Digital Music is eating Music Industry & streaming is surging

The annual revenues of the global recorded music industry is estimated at around $15 bn. Of this about 39% is digital music ( 24% downloads & 15% streaming). Traditional recorded music is now only 38% (36% CDs and 2% vinyl). Digital Streaming is fastest growing segment displacing downloads & eating into CDs.

Swedish start-up-Spotify, a digital music service, is a leader in music streaming. The company, has about 28 mn paying subscribers (end 2015) which pay $10/month to get on demand access to a music catalogue of 30+ mn songs. The also has a advertising based free service. Its total active users are estimated at >75 mn. At its last round of equity funding (June 2015) it was valued at $8.5 bn.

Apple Music, a streaming subscription service launched 6 months back, has grown rapidly to 10 mn subscribers. However, Apple has not been able usurp Spotify from market leadership.

Streaming is on track to become the primary mode of digital music consumption, offsetting declines in music downloading. This is a 1st failure of sorts in a new category as in past in all new categories it has become market leader at least in value (iPod, smartphones, tablets, etc)

The growth of Spotify and Apple streaming services has squeezed smaller streaming services, which are finding it difficult to access finance. The number licensed digital music companies has declined by 100 over last 3 years to 400 (Source: IFPI, FT).

Let’s see how the market evolves.

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