Music subscriber market shares 2022

MIDiA has just released its annual ‘Music subscriber market shares’ report and dataset, with data for 23 DSPs across 33 different markets (clients can access it here). Here are some of the key global trends:

Music subscriptions may be recession-resilient, as China leads the way

As the world edges towards a recession, the music streaming market continues to stand strong. Despite indications of slowdown in some markets, the global music subscriber market remains buoyant. Growth, though, is uneven, with a number of leading streaming services outpacing the rest, especially the Chinese ones, which are now setting the global pace. 

Home entertainment tends to perform well during recessions, not least because people are inclined to cut down on leisure spend (eating out, bars, clubs, etc.), and thus spend more time at home. In previous recessions, lipstick sales boomed, reflecting their role as an affordable luxury that consumers turn to when they can no longer afford the more expensive luxuries. Music subscriptions have a good chance of playing a similar role in the coming recession.

The early signs are positive (subscriber growth was stronger in the full year of 2021 than 2020), and though the first half (H1) of 2022 growth was down from H1 2021, this reflects the mature state of the streaming market in many markets, as much as it does global economic headwinds.

The evolution of the global music subscriber market is beginning to fork between the leading Western digital service providers (DSPs) and those in Asia – China especially so. Nearly all the leading DSPs continue to experience strong subscriber growth, but none more so than Chinese DSPs Tencent Music Entertainment (TME) and NetEase Cloud Music. 

These were the key trends in 2021 and the first half of 2022:

  • Subscribers: There were 616.2 million subscribers by the mid-point of 2022, up by 7.1% from the end of 2021. Total net subscriber additions for the first six months of 2022 (42.1 million) were down on the 53.8 million that were added one year earlier, hinting at the slowing global economy. However, more subscribers were added in 2021 than 2020
  • Revenue: The $12.9 billion of subscription label trade revenue generated in 2021 was up by 23.1% on 2020, and it was the first year since 2017 that revenue growth exceeded subscriber growth, resulting in a 1.0% increase in global annual ARPU, reaching $22.42
  • Spotify: With 187.8 million subscribers in Q2 2022, Spotify remained by far the largest DSP. However, its market share has steadily eroded since Q4 2020, and its Q2 2022 share of 30.5% was down from a high of 33.2% in Q2 2018
  • Tencent Music Entertainment and NetEase Cloud Music: Spotify’s declining market share has much to do with the growth of the Chinese market (where Spotify does not operate). In Q4 2021, TME overtook Amazon Music to become the third largest DSP globally, and in Q2 2022 it had 82.7 million subscribers (13.4% market share). China has long been the world’s second largest subscriber market and is on track to soon surpass the US as the world’s largest
  • Apple, Amazon, and YouTube: Amazon Music was the fourth largest DSP, with 82.2 million subscribers, and YouTube Music was fifth, with 55.1 million. Both gained share between Q2 2021 and Q2 2022, growing faster than the total market. While YouTube and Amazon both gained share in 2022, albeit it at a declining rate, second-placed Apple Music continued its long-term trend of underperforming the market, with its 84.7 million subscribers recording a 13.8% market share, down 1.2% from Q2 2021. 

The global music subscriber market is approaching a pivot point, with the slowdown in mature, Western markets contrasting with more dynamic growth in other regions. It is realistic to assume that the global recession and the organic maturation of the global subscriber market will result in some slowdown of growth in 2023, even if the sector remains otherwise resilient.

The slowing growth should be the catalyst for what needs to come next, especially in developed markets: unlocking growth pockets through differentiation. Western DSPs have managed to grow with largely undifferentiated product propositions. Music rightsholders should explore creative ways in which they can empower their DSP partners with differentiated content assets, enabling them to super-serve specific consumer segments and thus unlock extra growth within them.

If you are not yet a MIDiA client and would like to find out how to get access to this report and data then email stephen@midiaresearch.com

Will the recession change Big Tech’s view on entertainment?

Music start up Utopia just announced a round of layoffs, fitting into a much bigger dynamic that may reshape the entertainment landscape. There are many reasons why the coming global recession will be unique, but the one that is most relevant to the digital entertainment sector is that it is going to be the first one since modern consumer tech has been truly mainstream. This matters, not just because of the unchartered territory this reflects, but also because tech companies (even the biggest) operate differently than traditional companies, placing much bigger bets on future growth. A strategy that works well in times of plenty, but that is undergoing rapid re-evaluation in the face of an onrushing recession. Big tech firms are reducing headcount, especially in the bets that plan to make profit in the future, but not yet. Most forms of digital entertainment fall in this bracket. Streaming music and video have long been loss leaders for the tech majors, but can that continue in a recession? 

