Music Streaming

After years of disappointment, things are looking up for the music industry, at least in terms of streaming music services.

According to new research from Parks Associates, the number of users of major music streaming services (such as Pandora or Spotify) has increased by more than 200% since 2011. What’s more, the growth in users willing to pay for those services has increased more than 80%.

“One of the things we’ve noticed is these [streaming companies’] business models have changed, and as they’ve moved to a ‘freemium’-type model, adoption has gone up,” Brett Sappington, director of research at Parks Associates, tells Marketing Daily. “As the penetration of mobile devices has increased, consumers have used their smartphones and tablets to access those services, which has also spread awareness.”

According to Parks, worldwide unit sales of network-capable audio products has increased 170% to more than 24 million in 2012. Of those who own connected music systems, 14% have paid for music services, compared to 6% of households without connected music systems. By the year 2017, Parks predicts the number of connected audiences will double, and the number of people using the services will increase to 15 million worldwide.

As use of music streaming services grows, it’s likely there will be more partnerships to make them available on more platforms, Sappington says. Recent partnerships have included Google’s inclusion of Pandora on its new Chromecast product and Rdio’s partnership to stream Live Nation events.

“A device without services to work on it isn’t [very useful],” Sappington says. “These partnerships have made a lot of sense to both hardware manufacturers and the services.”

In fact, the one service that may be hurt the most by the growth in streaming is the one that revolutionized the music industry: iTunes. Because it’s so closely tied with Apple’s iOS operating system, the proliferation of devices on other platforms could cut into iTunes’ growth, Sappington says. “As [Android-based] systems increase in penetration, the use of iTunes might be less,” he says.