Welcome to digital music in 2015, when the number of consumers who download songs soon will surpass the number of consumers who stream songs. In May 2015, Warner Music Group (WMG), which is the world’s third-largest recording company, announced that it earned more money from digital streaming than from digital downloads in the first quarter of 2015. That’s the first time that a large music label achieved that distinction, and it won’t be the last.
“The rate of growth has made it abundantly clear that, in years to come, streaming will be the way that most people enjoy music,” said WMG CEO Stephen Cooper in a statement in May 2015.
Recording Industry Association of America (RIAA) says that from 2013 to 2014, the total revenue from streaming-music services in the United States increased 29 percent to $1.87 billion, which represented 27 percent of the total revenue that was generated by the music industry. The same RIAA study found that digital-music downloads remained the largest source of music-industry revenue ($2.58 billion) in 2014. However, a recent Juniper Research report projects that streaming-music revenue will pass downloaded-music revenue in 2018.
On-demand streaming, which is accomplished through ad-supported free services and subscription-based paid services, allows consumers to listen to any album or song that a streaming service has in its library. You find a song, click it, and it plays. This differs from passive-streaming services, which operate like a radio station and create play-lists for you based on what it knows about your preferences.
We found roughly 40 streaming-music services that are available in the United States, and most are on-demand services. The number of streaming-music services is shifting constantly. Five years ago, fewer than 10 on-demand services existed. In the past year, four streaming services launched, and nine shut down.
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Almost all streaming services can be used on home computers, notebook computers, smartphones and tablet computers as well as some smart TVs. For a monthly subscription fee, the services provide features beyond basic streaming: the capability for songs to be played without advertisements; curated playlists from guest DJs; the capability to listen to music without being connected to the Internet; the capability for music to be downloaded to listen to later; and higher quality audio. (A few services now even stream high-resolution audio, although, as we reported previously, most listeners can’t distinguish between high-resolution and standard-resolution audio.) The price of streaming subscriptions came down considerably to an average of $10 per month now from an average of $15 per month in 2010.
Despite more streaming-music services than ever before, not many differentiating features can be found among the services. However, we found that figuring out which service is right for you isn’t easy. (For a breakdown of the prices and pros and cons of the top eight streaming-music services, see, “Listen Now.”)
AT WHAT PRICE? What does the future hold for streaming-music services? Half of the 12 experts whom we interviewed believe that the market has room for more streaming providers. However, the other half believes that consolidation is likely in the next 3 years. All of our experts believe that the services that will survive will be run by large technology companies (think: Apple) that have other revenue sources to support their music endeavors. Stand-alone streaming-music services that depend solely on music and advertising for revenue will have a tough road to survival.
In terms of price, the current $9.99 monthly price for subscription services is as low as major record labels will allow major streaming-music services to charge at the moment. Major labels control the price of streaming services, and labels believe that $9.99 is the highest monthly price that they can charge without driving away customers.
Still, Casey Rae, who is the CEO of Future of Music Coalition, which advocates for musicians’ rights, says prices might drop industry-wide if services can’t successfully sign up enough subscribers in the next year at the current $9.99 rate. Six experts whom we interviewed say $9.99 per month is too high for average consumers, who are faced with multiple entertainment-focused subscriptions (e.g., streaming-video service, cable TV, cellphone). Music-industry analyst Mark Mulligan of MIDiA Research says streaming-music packages should cost between $3 and $5. A handful of passive-streaming services and niche on-demand services already charge as little as $3.99 per month.