2007 was the year the last recession started and the consumer tech world looked very, very different to today. The first iPhone was not sold until June 2007; Facebook started the year with 14 million users; Netflix launched its streaming service; but Spotify was still a year away from launch; Instagram would not be launched for another three years; and Snapchat for another five. So, when the next recession most likely hits in 2023, it will be the first one in which consumer tech has been mainstream.

All of those companies, and most of the rest that drove the consumer tech revolution, grew fast because they aggressively invested in future potential, rather than wait to fund it organically. It is a mindset that has its origins in the VC world view of: build product and customer base first, worry about profit later. Without that approach, it is probable that the consumer tech sector would not be anywhere near as big and developed as it is now. But the strategy requires the basic premise of next year bringing more growth, otherwise the model falls down. Which is why we are now seeing retractions across big tech. Meta laid off 11,000 employees, many from its VR Labs division; Stripe cut 1,000 jobs because it overexpanded during its lockdown-boom; Apple froze hiring outside of R+D; and 10,00 layoffs look on the cards for Amazon

Out of all this redundancy mayhem, one particularly interesting figure emerged: Amazon is on track to lose $10 billion a year from its ‘Worldwide Digital’ team, which includes Alexa, Echo, and its streaming businesses. Amazon makes its money from Cloud services and commerce, devices and content are growth categories that it is investing in, both for future growth and because they help its core business. Very similar arguments can be made for Apple’s streaming businesses (video and music) and, at the very least, for YouTube Music and YouTube Premium.

Which raises the question, if the tech majors start reigning in their non-core expenditure, where does this leave streaming? Practically speaking, it is highly unlikely that the tech majors are going to face such difficulties that they will have to think about shuttering their streaming services, but they may well have to trim spending. And if that happens, it is video that is far more exposed than music, because streaming video requires large investments in original content, whereas music rights costs are fixed. All that said, any music rights deals that are up for negotiation with tech majors from this point on will almost certainly see the licensees pushing for reductions anywhere they can find them.

Why Amazon Music is primed for success

Amazon Music today announced that it was extending the number of songs available on its Prime Music tier from two million to one hundred million. It is kind of a big deal, but not that big a deal when you consider the actual value of these additional 98 million tracks. With around 2.5 million new songs being uploaded to streaming services every single month, the simple truth is that most people will not listen to most of the catalogue. Prime Music already had a good chunk of the most valuable tracks, now it has all of them, alongside tens of millions of streaming detritus. And yet, the catalogue increase is actually really important, but because of what it represents rather than what it actually is.

A dark horse no longer

Back in the mid-2010s, MIDiA first identified Amazon as being the dark horse of streaming music, but these days there is no doubting Amazon Music’s thoroughbred pedigree. It has the third-largest subscriber count of any Western streaming service and will likely pass Apple Music in second place sometime within the next twelve months, quite possibly sooner. But what makes Amazon Music so important to the music industry is not just its size but its audience segmentation. Which is a good part of the reason it just unlocked those extra 98 million tracks for Prime Music users.

Prime Music has come a long way

When Amazon launched Prime Music, it was not exactly with exuberant support from music rightsholders. So much so that Universal Music did not license it until 15 months later (making Amazon the only global scale streaming service that was able to successfully launch without all three majors on board). At the time, Prime Music looked risky to rightsholders: just as subscriptions were beginning to get traction, along comes a service that gives consumers a music subscription experience, free at point of access. So, rightsholders insisted on a limited catalogue size to ensure that it did not risk cannibalising potential 9.99 subscriptions. Over the years, rightsholders unlocked extra slices of catalogue, but today’s announcement is the genuine step change. 

A segment-based approach

So what changed? The market did. Now, as subscriptions reach maturing in most of the world’s bigger music markets, rightsholders are shifting focus from full frontal growth to a more segmented approach that can unlock growth pockets in otherwise mature markets. This is no easy task when they provide broadly similar licenses and the same catalogue to all streaming partners. But Amazon has managed to make a silk purse out of sow’s ear, launching a stack of different streaming products and deploying them strategically across different markets. If you need convincing, take a look at its product availability list. While most streaming services have built their audiences around mobile-centric millennials, Amazon has managed to build an audience that looks very different. 34% Prime Music users listen to music on a smart speaker compared to 14% overall consumers, while 22% are aged 55+ compared to 9% Spotify users. 

