodyVR, a VR music platform has built a collection of live shows, recorded for streaming on VR headsets, such as Oculus Go and Samsung Gear VR, or Android and iPhone devices through its app. Likewise, Deezer, a French music streaming platform, offers a fully-immersive AR music experience to the users, leveraging a specially created Snapchat lens.
Online streaming has helped artists to increase their outreach to even the remote regions of the world, democratising the music business. Platforms like YouTube and SoundCloud allow users to freely upload their content making it extremely easy for talents to become viral. The tech giants are betting big on music streaming as part of their digital ecosystem.
COVID-19 IMPACT ON MUSIC STREAMING MARKET
The global pandemic seems to have had a catalytic impact on the market similar to other OTT services with users tuning into news and podcasts from the comfort of their home. This pandemic resulted in an increasing number of users, who are engaged in live streaming through platforms like Instagram and YouTube.
According to Tencent Music Entertainment, the revenue from online music subscriptions is increased by 70% in the first quarter of the year 2020. In addition, online music paying users have increased to 42.7 million with a year-over-year increase of over 50%. Furthermore, the increasing popularity of live streaming and the accessibility of the users to local content on such online platforms are also contributing to the growth of the market.
India’s largest platform, Gaana, grew 19% Q-o-Q to reach more than 180 million monthly listeners. Alternatively, while the listening hours plunged for global platforms, they grew for regional brands due to the presence of local content.
One of the critical areas highly impacted by the Covid outbreak in the Music and Media industry is live performances. The industry is fighting back to recover the loss and come-up with new business models. To monetize, the companies are coming up with live shows on streaming devices.
For Spotify, more time at home resulted in more people discovering streaming and turning to their platform, but it also created disruption in listening habits, consumption hours and the release of new music and podcasts. However, the trendlines are healthy and long term the shift from linear to on-demand that COVID accelerated is expected to continue and remains a massive multi-billion user opportunity.
REVENUE MODEL IN MUSIC STREAMING MARKET
While subscribers are growing at a healthy rate, keeping the revenue growth up has been a challenging feat for the companies. Users are willing to pay for ad free, intuitive experiences with original and exclusive content, a strategy adopted by Spotify through partnerships with record labels and content creators.
Streaming platforms have used advertising and referral campaigns to gain free subscribers and then offer attractive subscription plans for premium features. Apple is reluctant to join the free plan strategy, a luxury it can afford thanks to its loyal customer base and its high-end tag.
Amazon offers its music service as part of its prime subscription, and a paid unlimited version separately. Amazon is also pitching its lossless music for high quality audio content as a premium offering, competing directly with Tidal. Google intends to consolidate by shutting down their play music and integrating with YouTube Music.
The tech giants offer their streaming service across a range of their devices, integrating key features such as virtual assistants to boost user experience.
In new markets such as India, where paid subscribers are hard to come by, ads are a common feature, considered as a small price to pay for free music by the average user. They also rely on telecoms for bundling their product, an alliance to dominate the market.
Local players have attributed their success through a deep understanding of the cultural preferences and a plethora of regional content. By 2021. Music streaming app Gaana, holding the largest market share in India hopes to scale to 225 million MAUs. It is eyeing to turn operationally profitable in the next three years, riding on new user acquisitions. The platform, which has a 45 million strong library, now has 152 million monthly active users (MAUs). Paid users are still a small percentage of their total user base, but are growing rapidly.
MUSIC STREAMING MARKET SIZE & FORECAST
The global music streaming market is estimated at $XX Million in 2020, growing at –% CAGR till 2025.
MUSIC STREAMING MARKET COMPETITIVE LANDSCAPE
Spotify is the global market leader with a 23% YOY growth in revenue in 2019. Spotify commanded a 31% share of total revenue and 35% of paid subscribers in 2019, tailed by Apple music (24% Revenue, 19% Subscribers). Amazon Music grew its revenue from 10% in 2018 to 15% in 2019.
Spotify leads the paid subscription market with a share of 35% in 2020, followed by Apple Music with a share of 19%. Amazon Music takes the third spot with a market share of 15%, followed by Tencent Music, YouTube Music, and others. Some factors driving global online music streaming services include exclusive content like originals and podcasts.
