technology
A billion reasons why ad-supported music streaming is effective
Revenues from streaming will overtake digital downloads by 2018. – AFP/Relaxnews pic, August 12, 2015.Even though many experts believe that Apple's entry into the music streaming business will lead to the eventual end of freemium services – ie. streaming services that offer a tier supported by advertising – new data shows that the ads are serious revenue drivers.
According to Juniper Research, revenues generated by ad-supported streaming are already worth US$782 million (RM3.1 billion) and by 2017 will have hit US$1 billion.
Its latest research paper, "Digital Music – Subscriptions, Ad Revenues & Download Services 2015-2020", published on Tuesday, also forecasts that 2018 will be the year in which revenue from premium, subscription-based streaming services such as Tidal, Rhapsody and of course Apple Music will have surpassed paid-for digital downloads.
The research lands at the same time as reports in the media that Spotify – currently the streaming music leader with 20 million subscribers and 75 million active users – is facing pressure from record labels to reconsider how it offers its services to those consumers who don't want to pay a monthly fee.
According to Digital Music News, Spotify could be forced to limit access to the latest releases to free-tier users or to offer exclusives that only premium users can access.
Exclusivity is currently the number-one promotional tool for competing premium streaming services. Apple Music is the only place where the latest albums form Dr Dre and Taylor Swift can be heard. Meanwhile on Tidal, the Jay Z-backed competitor, members can listen to a new Prince album unavailable anywhere else.
Despite being the last company to join the music streaming market, Apple claims to have attracted 11 million subscribers in recent weeks. However, all consumers signing up to the new service have a three-month grace period before the company will start charging its monthly fee. Therefore it won't be until the holiday season that a clearer picture of Apple's impact emerges.
If the company can retain or build on those initial numbers, then Juniper Research believes it will serve as the catalyst for others to move to premium services only.
However, Spotify's success shows that offering free access is also effective in offering curious consumers a first taste of streaming and of building loyalty.
"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," noted research author Joe Crabtree. – AFP/Relaxnews, August 12, 2015.
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