Competing around everyone else

Rather than just competing with the other streaming services, Amazon Music has competed around them. In doing so, it has expanded the addressable market for streaming, helping mature markets still grow strongly (while YouTube Music has been having a similar effect at the opposite end of the age spectrum, converting younger subscribers at scale). It is in this later stage of streaming growth that the more segmented partners, like Amazon and YouTube, become so important to music rightsholders. Unlocking 98 million more tracks, reflects both this elevated importance and an understanding among rightsholders that enhancing Prime Music will grow the market around Spotify and co., not at the expense of them. 

Another super power

On top of all this, Amazon Music has another super power at its disposal: emerging markets. These regions have long been identified as the driver of future growth, but they have also struggled to deliver in many cases. Markets like India and China number their free streaming users in the hundreds of millions, but paid users in the tens of millions (in China’s case) and single millions in India. Ad-supported revenue massively lags subscription revenue, even in Western markets, but in lower per capita GDP markets, ad spend is even smaller. Prime Music is proving to be a happy middle ground in markets like Brazil and India, striking the balance between scale and ARPU. With premium subscriptions needing time to find their audiences, Amazon looks set to become an ever more important partner in some of the key emerging and mid-tier markets.

When Amazon first launched Prime Music, the value proposition: pay for free shipping and get a music service for ‘free’, or as Amazon puts it, as a perk of membership. Now though, Prime is becoming much more than just free shipping, it is an ever-expanding household subscription in which entertainment now plays a central role (the recently announced Amazon Music Live / Thursday Night Football line-up is a case in point). As we enter a global recession, where consumers will likely cut back on buying things, a free shipping subscription could look like an unaffordable luxury. But a music and video service that has the benefit of free shipping suddenly looks like a value-for-money proposition. Prime may not be recession proof, but music and video certainly reduce its exposure to risk. The value equation in Prime Music is beginning to shift, as is Amazon’s role in the global music business. From dark horse to top-tier player in half a decade is no mean feat. 

Music subscriber market shares Q2 2021

MIDiA’s annual music subscriber market shares report is now available here (see below for more details of the report). Here are some of the key findings.

The global base of music subscribers continues to grow strongly with 523.9 million music subscribers at the end of Q2 2021, which was up by 109.5 million (26.4%) from one year earlier. Crucially, this was faster growth than the prior year. There is a difference between revenue and subscribers – with ARPU deflators, such as the rise of multi-user plans and the growth of lower-spending emerging markets – but growth in monetised users represents the foundation stone of the digital service provider (DSP) streaming market. So, accelerating growth at this relatively late stage of the streaming market’s evolution is clearly positive.

Spotify remains the DSP with the highest market share (31%), but this was down from 33% in Q2 2020 and 34% in Q2 2019. With Apple Music being a distant second with 15% market share, and Spotify adding more subscribers in the 12 months leading up to Q2 2021 than any other single DSP, there is no risk of Spotify losing its leading position anytime soon – but the erosion of its share is steady and persistent. Amazon Music once again out-performed Spotify in terms of growth (25% compared to 20%), but the standout success story among Western DSPs was YouTube Music, for the second successive year. Google was once the laggard of the space, but the launch of YouTube Music has transformed its fortunes, growing by more than 50% in the 12 months leading up to Q2 2021. YouTube Music was the only Western DSP to increase global market share during this the period. YouTube Music particularly resonates among Gen Z and younger Millennials, which should have alarm bells ringing for Spotify, as their core base of Millennial subscribers from the 2010s in the West are now beginning to age.

But the biggest subscriber growth came from emerging markets. Between them, Tencent Music Entertainment (TME) and NetEase Cloud Music added 35.7 million subscribers in the 12 months leading up to Q2 2021. Together, they accounted for 18% of global market shares, despite being available only in China. Yandex, in Russia, was the other big gainer, doubling its subscriber base to reach 2% of global market share.

Combined, Yandex, TME and NetEase account for 20% of subscriber market share, but they drive 37% of all subscriber growth in the 12 months leading up to Q2 2021.

The strong growth in subscribers holds an extra meaning going into 2022. The surge in non-DSP streaming in 2021 means that the streaming market is no longer dependent on the revenue contribution of maturing Western subscriber markets (nor indeed ARPU-diluting emerging markets). With non-DSP streaming revenue looking set to have contributed between a quarter and a third of streaming revenue increase in 2021, streaming revenues look set for strong growth, even if subscriber growth lessens. That is what you call a diversified market.

A little more detail on the subscriber market shares report:

The report has 23 pages and 13 figures featuring country level subscriber numbers, revenues and demographics by DSP. The accompanying data set has quarterly subscriber numbers and annual revenue figures from Q4 2015 to Q2 2016 by DSP by country, with 33 markets and 27 DSPs. The report and dataset is available to MIDiA subscribers hereand also available for individual purchase via the same link.

