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.

Global music subscriber market shares Q1 2021

The music industry’s growing obsession with declining ARPU will continue to colour the outlook for the global streaming market in revenue terms, but the positive driver of this equation is the rapid growth of music subscribers. There were 100 million new music subscribers in 2020, taking the total to 467 million. (In 2019 there were just 83 million net new subscribers). A further 19.5 million new subscribers in Q1 2021 pushed the number up to 487 million. While the failure of subscription revenues to keep up with the pace resulted in ARPU falling by 9% in 2020, this lens detracts from the huge momentum in paid user adoption. Subscription revenue might not be increasing as fast as some would like, but the global music subscriber base is not just growing – it is growing faster than ever.

Spotify continues its global dominance, adding 27 million net subscribers between Q1 2020 and Q1 2021, more than any other single service. However, it lost two points of market share over the period because its percentage growth rate trailed that of its leading competitors. Google was the fastest-growing music streaming service in 2020, growing by 60%, with Tencent second on 40%. Amazon continued its steady trajectory, up 27%, while Apple grew by just 12%.

Google’s YouTube Music has been the standout story of the music subscriber market for the last couple of years, resonating both in many emerging markets and with younger audiences across the globe. The early signs are that YouTube Music is becoming to Gen Z what Spotify was to Millennials half a decade ago.

Emerging markets are now central to the music subscriber market, with Latin America, Asia Pacific and Rest of World accounting for 60% of all 2020 subscriber growth. This is of course, also a key reason why global ARPU declined. Nonetheless, a number of emerging markets services now boast large subscriber bases. Beyond Tencent’s 61 million, China’s NetEase hit 18 million subscribers in Q1 2020 and Russia’s Yandex hit 8 million. (For more on streaming in emerging markets check out MIDiA’s latest free report: Local Sounds, Global Cultures.)

MIDiA will be publishing its country-level music subscriber numbers as part of the global music forecast report and dataset which will be available to clients Monday 12th July. If you are not yet a MIDiA client and would like to know how to get access to the data, email stephen@midiaresearch.com

Hi-Res audio: It’s all about a maturing market

Apple and Amazon made a splash this week by integrating Hi-Res Dolby Atmos audio into the basic tiers of their streaming services. The timing, i.e. just after Spotify started increasing prices, is – how shall we put it, interesting. It also struck a blow against the music industry’s long-held hope that Hi-Res was going to be the key to increasing subscriber ARPU. While that might be true, for now at least, the move is an inevitable consequence of two streaming market dynamics: commodification and saturation.

Music streaming contrasts sharply with video streaming. While the video marketplace is characterised by unique catalogues, a variety of pricing and diverse value propositions (including a host of niche services) music streaming services are all at their core fundamentally the same product. When the market was in its hyper-growth phase and there were enough new users to go around, it did not matter too much that the streaming services only had branding, curation and interface to differentiate themselves from each other. Now that we are approaching a slowdown in the high-revenue developed markets, more is needed. Which is where Hi-Res comes in.

Now that streaming is, as Will Page puts it, in the ‘fracking stage’ in developed markets, success becomes defined by how well you retain subscribers rather than how well you acquire them. As all the key DSPs operate on the same basic model, they need to innovate around the core proposition in order to improve stickiness and reduce churn. Spotify started the ball rolling with its podcasts pivot, but the fact that its podcasts can be consumed by free users means it is not (yet) a tool for reducing subscriber churn.

On top of this, when podcasts are mapped with other positioning pillars, Spotify’s competitive differentiation spread is relatively narrow. Because Apple and Amazon now both have Hi-Res as standard, they not only boost audio quality but value for money (VFM) as well. Bearing in mind, both companies already scored well on VFM because they have Prime Music and Apple One in their respective armouries. 

It is Amazon, though, that looks best positioned of the four leading Western streaming services. In addition to audio quality and VFM, it is building out its podcasts play (as compared to the Wondery acquisition) and it has the potential to bundle in the world’s leading audiobook company, Audible. Given that spoken-word audio consumption grew at nearly twice the rate music did during 2020, being able to play in all lanes of audio will be crucial to competing in what will become saturated streaming markets. 

Immersive audio storytelling 

Finally, Dolby Atmos is more than simply Hi-Res audio; it is an immersive format that enables the creation of spatial audio experiences. If we are truly on the verge of a spoken-word audio revolution, then immersive audio may have a central role to play. Surround sound has been a slow burner for home video, but that may be because the video experience itself has improved so much (bigger screens, HD, more shows than ever) that the audio component has been less important (though the growing soundbar market suggests that may be beginning to change). However, in audio formats there is only the audio to do the storytelling. This could mean that tools like immersive audio become central to audio storytelling, which means, you guessed it, Amazon and Apple would then have a competitive advantage in podcasts and audiobooks that Spotify would not.

