Announcing MIDiA’s Streaming Services Market Shares Report

As the streaming music market matures, the bar is continually raised for the quality of data required, both in terms of granularity and accuracy. At MIDiA we have worked hard to earn a reputation for high-quality, reliable datasets that go far beyond what is available elsewhere. This gives our clients a competitive edge. We are now taking this approach a major step forward with the launch of MIDiA’s Streaming Services Market Shares report. This is our most comprehensive streaming dataset yet, and there is, quite simply, nothing else like it out there. Knowing the size of streaming revenues, or the global subscriber counts of music services is useful, but it isn’t enough. Nor even, is knowing country level streaming revenue figures. So, we built a global market shares model that breaks out subscription revenues (trade and retail), subscribers, and subscription market shares for more than 30 music services at country level, across 30 countries and regions. You want to know how much subscription revenue Spotify is generating in Canada? How many subscribers Apple Music has in Germany? How much subscription revenue QQ Music is generating China? This is the report for you. Here are some highlights:

 

• At the end of 2016 there were 132.6 million music subscribers, up from 76.8 million in 2015
• In Q4 2016 Spotify’s subscriber market share was 35% and it had $2,766 million in retail revenue
• Apple Music was second with 21 million subscribers at the end of 2016, a 15.6% market share and it had $912 million in retail revenue
• In 2016 Apple was the largest driver of digital music revenue across Apple Music and iTunes
• The US is the largest music subscription market, which Spotify leads with 38% subscriber market share
• The UK is Europe’s largest streaming market, which Spotify also leads
• China’s subscriber base is the second largest globally, but it ranks just 13th in revenue terms
• Japan is the world’s third largest subscription market, in which Amazon has the largest subscriber market share
• Brazil is Latin America’s largest music subscription market

The report contains 23 pages and 13 charts with full country detail as well as audience engagement metrics. The dataset includes four worksheets and a comprehensive methodology statement.

Streaming Services Market Shares is available right now to MIDiA premium subscribers. If you would like to learn more about how to access MIDiA’s analysis and data, email Stephen@midiaresearch.com.

The report and data is also available as a standalone purchase on MIDiA’s report store as part of our ‘Streaming Music Metrics Bundle’. This bundle additionally includes MIDiA’s ‘State of The Streaming Nation 2.1’. This is our mid-year 2017 update to the exhaustive assessment of the streaming music market first published in May. It includes data on revenue, forecasts, consumer attitudes and behaviour, YouTube, app usage and audience trends.

Examples of country graphics (data labels removed in this preview)

MIDiA Exclusive: 7digital Acquires Leading Competitor 24-7

UK music services provider 7digital today announced they are currently considering the acquisition of longstanding competitor 24-7 from German retail giant MediaMarktSaturn (MMS).  24-7 is one of the longest standing companies in the entire digital music space, founded in 2000 (MMS took a majority holding in 2009). In a marketplace where the average life span of a digital music start up is 5.5 years, 24-7 is a veritable veteran and powers one of the very first telco music services: TDC’s Play. 7digital takes full ownership of 24-7’s business and its existing music service customers, including Play and Saturn’s Media Markt.

Market Consolidation

2016 was a year of consolidation in the white label services space, with Omnifone going into administration and Medianet getting bought by SOCAN. 7digital’s acquisition of 24-7 further concentrates the market. With the growing brand strength of streaming services like Spotify and Tidal, telcos have been increasingly looking to partner with those brands rather than build their own. Which was one of the key drivers of market consolidation. Those companies that have weathered the storm, of which 7digital is clearly one, have done so by diversifying away from telcos. For example, in 2016 7digital powered French retailer Cdiscount’s streaming service Cstream.

Sleeping Giant Retailers

That is not to say that opportunity does not still exist in the telco sector, it does, but a successful white label services provider now has to have a much more diversified client and product portfolio. Retailers will be a big part of that mix going forward. Especially so in markets where CD sales still account for a large portion of music sales. Germany, just and so happens to be the world’s 4^th largest recorded music market with 59% of its sales physical in 2015. So powering the music service of the country’s largest CD retailer has clear potential. Add into the mix the fact Media Markt is also the leading consumer electronics retailer with a very large base of online user accounts and the tantalizing prospect of an Amazon Prime / Echo type proposition emerges, should they ever decide to go down that route.

Powering The Next Generation Of Spotifys

Another real area for growth for companies like 7digital is giving pure play services a head start in the streaming race. Bringing a streaming music service to market is no easy task and many a start up finds itself 2 years into its journey wishing it had realised just how complex a business multi-territory music licensing actually is. By bringing licensing, tech knowhow and infrastructure to the table, companies like 7digital should be well placed when a post-Spotify IPO / sale generation of streaming services look to come to market.