Email stephen@midiaresearch.com for more details.

Can Spotify break out of its lane?

After years of relative stability, music consumption is shifting, with the DSP streaming model beginning to lose some ground as illustrated by the major labels growing streaming revenue by 33% in Q2 2021 while Spotify was up by just 23%. It is never wise to read long-term market trends into one quarter’s worth of results, but there was already enough preceding evidence to suggest we are entering a genuine market shift. The question is whether Spotify and the other Western DSPs are going to find themselves left behind by a fast-changing market, or can they innovate to keep up the pace?

Social music is streaming’s new growth driver, generating around $1.5 billion in 2020 and growing fast in 2021. It represents a natural evolution of social media rather than an evolution of streaming. Audio is just another tool for social expression, along with video, pictures and words. MIDiA has long argued that Western streaming focuses too heavily on monetizing consumption, at the expense of fandom. While social video does not fix the fandom problem, it does cater to some of the key elements of fandom: self-expression, identity and community. Which means that, in some respects, Spotify and the other DSPs only have themselves to blame for having kept fandom out of their propositions. In doing so, they created a vacuum that TikTok and Instagram eagerly filled.

The data in the above chart comes from MIDiA’s latest music consumer survey report which is available now to MIDiA clients and is also available for purchase here.

Rights holder licensing met market demand

Spotify and the other DSPs are the dominant, core component of recorded music and they will remain so for the foreseeable future. But whereas a couple of years ago it looked like they might be the entire story, now music consumption is moving beyond, well, consumption. Finally, we are seeing music becoming an enabler of other experiences. Historically this was restricted to non-scalable, ad hoc sync deals. Now rights holders have established licensing frameworks that are flexible, dynamic and scalable enough to enable a whole new generation of experiences with music either in a central or supporting role.

DSPs occupy one of streaming’s lanes

The implication of this is that Spotify and the other DSPs now risk looking like they are stuck in just one lane of the streaming market. What looked like a highway is now just a single lane – and Spotify, Apple and Amazon do not have the assets to build propositions that can get them out of it. Being part of this social music revolution requires both massively social communities and video. They could all build that, of course, but with little guarantee of success. YouTube is a different case, having launched Shorts in a belated bid to ward off TikTok’s audience theft – but at least it is now running that race, and Alphabet reported 15 billion daily global views for Q2.

An increasingly segmented market

Spotify and other DSPs now find themselves not being part of streaming’s new growth story and, YouTube excepted, with no clear path to becoming part of it. To be clear, Spotify will continue to be the world’s largest subscription revenue generator and the DSP subscription model will continue to be the biggest source of revenue, at least for the foreseeable future. But revenue growth will increasingly come from elsewhere. In many respects this simply reflects the maturation of the music streaming market. Consider video streaming. Netflix added just 1.5 million subscribers in Q2 2021 while YouTube grew by 84% and TikTok went from strength to strength. Netflix occupies just one lane in a multifaceted streaming market. The same is now becoming true of the DSPs.

Time to do a Facebook?

So, what can Spotify and the other DSPs do about it? If Spotify really wants to ‘own’ audio, then it will have to do what Facebook did to ‘own’ social: create a portfolio of standalone sister apps. Facebook would have become the Yahoo of social media if it hadn’t bought / launched Instagram, WhatsApp and Messenger. The signs are already there for Spotify. Even ignoring the slowdown in monthly active user (MAU) growth in Q2 2021, podcast users stopped meaningfully growing as a share of overall MAUs in Q4 2020. It turns out that trying to compete with yourself in your own app is hard to do. The time may have come for a standalone podcast / audiobook app (by the way, I’m just taking it as read that Spotify is going to take audiobooks a whole lot more seriously). If Spotify does launch a podcast app, then the case suddenly becomes a lot clearer for other audio-related apps, all of which could include subscription tiers, such as social short video, karaoke, and artist channels.

The more probable outlook however is for specialisation, with segments going deep and vertical rather than wide and horizontal. While Spotify, and other DSPs, might have success in one or more side bets, it will be the specialists who lead in streaming’s other lanes. Whatever the final market mix looks like as a result of this change, the streaming market is going to be more diverse and innovative for it.

