CMU Trends Guide Streaming Business Library

CMU Trends In Ten: Streaming Challenges

By | Last Updated: July 2020

This is a ten step guide to the biggest challenges facing the streaming music business in 2020, including both issues for the industry at large, and issues that specifically impact on artists and songwriters.

01: There aren’t enough services and most of them are loss-making
The digital music market is now dominated on a global basis by three premium streaming services and three free streaming services, with a handful of regional players providing significant competition in a handful of mainly emerging markets.

The three dominant premium services are run by Spotify, Apple and Amazon. The big free services are Spotify Freemium, the main SoundCloud platform, and the music content found on the main YouTube platform (ie as opposed to YouTube’s standalone music service).

Regional services of note include Pandora and iHeartMusic in the US; the Tencent services and NetEase Cloud Music in China; Gaana and JioSaavn in India; and the music services run by Yandex and VK in Russia. We might also add Joox and KK Box in some Asian markets, the likes of Boomplay in some African markets, and possibly Bytedance’s new Resso app.

The income generated by these services has allowed the wider recorded music business to return to growth and opened up a number of emerging markets to the global record industry for the first time. So, there is lots to be pleased about.

However, it does mean a small number of streaming companies are now very powerful: Spotify, Apple and Amazon in particular, as premium streaming generates so much more income than the free services. All three of these companies have their own agendas of course, which are sometimes in line with the music industry’s agenda, but not always.

It’s true that in the physical era each market was also often dominated by a small number of major high street retailers – so in the UK that would include HMV, Virgin Megastore and Woolworths. But the major players in each country were different.

And there was also a strong network of independents that often championed less mainstream music. They don’t exist in streaming. And the nature of the streaming deals – and the complexities of securing those deals – means it’s unlikely there will ever be a streaming equivalent of the indie retailers.

So, in physical, there were never dominant players with global reach, and there were always alternative options when trying to find support for the kind of releases that did not excite the more mainstream retailers. In streaming, the dominant players are much more dominant because of their global status and the lack of indie alternatives.

And while some in the music industry may dislike just how dominant these global streaming services have become – or worry about how that dominance may be exploited in the future – at the same time everyone needs these dominant companies to succeed. After all, streaming now accounts for more than half of global recorded music revenues, so if one of the major players was to collapse that would have a huge impact on the record industry.

To date few streaming services have made a profit because the business model only really works at massive scale. And while Spotify is now starting to reach that level of scale, the big services may ultimately seek to achieve or boost profitability in other ways.

For example, by reducing their royalty commitments to the music industry and/or increasingly charging for data, marketing and other promotional tools previously provided to artists and labels for free. If and when that happens, a record industry that is increasingly dependent on those few global players will likely find they have a much weaker negotiating hand when licensing deals come up for renewal.