Music Subscriber Market Shares Q1 2020

WWDC would have been a perfect opportunity for Apple to announce another streaming milestone for Apple Music. It didn’t but the good news is that MIDiA already have a figure for Apple Music, as part of our latest music subscriber market shares. Whether Apple’s lack of announcement was because it didn’t have a good news story to tell or because it is waiting for a bigger number to pull out of the hat at a later date, well, we’ll have to wait and see.

Music Subscriber Market Shares 2020 MIDiA Research June 20

Overall there were 400 million music subscribers in Q1 2020, up 30% from Q1 2019, with 93 million net new subscribers added. This compares to the 77 million added one year earlier. The eagle eyed of you may be struggling to rationalise why streaming revenue growth slowed in 2019 while subscriber growth accelerated. The simple answer is ARPU. The combination of family plans, promotional trials and progressively more global growth coming from lower ARPU, emerging markets means that the long-term outlook for streaming is that subscriber growth will increasingly outpace revenue growth.

Spotify remains the standout leader in terms of subscribers with 32% market share. Spotify’s market share has remained between 32% and 34% every quarter since 2015. This is some achievement given how much more competitive the market has become in that time, and the stellar growth of Amazon. Spotify’s growth is both an extension of the wider market and a driver of it.

Despite Apple Music’s strong showing in second with 18%, this market share is down from 21% in Q1 2019 and contrasts with Amazon Music which finished Q1 2020 with 14% share, up from 13% one year earlier. Apple Music is making ground in absolute terms, Amazon is making ground in both absolute and relative terms.

Tencent Music Entertainment takes fourth spot with 11%, all the more impressive given that this number almost entirely refers to China and that it is accelerating growth, adding 14 million subscribers by Q2 2020 compared to 6 million on the year earlier.

Google is fifth with a more modest 6% but this represents a turnaround, with YouTube Music finally making Google a genuine contender in the subscription space. In Q1 2018, Google’s market share was just 3%. Google is outperforming the overall market.

What is particularly interesting about the state of the global market now compared to a couple of years ago is that we are starting to see some genuine segmentation taking place, which is a real achievement given that most of the services have to operate with the same catalogue and pricing:

  • YouTube Music is resonating with Gen Z and younger Millennials
  • Amazon Music is bringing older audiences to subscriptions
  • Spotify and Apple Music are the mainstream options
  • Deezer is enjoying success in emerging markets – Brazil especially – with pre-pay mobile bundles

The global subscriber market is in rude health in Q1 2020, significantly more so than the revenue and ARPU side of the equation.

These figures are the very top level findings from MIDiA’s Subscriber Market Shares model which includes quarterly data for 25 music services across 36 markets. This year we have added splits for MENA, Russia and Ireland. As well as a whole new dataset: Ad supported market shares, with splits for Sub-Saharan Africa. This data will be available for MIDiA clients in the coming weeks. If you are not yet a MIDiA client and would like to learn more about this dataset, email stephen@midiaresearch.com

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.

Spotify AND Apple Lead Podcasts – It’s All Down to How You Measure It

midia podcast tracker q4 2020The podcast platform data from MIDiA’s Q4 tracker is in. These are the high-level findings:

  • Apple still leads overall: A recent report showed that Spotify has become the leading podcast platform in the US. MIDiA’s Q4 Tracker data shows that among regular podcast users, Spotify is very nearly but not quite the leading platform in the US, just trailing Apple’s podcast app – though the difference is so small that it could be within margin of survey error. However, when Apple Music is factored into the equation, Apple remains the leading platform.
  • Spotify the leading single platform: In terms of single platforms – i.e. considering Apple Music and Apple’s podcast apps separately – Spotify has quickly established a leading position across all markets surveyed except the US. Spotify is betting big on podcasts, but this bet is as defensive as it is offensive. Spotify knows that its users over index for podcasts – 28% use them weekly, compared to 15% of overall consumers. If it did not go big with podcasts it was always at risk of losing share of ear as podcasts grew, in the same way Amazon lost CD buyers to Apple’s iTunes. It has taken Amazon years to start winning back the spend of its music consumers, but it could tolerate that inconvenience as it makes most of its money elsewhere. Spotify has no such luxury.
  • National broadcasters faring well: Radio broadcasters lost their younger music audiences to streaming. They were not going to sit back and let streaming services then go and steal their older, spoken word audiences without a fight. In many respects, radio broadcasters have a greater chance of being power players in podcasts because their decades of programming expertise will take time for streaming services to learn. With music, they were sitting on the shoulders of a decade of experience learned by Apple’s iTunes. The three national broadcaster apps we tracked (BBC Sounds, NPR One, CCBC Listen) had mixed fortunes, but all have solid adoption. None more so than BBC Sounds, which is the second-most widely used single platform in the UK – a testament to the BBC’s sometimes controversial Sounds strategy. However, one major factor is that broadcaster podcast app users are much older than streaming service podcast users, and indeed of dedicated apps like Acast and Stitcher. This shows that broadcasters are doing a good job of bringing their older audiences over to podcasts but are not yet making podcasts an entry point for younger users lost to streaming.