The COVID Bounce: How COVID-19 is Reshaping Entertainment Demand

The economic disruption and social dislocation caused by the COVID-19 pandemic is not evenly distributed. Some business face catastrophe, while others thrive. Across the entertainment industries the same is true, ranging from a temporary collapse of the live business through to a surge in gaming activity. As we explain in our free-to-download COVID-19 Impact report, the extra time people have as a result of self-isolation has boosted some forms of entertainment more than others – with games, video and news the biggest winners so far.

midia research - the covid bounceTo further illustrate these trends, MIDiA compiled selected Google search term data across the main entertainment categories. The chart below maps the change in popularity of these search terms between the start of January 2020 up to March 27th. Google Trends data does not show the absolute number of searches but instead an index of popularity. These are the key findings:

  • Video streaming: All leading video subscription services saw a strong COVID-19-driven spike, especially Disney+ which managed to coincide its UK launch with the first day of national home schooling.
  • Music streaming: Little more than a modest uptick for the leading music services, following a long steady fall – reflecting a mature market sector unlike video, which has been catalysed by major new service launches.
  • Video demand: With the mid- to long-term prospect of a lot more time on their hands, consumers have been strongly increasing searches for TV shows, movies and games to watch and play. The fact that ‘shows for kids to watch’ is following a later but steeper curve reflects the growing realisation by locked-down families that they have to stop the kids going stir crazy while they try to work from home.
  • Music demand: Demand for music has been much more mixed, including a pronounced downturn in streams in Italy. Part of the reason is that music is something people can already do at any time in any place. So, the initial instinct of consumers was to fill their newfound time with entertainment they couldn’t otherwise do at work/school. As the abnormal normalises music streaming will pick up, as the recent increase in searches for music and playlist terms suggests. Podcasts, however, look like they will take longer to get a COVID bounce.
  • Games: Games activity and revenues have already benefited strongly from the new behaviour patterns, as illustrated by the fast and strong increase in search terms. However, the recent slowdown in search growth suggests that the increase in gaming demand may slow.
  • News: The increased searches correlate strongly with the growth of the pandemic, but the clear dip at the end provides the first evidence of crisis-fatigue.
  • Sports: The closure of all major sports leagues and events has left a gaping hole in TV schedules and the lives of sports fans. The sudden drop in search terms shows that sports fans have quickly filled their lives with other entertainment and have little interest in keeping up with news of sports closures.
  • Leaders: Finally, Boris Johnson has seen his search popularity grow steadily with the pandemic, while Donald Trump’s has dipped.

Amazon Music: From Dark Horse to Thoroughbred

Neatly ahead of Spotify’s Q4 earnings, Amazon has taken the rare step of announcing subscriber metrics for Amazon Music (inclusive of Prime Music and Music Unlimited). Amazon Music closed 2019 with 55 million ‘customers’ across free and paid. Based on our Q2 2019 numbers for Amazon and the fact that Amazon’s free tier was only rolled out in late 2019 across a few markets, MIDiA estimates Amazon Music’s actual subscriber number to be 50 million. This implies a subscriber growth of 16 million on 2018. Make no mistake, this is a really strong performance. From a bit-part player in 2015 and 2016, Amazon Music is now firmly established in streaming’s leading pack and looks set to overtake Apple Music in 2020. What’s more, unlike Apple and Spotify, Amazon’s wider business is not a top-tier player in dozens of countries, so Amazon Music’s geographic footprint is uneven – making its global figure even more impressive. Indeed, underneath this headline figure Amazon is the number two player in some of the world’s biggest music markets. Amazon is now in the big league.

amazon music 55 million users 50 millionn subscribers midia research

Since Q4 2016, Spotify has averaged 34.8% global music subscriber market share, meaning that despite fierce competition it has managed to stay ahead of the pack, actually increasing share slightly from 34.2% to 35.3%. Amazon’s success is in some respects even more impressive. In Q4 2015 Amazon Music’s subscriber base was just 18% of Spotify’s. By Q4 2019 (assuming Spotify hit the 124 million that MIDiA predicted for Q4 2019) Amazon’s 55 million subscribers represented 40% of Spotify’s – more than doubling its relative scale.

However, the DSP that should be paying most attention is Apple Music. Over the same period Amazon Music went from 49% of Apple’s subscriber base to 82%. At this rate Amazon could trump Apple for second place in 2020. It has already done so in a number of major music markets, including Germany, the UK and Japan – three of the world’s top four recorded music markets.

Extending the market

Amazon is often competing around, rather than with, Spotify and Apple. The combination of Prime Music and Echo / Alexa means that Amazon is extending the addressable market for streaming by unlocking older, higher-income households that do not fit the young, mobile-first demographic mold that the streaming market generally trades upon. Ellie Goulding’s Amazon exclusive ‘River’ claiming the UK Christmas number one spot illustrates that this under-served segment is far from a niche. Of course, Amazon is now also competing for the younger, mobile-centric consumer – Music Unlimited grew by more than 50% in 2019 – but, along with its new ad-supported and HD tiers, Amazon is pursuing a segmented strategy that is pushing beyond its older Prime Music beachhead.

