With Apple’s World Wide Developer Conference approaching and the buzz of rumor they will release a much improved music streaming service, I thought it would be helpful to look at some of my US data on streaming music services. But first, an overall observation. If you recall, Steve Jobs criticized music streaming services, stating people wanted to own their music not rent it. What is happening is worth making the observation that some things, and in this case some statements by Steve Jobs, were true at a time but are no longer true. Markets are dynamic, not static. They evolve and do not stand still. As consumers needs mature, companies (and business models) need to do the same. The increasing popularity of streaming services is an indication of this change. Like the app industry, the music industry is filled with overwhelming amounts of choice. Radio has always been the bridge helping people discover and enjoy new music. This is why streaming services are relevant, in that they are digital evolutions of radio, with the built-in option to be specific on music choices, albums and artists on demand, and any new features the industry dreams up.
To shed light on this, our US survey data found the average time spent by US consumers on traditional radio is 1.32 hours. This number has remained relatively flat since 2013 in our studies. ((respondents were given a range of options to estimate their daily time listening to traditional radio ranging from less than 30 minutes to more 10 hours.)) This compares to .82 hours of listening to internet radio. The largest response in our survey related to daily hours using internet radio is Do Not Use which has dropped from 50% in 2013 to 47% as of Q1 2015. This data says traditional radio is still favored in the US and streaming is growing slowly in comparison.
Data we have on intent to purchase music to download and intent to subscribe to a streaming music services helps paint the picture even better. 22% of US respondents indicated a plan to purchase music to download and keep over the next six months vs. 3.2% indicating interest to purchase a subscription to an on-demand music service. Of course, all this can change if Apple releases something truly valuable in this space.
What streaming music services are used monthly for music? Well, in the US, there are two who hold the lion’s share — Pandora and Spotify. 25% of people in our US survey said they have used Pandora to listen to music in the past 30 days compared to 13% who said they used Spotify in the last 30 days. Pandora’s monthly active users are in the 80m range and, given it is largely a US service, that number likely is fairly US-based. Given Pandora is the largest in active user volume of music streaming/internet radio services in the US, it is a good measuring stick for the number of people who do this today in the US market.
I’ve been on record pointing out that, while talked about frequently in the mainstream media, small numbers of people subscribe to any given music service. If I was looking at both video subscription services like Netflix, or Amazon Instant Video, compared to internet music subscription services, I’d conclude video subscriptions have the edge by a large margin in terms of what US consumers spend real dollars on today. I’ve also been on record saying Apple has a unique advantage here in music. Not least the history iTunes has with consumers but also their integration advantage. However, just because Apple can deeply integrate a music service into their software doesn’t guarantee its success. iTunes Radio is a good example of this. Many original opinions, mine included, were Apple would hurt services like Pandora with iTunes Radio because they could integrate it better into the OS, yet this did not happen. Lessons to be learned for sure but, in this case, looking at what people spend money on today with subscription media and Apple’s ecosystem advantage, it feels like the Music side is both an opportunity but also still a challenge.
There may very well be new dynamics around music today. Perhaps consumers are content. Perhaps everything out there fits their needs. Maybe music is less a priority than it was in years past and just the lure of listening to a genre and not having to do any work is trumping personal curation. However this plays out, when I look at the numbers, it appears the radio model, meaning curated music of a certain genre, free with ads, is the predominant model in the US. There are certainly internet radio parallels but those paying for music subscriptions are quite few. Estimates for premium Pandora is in the 4-5 million range and similar ranges have been estimated for those paying for Spotify. All of this to say perhaps nothing changes, or maybe everything changes. We will see when we know more next week.
Maybe, just maybe, we could contemplate that S. Jobs was wrong (gasp !) even as he was saying people want to own not rent music, but the tech and business was only catching up to customers at the time. I’d argue he was more than wrong, and people want to get music for free and are willing to listen to ads and give up some data to get it. In the end what he wanted, thought, said and what we heard (those are probably 4 different things) matters though, and actually I personally do want to 1- own my music 2- have it on my phone’s SD so I can listen to it at any time and 3-discover new stuff.
In the end I’m still wondering, how much of the music currently listened to is “free” (whether streaming or radio), how much is rented, and how much is bought ? And how does that translate, users- and revenue-wise ?
“I’d argue he was more than wrong, and people want to get music for free and are willing to listen to ads and give up some data to get it.”
I’m not sure how you can make that argument, even at the time people _were_ getting music for free and not even dealing with ads via Napster. Yet iTunes sales showed that can charge. Your point is not about paying rent since it is exactly the same model (in the consumer’s eyes) as radio, which is exactly what Jobs was talking about. On that point I agree with Naofumi that the shift doesn’t seem all that great and Jobs seems to be right.
Joe
If I understand correctly, you are saying that if users are going to spend money at all, they are currently purchasing music instead of subscribing to a service. The only reason many people are using a streaming service is because they don’t have to spend money, and can listen to music for free.
If this is the case, then what Steve Jobs said still seems valid. I don’t remember his exact words, but if he said “own music” instead of “rent music”, then he is limiting his scope to paying customers, and the data you show suggest that for these customers, 22% intend to purchase and keep vs. 3.2% intending to rent.
What seems to have changed is that free with ads is gaining in usage. I don’t think this was included in the scope of Steve Jobs’ comments.
Assuming that Apple is more interested in increasing the number of paying customers or the average purchase amount of each customer, what they need to do is to raise the perceived value of owning music, or helping people find music that they would consider owning. It will be interesting to see what they have to show.
