Technology | Media | Telecommunications

Thursday, August 13, 2015

How Music-as-a-Service is Transforming the Industry

Recorded music is the most mature segment of mobile entertainment. Given the current spread across competing platforms, it's clear that online digital distribution is now the core of that industry. And, when offered a choice, fewer people will opt to own copies of music recordings.

According to the latest market study by Juniper Research, revenue generated through advertising-based online music streaming is now forecast to exceed $1 Billion by 2017 -- that's up from $782 Million in 2015.

However, the key music industry leaders are now attempting to slow this transition and exclude full-featured freemium services, with current offerings instead being restricted to basic 'radio' style features.

Regardless, ad-based revenues are still expected to see strong growth as more people migrate to music streaming services, including some evolving offerings such as Google Play Music.


The Juniper study found that while ad-based freemium services will continue to entice a growing number of new users, it's also hoped that this model could influence people to adopt the more profitable paid-subscription options.

Therefore, with the drive of ad-based services coupled with the growing impact of key players like Google, streaming is expected to be brought to the forefront of the market with a significant global growth in user numbers.

Apple Music is also expected to act as a major catalyst in driving the expansion of subscription-based streaming services, with growth potential expected across all major markets. In fact, Apple has already reported a user base of 11 million 'free trial' subscribers.

"With convenience, accessibility and curation having become the defining elements of the music landscape, the potential of the streaming industry will revolve around the levels of which providers can convert free customers to paying customers" said Joe Crabtree, analyst at Juniper Research.

Juniper also found that the music industry has reached a pivotal point in its digital distribution transition, with the 'download' market experiencing its first decline in 2014. Moreover, the outlook is bleak; downloads are forecast to continue in a global decline as online streaming gains new momentum.

Other key findings from the study include:

  • Music-as-a-Service subscription revenues will overtake music download revenues in 2018.
  • According to the forecast, the digital music industry will continue consistent user growth, despite the declining download market and the likely ongoing reduction of profit margins.
  • The wealth of investment in music recommendation and discovery features is rapidly gaining importance in service provider differentiation. It's also helping to promote the appeal of streaming services.
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