Amazon Music’s success trades heavily on Amazon’s overall brand reach and existing customer relationships, so its global brand reach will always be less evenly distributed than Apple and Spotify’s. However, throughout 2018 and 2019 Amazon has been assertively building its reach in non-core markets through music and video. Traditionally Amazon has been a retailer first and a content brand second. Now, in newer markets across the globe, Amazon is building a reputation as a digital content provider first and retailer second. Though Amazon is clearly going to remain a retailer first globally, streaming is proving to be a powerful tool for establishing the company in markets that would have previously taken years and hundreds of millions of dollars to set up as fully functioning e-commerce markets.

While rightsholders will have well-grounded concerns about Amazon’s corporate objectives of using content to help sell consumer products, what is now undeniable is that Amazon Music and Video are both top-tier content services. Back in 2017 we suggested that the dark horse of Amazon was emerging from the shadows; now it is clear to see it is a thoroughbred in its own right.

Ellie Goulding and Billie Eilish Are Streaming’s New Normal

Less than a week into the new decade and we already have the first indications that the streaming rulebook continues to be rewritten faster than the ink can dry on its last entry. Three separate articles, on the surface unrelated, when stitched together create the outline of a new streaming narrative that while firmly rooted in recent developments represents an entirely new chapter for the music industry:

  1. Ellie Goulding’s ‘River’ was the UK Christmas number one despite being an Amazon exclusive
  2. Jimmy Iovine claims Drake and Billie Eilish each have more streams than the entirety of the 1980s
  3. UK streaming revenue growth slowed, adding £191 million in 2019 compared to £210 million in 2019

Fusing consumption and retail

Streaming’s impact is both commercial and cultural, in large part because it fuses what used to be retail and radio. Like some kind of musical nuclear fusion, it smashes discovery and consumption together to create a chain reaction with explosive implications. In the old world, repeated radio spins drove awareness and then sales. In streaming environments, lean-back streams are simultaneously radio-like listens and sales. The distinction does not matter for streaming services – they are focused on user acquisition, engagement and retention, but for labels it challenges the very premise of what marketing campaigns are meant to achieve. It is in this environment that today’s streaming stars are made.

‘More of more’

With streaming services lacking any meaningful way to differentiate, they are forced to compete on who can deliver their users’ the most new music to drive the most listening. This strategic imperative of ‘more of more’ is at direct odds with the objective of any label campaign, which is inherently about ‘more of less’, i.e. listen to this song more instead of more songs. The net result is vast amounts of streams spread widely, but also an environment in which hits become megahits. The songs that get traction experience a domino effect of successive algorithmic decisions, rapidly pushing songs with buzz to a progressively wider number of playlists and users. In the old world this would have been radio airplay success; now it is just volume of streams.

Catalogue Darwinism

Because of the focus on new, streaming-era artists end up with far bigger streaming volumes than older artists that were ‘bigger’ in their respective eras, but an afterthought in the streaming era. Hence, Drake and Billie Eilish being bigger than the entirety of the 1980s. Back in mid-2018 MIDiA published a report predicting that music catalogue was going to decline. We faced a lot of opposition then but now we are beginning to see that catalogue is indeed undergoing a fundamental change. For deep, legacy catalogue, streaming dynamics are stripping out the long tail and boiling down entire decades to a handful of tracks. Think of it this way: if 10% of the artists released in the 1980s were ‘successful’ at the time, and 10% of those were successful enough for their music to still be listened to now, and that the songs that are still listened to are 10% of these artists’ entire 1980s output, then you end up with 0.1% of the music from the 1980s being streamed at any meaningful scale now. Added to that, new music gets pushed to more lean-back playlists so is listened to more times. The multiplier effect for new music acts as a divider for older music. As an illustration, 40 music videos on YouTube have more than one billion views but in October 2019 Guns ‘n Roses ‘Sweet Child o’ Mine’ was the only one from the 1980s that had a billion views.

If you own the rights to those catalogue gems then the value of that asset is arguably higher now than ever before, because it has won the Darwinian game of catalogue evolution. But the rest fall by the wayside.