These findings come from MIDiA’s quarterly tracker survey and will be presented in much more detail in MIDiA’s forthcoming ‘Podcast Platforms’ report.

If you are not already a MIDiA client and would like to learn more about how to get access to MIDiA’s research, data and analysis, then email stephen@midiaresearch.com

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.

State of the Streaming Nation 3.0: Multi-Paced Growth

MIDiA Research State of the Streaming Nation 3Regular followers of MIDiA will know that one of our flagship releases is our State of the Streaming Nation report. Now into its third year, this report is the definitive assessment of the streaming music market. Featuring 16 data charts, 37 pages and 5,700 words, this year’s edition of the State of the Streaming Nation covers everything from user behaviour, weekly active users of the leading streaming apps, willingness to pay, adoption drivers, revenues, forecasts, subscriber market shares, label market shares, tenure and playlist usage. The consumer data covers the US, Canada, Brazil, Mexico, Australia, Japan, South Korea, Sweden, Denmark, Germany, Austria and the UK, while the market data and forecasts cover 35 markets. The report includes the report PDF, a full Powerpoint deck and a six sheet Excel file with more than 23,000 data points. This really is everything you need to know about the global streaming market.

The report is immediately available to MIDiA clients and is also now available for purchase from our report store here. And – for a very limited-time offer, until midnight 31stJuly (i.e. Wednesday) the report is discounted by 50% to £2,500. This is a strictly time-limited offer, with the price returning to the standard £5,000 on Thursday.

Below are some details of the report.

The 20,000 Foot View: 2018 was yet another strong year for streaming music growth, with the leading streaming services consolidating their market shares. Consumer adoption continues to grow but as leading markets mature, future growth will depend upon mid-tier markets and later on emerging markets. Disruption continues to echo throughout the market with artists direct making up ground and Spotify spreading its strategic wings. Utilising proprietary supply- and demand-side data, this third edition of MIDiA’s State of the Streaming Nation pulls together all the must-have data on the global streaming market to give you the definitive picture of where streaming is.

Key findings: 

THE MARKET

  • Streaming revenue was up $X billion on 2017 to reach $X billion in 2018 in label trade, representing X% of total recorded music market growth
  • Universal Music consolidated its market-leading role with $X billion, representing X% of all streaming revenue
  • There were X million music subscribers globally in Q4 2018 with Spotify, Apple and Amazon accounting for X% of all subscribers, up from X% in Q4 2015
  • With X% weekly active user (WAU) penetration YouTube dominates streaming audiences, representing X% of all of the WAU music audiences surveyed

CONSUMER BEHAVIOUR

  • X% of consumers stream music for free, peaking at X% in South Korea and dropping to just X% in Japan
  • X% of consumers are music subscribers, peaking in developed streaming markets Sweden (X%) and South Korea (X%)
  • Free streaming penetration is high among those aged 16-19 (X%), 20-24 (X%) and 25-34 (X%) while among those aged 55+ penetration is just X%
  • Podcast penetration is X% with pronounced country-level variation, ranging from just X% in Austria to X% in Sweden

ADOPTION

  • 61% of music subscribers report having become subscribers either via a free trial or a $1 for three months paid trial
  • Costing less than $X is the most-cited adoption driver for music subscriptions at X%
  • Today’s Top Hits and the Global Top 50 claim the joint top spot for Spotify playlists among users, both X%
  • As of Q1 2019 there were X YouTube music videos viewed one billion-plus times, of which X were two billion-plus view videos and X were three billion-plus

OUTLOOK

  • In retail terms global streaming music revenues were $X billion in 2018 in retail terms, up X% on 2017, and will grow to $X billion in 2026
  • There were X million music subscribers in 2018, up from X million in 2017 with Xmillion individual subscriptions

Companies and brands mentioned in this report: Alexa, Amazon Music Unlimited, Amazon Prime Music, Anchor, Anghami, Apple, Apple Music, Beats One, CDBaby, Deezer, Deezer Flow, Echo, Gimlet, Google, Google Play Music, KuGou, Kuwo, Loudr, MelOn, Napster, Netflix, Pandora, Parcast, QQ Music, RapCaviar, Rock Classics, Rock This, Sony Music, Soundcloud, SoundTrap, Spotify, Tencent Music Entertainment, Tidal, Today’s Top Hits, T-Series, Tunecore, Universal Music, Warner Music, YouTube