If you haven’t been paying attention to the music industry as of late, we are way into the era of streaming services. However, according to this Billboard article, lead music streaming service, Spotify, lost $581 million dollars in 2016. However, if you look at the recent data from Nielsen from 2016 (below), on-demand audio streaming was up by 76.4%. So, what gives?
I would argue that the reason audio streaming has struggled to turn a profit is that because so many of these streaming services (like Spotify and Pandora) offer free versions of their product, it’s very difficult to make a profit. Storing music and streaming it to millions of people requires lots of infrastructure which gets very expensive very fast. Therefore, if most music streaming users are using free versions of services instead of the paid version, it’s no surprise that these companies are struggling to turn a profit!
I was talking with a classmate in my Brand and Product Management Class today about Spotify and he informed me that, apparently, they will be partnering with video streaming service, Hulu. If you start a premium Spotify account, you will receive access to Hulu for free. This accomplishes two things. First, it gives people an incentive to get Spotify premium ($5 for students, $10 for everyone else). Second, from Hulu’s perspective, they are receiving free brand recognition (advertising) within Spotify’s user base. This helps them attract a larger audience who might otherwise go to Netflix or Amazon.
As streaming becomes an even larger part of our society, differentiation among brands will become vital and that’s what we’re seeing in both the video streaming and audio streaming space. As far as who will gain control of the music streaming market, I would argue it’s Spotify for now, but only time will tell.
Want to know more about streaming? I’ll be doing a research paper on this topic for my Marketing Research class and would love to get your thoughts on the rough draft which I’ll post in a few weeks!
Stay tuned!
dB Sound Blog 