Ellie Goulding: niche mainstream

So, the current dynamics of streaming programming favour new versus old. It may not always be so, but this is where we are right now. These same dynamics can then be used to create hits – demand creation, if you like. This is where Ellie Goulding comes in. Goulding’s Joni Mitchell cover ‘River’ was an Amazon exclusive yet became the overall UK number one in large part because Amazon ensured it was on just about every holiday-themed playlist. Every time someone asked Alexa to play Christmas music, ‘River’ soon found its way there. Because Echo listening skews so heavily lean-back, ‘River’ simply became part of the sonic festive wallpaper, much in the same way ‘All I Want for Christmas’ did on radio. Just like with radio, lean-back listeners are unlikely to stop whatever else they are doing in order to change the track. Because streaming economics do not differentiate with lean-back and lean-forward listening, passive listening is just as valuable as active listening. Radio has become as valuable as retail but is much easier to manipulate.

The other crucial aspect of this is that Amazon has shown that you only need to find and activate a small slice of the mainstream to have a mainstream hit. As MIDiA first said last year, niche is the new mainstream.

At the start of this post I stated that streaming’s effects are both cultural and commercial. The commercial backdrop to all of these consumption and programming shifts is that the rate of revenue growth is beginning to slow (not just in percentage terms – that is a natural effect of markets getting bigger) but also in absolute terms. Early last year we predicted that streaming growth would start to slow towards the end of 2019 in developed markets and the ERA figures for the UK are the first evidence of this shift. Globally, growth will be sustained by emerging and mid-tier markets, but in markets like the UK and US, growth is peaking. The significance is that the conflation of radio and retail does not matter so much when everything is growing. When growth slows, however, quirks of the market can become business challenges. The ROI of throwing money at campaigns to cut through the audio clutter becomes problematic when the promise of the pie getting ever bigger begins to wane.

All of these things are of course simply part of a maturing and changing market. Nevertheless, the marketing strategies currently employed have been developed in an environment of growth abundance. The challenge for streaming’s next chapter is finding the new rules that are more ROI focused but can still play to streaming’s consumption strengths. Delineating different rates for lean-forward and lean-back streams feels like a logical place to start, but more evolution will need to follow – each iteration of which will trigger its own waves of unintended consequences. Exciting times.

Music Subscriber Market Shares H1 2019

Music Subscriber Market Shares 2019 MIDiA Research

The global streaming market continues to grow at pace. At the end of June 2019 there were 304.9 million music subscribers globally. That was up 34 million on the end of 2018, while the June 2018 to June 2019 growth was 69 million – exactly the same rate of additions as one year earlier.

Spotify remained the clear market leader with 108 million subscribers, giving it a global market share of 35.6%, EXACTLY the same share it had at the end of 2018 AND at the end of 2017. In what is becoming an increasingly competitive market, Spotify has continued to grow at the same rate as the overall market.

Meanwhile both Apple and Amazon have grown market share, though Apple is showing signs of slowing. At the end of 2017 Amazon (across all of its subscription tiers) had 11.4% global market share, pushing that up to 12.6% by end June 2019 with 38.3 million subscribers. Apple went from 17.3% to 18% over the same period – hitting 54.7 million subscribers, but while Amazon added share every quarter, Apple peaked at 18.2% in Q1 2019 before dropping slightly back to 18% in Q2 2019. Though at the same time, Apple increased market share in its priority market – the US, going from 31% in Q4 2018 to 31.7% in Q2 2019 with 28.9 million subscribers.

Google has been another big gainer, particularly in recent quarters following the launch of YouTube Music, going from just 3% in Q4 2017 to 5.3% in Q2 2019. Google had a well-earned reputation for being an under-performer in the music subscriptions market, a company that did not appear to actually want to succeed. Now, however, Google appears to be far more committed to subscriptions, pushing both YouTube Premium and YouTube Music hard, with a total of 16.9 music subscriptions in Q2 2019, compared to just 5.9 million at the end of 2017.

With the big four all gaining market share, the simple arithmetic is that smaller players have lost it. The share accounted for by all other services fell from 32.8% end-2017 to 28.4% mid-2019. This of course does not mean that all of these services lost subscribers; indeed, most grew, just not by as much as the bigger players. Of the other services, most are large single-market players such as Tencent (31 million – China), Pandora (7.1 million – US) MelOn (5.3 million – South Korea) with Deezer now the only other global player of scale (8.5 million).