7digital is not quite last man standing in the white label services marketplace (there is already a new crop of competitors emerging such as Cylo and General Harmonics) but it is now in the clear position of being the leading player with more than a decade of track record behind it. Do not under estimate the importance of that latter attribute to rights holders and potential partners, both of whom want to have the security of working with a trusted company that is still going to be around next week.

With Spotify, Apple and Amazon all set to follow up their strong 2016 with an ever stronger 2017, there is no doubt that the streaming market is heating up. It will be down to new entrants to ensure that the market does not become too concentrated around too few players. The newly expanded 7digital will be hoping to be a key part of that puzzle.

What the ISPs and the Record Labels Need to Do Next

The UK music industry and ISPs have been working towards the goals of the government-brokered Memorandum of Understanding since last summer but we’ve yet to see concrete results, in particular with regards to new music offerings. All stakeholders recognize the crucial importance of having a big fat carrot to accompany the stick. Yet we still seem to be some distance from the ISPs being empowered with truly compelling music services they can offer to their subscribers as a genuine alternative to file sharing.

On the surface of things this week’s reported tie up with Sky and Omnifone for a music subscription services seemed like a positive step forward. However, the lightest of scratches beneath the surface reveal it to actually be a microcosm of broader problems. Omnifone’s press announcement pointedly doesn’t even mention Sky as a partner for their new ISP white label offering. Although many press reports imply Sky have signed up, the only actual substance is that Sky are considering using Omnifone to power some of the technology on its offering.

The nuanced specifics here are important. Last year Sky and Universal Music proudly announced a music JV. Details were scarce in the extreme but the strategic ambition was bold. Sky has since then not been able to add any of the other 3 majors onto the JV roster. Part of this may well relate to the other majors getting increasingly narked about UMG’s highly proactive (even aggressive) digital strategy. But more broadly it talks to the fact that there is a lot of distance between what Sky wants to be able to offer its customers and what the labels feel they can provide for the financial terms Sky are willing to consider. This follows on the heels of Virgin Media dropping pursuit of PlayLouder’s MSP offering due to label concerns and also 7Digital so far failing to get any ISP to take up their white label offering.

The root of the problem is that the ISPs want to offer consumers more content and flexibility for less money (and pay the labels less) than the labels are willing to countenance.

But most UK ISPs have good reason for having high demands, as do many other continental European ISPs. They’ve been burnt once, launching poorly featured, weakly differentiated services near the turn of the century. Their inadequacies (and the subsequent failures) weren’t the fault of the ISPs per se, rather they were products of their time, restricted to the terms that the major record labels were willing to countenance back then. (e.g. 99 cents downloads that could only be played on your computer)

Apple changed the rules of the game and the failings of the ISP services were only accentuated.

The ISPs know now that if they get back in the game they have to be differentiated and be able to compete with Apple. But they also know that most of their file sharing subscribers are unlikely to be able or willing to pay much either. So the ISPs want compelling (ideally MP3) services that cost little or nothing to consumers. The labels business models can’t support that model without the ISPs picking up a lot of the cost, which they can’t afford to do due to falling broadband ARPU.

So we’re in a stalemate that nobody really expected to be in. (Indeed back in the summer of last year BMR CEO Feargal Sharkey said he expected to have something to announce “within a matter of weeks”). The labels thought the ISPs would lap up what they had to offer, and the ISPs thought they’d get more. The record labels are not about to change the fundamentals of how they value their IP, but there are some viable mid term compromises that can get us out of this malaise:

• A series of Joint Ventures: MySpace have created a blue print for using this approach to get favourable licensing terms to deliver free music that wouldn’t have been financially viable otherwise. And the labels get lots of potential upside and to extend their role in the value chain. JVs would bind the ISPs and labels closer together, create common purpose and engender greater strategic flexibility.
• Focus on free, not MP3: the success of Spotify has shown that MP3 isn’t everything. Free music streaming with good catalogue and easy to use UI is actually a winning formula. The business case for hiding the cost of a streaming service in the access subscription is a lot stronger than for MP3 downloads
• Leverage all elements of the multiplay: ISPs typically have multiple products (TV, mobile etc.). Fully leverage these. Creating a compelling music offering means going beyond a balkanized online vs mobile vs TV strategy. Fully integrate and actually drive other business areas in the process e.g. extending a streaming music offering to mobile via an on-handset app will drive mobile data usage

Time is of the essence: every day that goes by, file sharing grows in popularity and becomes more entrenched. So agreeing on intermediate solutions with a view to a longer term roadmap is far favourable to stalling until the perfect solution can be agreed upon.