In Japan, the most popular female idol group (AKB48) puts various coupons inside their CDs, which you need to collect to go to events where you can shake hands with the stars, and which gives you the right to vote on ballot for the most popular member. I personally have no interest in these events, but they have been very effective for increasing CD sales, and this is the kind of thing that labels should really be doing to counter “free with ads”. Labels should be ashamed of themselves, relying on Apple to solve these issues.
What would be more telling to me is how this compares to pre-internet radio, maybe even pre-iTunes days. I don’t see Pandora and Spotify as anything but an internet version of the radio and their premium/pay versions simply an internet version of Sirius and XM radio. Ultimately it seems the more things change the more they stay the same.
And the problem with Pandora and Spotify ad versions is what was the “problem” with regular radio. You are still at the whims of what the labels, and sometimes even the artists, want to make available. Advantages and disadvantages to either radio/ad supported streaming vs paid streaming vs purchase remain the same.
Obviously the biggest difference is not the affect on the consumer, but the affect on the industry. I would suggest they are the ones who want it to stay as much the same as before. And they are wielding as much power as they can to keep it that way.
Joe
Music pricing seems out of whack: renting music is sandwiched between free music that costs very little to the provider and is so widely available that users can always find what they want; and bought music that turns out cheaper in the long run (say you need 100 CDs to be happy, $5 average new/used, $500 ie 5 years of music renting). The optimized combination of free+bought (50 CDs instead of 100 ?) is deadly to renting, you get to own your for-life faves while getting variety and new stuff.
People may pay extra for curation, early access, goodies, events… but that’s more in favor of sales, which allow bundling (physical) and probably better tracking (virtual). And free music mostly has curation built-in via stations/playlists.
“users can always find what they want”
Often, but not always. Not even just esoteric works, but evidence Taylor Swift retracting her latest album on Spotify.
A bit off topic, but your post made me think of this. Do you think the recent resurgence in vinyl is just a fad, a sort of counter-reformation, not enough to have a lasting impact?
Joe
As a vessel for music, vinyls are the equivalent of slates of clay for writings: inconvenient, low-quality, low life expectancy.
I think Vinyl is at best a collector thing, at worst a fad for poseurs. Doesn’t mean it isn’t going to last, there’s a permanent oversupply of both, same as for first editions book collectors. A gentler way to phrase this is as a tribe-defining thing for people looking for an identity. There’s worse tribes to latch onto ^^
I had to use vinyl as a kid (both as a lunchbox player kiddy thing and on my parents’ stereo)… CDs were a godsend in terms of ease of use, quality, life expectancy (both the music’s and mine for scratching LPs)… What’s next ? Tapes ?
But I’m biased, I’m rather extremely anti-objects. Ripped my CDs very early on, downloaded ebooks and gave away their paper version, was for a long time proud my possessions fit in 2 trunks…
There’s something about physical media though. I used to enjoy browsing through my CDs, sometimes I caught myself doing that for longer than actually listening to music. Now that’s it’s all lines in a file manager, browsing is no fun, and I even listen less, but then again I think it’s an age thing, I don’t look much for new stuff nor go to many concerts anymore either anymore, whereas I used to devote hours/week to that.
The pricing of music is something that I’ve always struggled with. It’s very emotional. Some tunes live in your heart for your whole life and help you through difficult periods. These tunes are better described as priceless.
I understand your rationale for pricing for renting vs. owning. However, it doesn’t feel right to me. Maybe I’m too old.
I fully agree with you. Music’s effect on mood is incredible. I still have my “stages of grief” “wake up” “serenity” “downers” and “uppers” playlists, from when I was young. Plus aside from the endogenous mood, specific songs and artists get associated with specific moments, phases of life, people… There’s the first song I put on a jukebox, the song I was waiting for to overcome my shyness and get dancing in discos, the band/album at whose concert I had a big lovers’ spat, the concert I couldn’t go to because I had entrance exams the day after and I really hated my life… ^^
Funny how music does that, more than colors, books, or things. Maybe food, a bit, and smells. La madeleine de Proust should have been a song. http://en.wikipedia.org/wiki/Madeleine_(cake)
From a certain perspective I wonder how much is really comparable? What I mean is radio, streaming, pay streaming, and purchasing all offer different products. What I mean by that, and thanks to Taylor Swift this should be clear, not all services offer exactly the same music.
This is due to how the recording industry likes to manipulate the market. Sometimes the offerings are the same across the board, but the recording industry has the tendency to remove some music from “airplay” (whether radio or internet) on purpose, just like Disney likes to release and then remove movies from circulation. You don’t really notice it until you look for something that you once had access to and all of a sudden it is gone. That’s one reason I gave up on both Spotify and Pandora.
Joe
I think the role of music in many people’s lives has changed. From a jobs to be done perspective, before the advent of the iPhone + App Store, a lot of people used the iPod to make the times they would normally be alone & bored a more pleasurable experience (walking, commuting, waiting room, teenage bedrooms etc). Post 2008 that job now is filled by mobile devices running social media apps and games etc.
For the vast amount of the population who are not music obsessed, the 2 decade love affair with portable music is mostly over. These people were happy to pay for music when it was the primary form of mobile entertainment, but now with so many other mobile entertainment options these people are not going to pay for music, especially when it’s usually available for free in some form. Everyone likes music, but few are big enough fans to pay for it unless they are seeing it live.
Thank you for great information. I look forward to the continuation.