In summary, 2019 was a year of growth and consolidation, with the global picture dominated by the big four players and Spotify retaining market share despite all three of its main competitors making up ground. 2020 is likely to be a similar year, though with a few key differences:

  • Key western markets like the US and UK will likely slow from Q4 2019 through to 2020. Meanwhile, emerging markets will pick up pace
  • This could shift market share to some regional players. For example, in Q3 Tencent’s subscriber growth accelerated at an unprecedented rate to hit 35.4 million subscribers. Tencent could be entering the hockey stick growth phase, and at just 2.6% paid penetration there is a LOT of potential growth ahead of it
  • Bytedance could create a new emerging market dynamic with its forthcoming streaming service. Currently constrained to India and Indonesia, Western rights holders may remain cautious about licensing it into Western markets. The unintended consequence is that the staid western streaming market could by end 2020 be looking enviously upon a more diverse and innovative Asian streaming market

These figures and findings are taken from MIDiA’s forthcoming Music Subscriber Market Shares, which includes quarterly data from Q4 2015 to Q2 2019 for 23 streaming services across 30 different markets. The data will be available on MIDiA’s Fuse platform later this week and the report will follow shortly thereafter.

If you are not yet a MIDiA client and would like to know how to get access to this report and dataset, email stephen@midiaresearch.com

Why Music Streaming Could Really Do with a Disney+

The music and video streaming markets have long been best understood by their differences rather than similarities, but the flurry of video subscription announcements in recent months have upped the ante even further. New services from the likes of Disney, Warner Bros, Apple and AMC Cinemas point to an explosion in consumer choice. These are bold moves considering how mature the video subscription business is, as well as Netflix’s leadership role in the space. Nevertheless, Netflix is going to have to seriously up its game to avoid being squeezed. The contrast with the music streaming market is depressingly stark.

Diverging paths

The diverging paths of the music and video subscription markets tell us much about the impact of rights fragmentation on innovation. In music, three major rights holder groups control the majority of rights and thus can control the rate at which innovation happens. As a consequence, we have a streaming market in which each leading service has the same catalogue, the same pricing and the same device support. If this was the automotive market, it would be equivalent of saying everyone has to buy a Lexus, but you get to choose the colour paint. Compare this to video, where global rights are fragmented across dozens of networks. This means that TV rights holders have not been able to dictate (i.e. slow) the rate of innovation, resulting in dozens of different niche services, a plethora of price points and an unprecedented apogee in TV content.

Now, Apple and major rights holders Disney and Warner Bros have deemed the streaming video market to be ready for prime time and are diving in with their own big streaming plays. Video audiences are going to have a volume of high budget, exclusive content delivered at a scale and trajectory not seen before. There has never been a better time to be a TV fan nor indeed a TV show maker.

The music streaming market could really do with a similar rocket up its proverbial behind right now. The ‘innovation’ that is taking place is narrow in scope and limited in ambition. Adding podcast content to playlists, integrating with smart speakers and introducing HD audio all are important – but they are tweaking the model, not reimagining it. Streaming music needs an external change agent to shake it from its lethargy.

Do first, ask forgiveness later

The nearest we have to that change agent right now is TikTok. TikTok has achieved what it has by not playing by the rules. It has followed that long-standing tech company approach of doing first and asking forgiveness later. Sure, it is now locked in some difficult conversations with rightsholders – but it is negotiating from a position of strength, with many millions of active users. TikTok brought a set of features to market that rightsholders simply would not have licensed in the same way if it had gone the traditional route of bringing a business plan, pleading for some rights, signing away minimum guarantees (MGs) and then taking the neutered proposition to market.

I recall advising a music messaging app client who was just getting going to do the right thing. I hooked him up with some of the best music lawyers, made connections at labels, and basically helped him play by the rules. Two years later he still hadn’t managed to get a deal in place with any rightsholders – though he had racked up serious legal fees in the process. Meanwhile, Flipagram had pushed on ahead without licensing deals, secured millions of users and tens of millions of dollars of investment and only then started negotiating deals – and the labels welcomed it with open arms. To this day, this is my single biggest professional regret: advising this person who was betting his life savings to play by the rules. He lost. The ‘cheats’ won.

We need insurgents with disruptive innovation

The moral of this story is that in the consumer music services space, innovation happens best and fastest when rights holders do not dictate terms. This is not necessarily a criticism. Rights holders need to protect their assets and their commercial value in the marketplace. They inherently skew towards sustaining innovations, i.e. incremental changes that sustain existing products. New tech companies looking to build market share, however, favour disruptive innovations that create new markets. Asking an incumbent to aggressively back disruptive innovation is a bit like asking someone to set fire to their own house. But most often it is the disruptive change that really drives markets forward.

Streaming subscription growth will slow before too long, and as a channel for building artist-fan relationships they are pretty much a dead end. There is no Plan B. Back in 1999 there was only one format; it was growing well, but there was no successor. Looks a lot like now.