It may be the hottest sector of the media industry, but streaming is anything but perfect. There is even discussion of its sustainability for all industry players including platforms. Consumers excluded, everyone is losing something, in the best tradition of the web. Artists are in grumbling mode (some consider streaming royalties an insult), labels are in an uproar because they want to get rid of the freemium level that is the linchpin of the anti-piracy action, platforms are still a long way from breaking even which is vaguely identified in the 35-40 million paying users, the population of a country like Canada.
It sounds like a scenario from the last days of Pompeii, but it's not at all like that for a simple fact: consumers love streaming and over 100 million people use it daily: 29 of the 30 most viewed videos on YouTube are professionally produced music clips by musicians or music labels. YouTube has become the jukebox of the world. YouTube's mechanism has been refined to such an extent that artists can receive automatic passive payments even for songs posted illegally or without their knowledge.
And it's this falling in love with consumers, seduced by services like YouTube, that motivates investors to put money into the industry. It is venture capital that keeps the music streaming economy going.
Spotify, which lost some $2014 million in 162, recently benefited from a new $400 million investment round (the seventh in nine years). Today the overall valuation of the platform is 8,4 billion dollars, six and a half times the value of its revenues of 1,3 billion in 2014. According to the "Financial Times" 81% of these revenues are transferred directly to owners rights to the music tracks listened to by subscribers to the service. What can remain on the platform is a mystery.
There is another obstacle that should not be underestimated in the march of music streaming towards the dominant form of music consumption: the expansion of demand. It's about getting consumers to invest more money in music than they do now. According to Deloitte, in the US, the per capita spending per year on recorded music is $48, while the cost to subscribe to any streaming service is $119,88, three times as much. The half empty bottle becomes half full if we look at the data of millennials (18-34 years old) who are starting to invest some money, in fact they spend 125 dollars a year on music.
However, many observers agree that for many average users, the free tier with ads, such as that offered by Spotify, is more than enough and it will take something very special to convince them to pay 9,99 a month to get rid of ads. However, if we look at the experience of pay TV in the United States, where there are 100 million paying customers, it can be inferred that the growth in the quality and services of the pay offer can effectively stimulate the rapid growth of qualified demand. Perhaps the most robust challenge lies right here and perhaps all players in the music industry should look to the experience of pay TV as a source of their own.