The market comprises numerous global as well as regional players, making the competitive landscape fragmented. Service providers in the market follow a two-step approach to expand subscribers: first enrolling them in their freemium platform using advertising campaigns and then pitching them with attractive discounts and offers to convince them to become paying subscribers. Furthermore, market participants are also focusing on expanding their geographic footprint.
For instance, in April 2020, Apple Inc. launched its music streaming service in 52 new countries to expand Apple Music’s global presence. Spotify launched in 13 new markets across Europe in 2020, bringing the total number of markets to 92 including Albania, Belarus, Croatia, Russia, Serbia, Slovenia, and Ukraine among others who can enjoy a listening experience that includes 50 million tracks, 4 billion playlists, and localized music personalization features.
Russia in particular is one of the world’s top 20 largest streaming markets and this launch opened the door for nearly 250 million fans to start discovering new music from their countries and around the world for Spotify.
Market participants also engage in mergers and acquisitions to expand their business presence and sustain the competition. For instance, in February 2019, Sirius XM Holdings, a U.S.-based audio entertainment company, acquired Pandora Media, Inc., a U.S.-based music streaming service provider.
With this acquisition, Sirius XM Holdings increased its customer base across its audio products by bringing both Sirius XM Holdings’ subscription-based exclusive content and Pandora’s highly personalized free ad-supported service under one roof.
In August 2020, Google Play Music will cease to exist by the end of this year and merge with YouTube Music, its parent company Alphabet had announced.
However, in culturally distinctive markets, local players have outpaced their global counterparts despite their aggressive strategies.
Market Leader in-
- India – Gaana
- Russia – Yandex
- Arab Nations – Anghami
- China – Tencent
- France- Deezer
- Africa- Boomplay
Certain streaming services focus solely on niche segments within the market such as Idagio and Prime phonic that exclusively feature classical music, and SiriusXM providing satellite radio services and podcasts. In a global context this segment is merely a sliver of the pie.
THE WAY FORWARD MUSIC STREAMING MARKET
Online music streaming is a game of numbers: the one with the most subscribers gets to dictate the market and shape the industry. The next important metric is the user retention for a stable revenue stream. Contrary to popular belief, music licensing is expensive which makes profitability elusive, additionally due to expansion costs.
With increasing smartphone penetration and cloud based connected devices aided by reliable internet that is getting faster and cheaper by the day, the stage is set for the market to be dominated, outlined by the following factors for growth as a winning combination:
The market has grown beyond just recorded music to podcasts and live concerts, making it imperative to stand out through exclusive, original content.
Software interface with personalised recommendations enriches user experience making it likely for them to stay with the service, especially in non-homogenous markets.
Decisive Business Model
A committed strategy focussed on USPs with a clear well-defined vision is likely to be more successful than a cautious approach.
Following the Youth
The youth of today drive the musical trend. Open to new genres their musical taste is constantly changing. Youth being the largest user base, the streaming platforms must consistently endorse their preference to stay relevant in the market, using data for insights.
Music Streaming as a standalone product is harder to sell than a suite of software such as the Microsoft Office. This gives an edge for tech companies that do not solely focus on streaming. Thus, a partnership at the right time could prove beneficial for all the involved entities including users.
While majority of the revenue comes from the developed nation like that of USA, a dominant market, it is clear that the long-term lucrative interests lie in the emerging markets with massive young populations and increasing income at disposal.
Streaming platforms have witnessed increased social engagement, subscriptions, and artist activity through their COVID-19 innovations. But the bigger question that lies ahead is whether these platforms be able to retain and expand its subscriber base and help artists recoup some of their lost tour revenue. And can streaming platforms grow their own revenues while enabling these features for the music community.
The answers to these questions may lie in streaming platforms’ ability to innovate, continue hosting popular virtual events, increase consumer engagement and loyalty, and efficiently monetize their offerings. Streaming players have successfully done that to an extent during the current crisis. The learnings from this crisis will likely help them scale up further and play a significant role in the growth of music industry going forward.