How is the music streaming market?


While digital is worth 50% of the entire music industry, Spotify is about to quit on the stock market. Let’s make a point on the online listening market

The streaming becomes adult: the next listing of Spotify on the Stock Exchange is not only one of the most anticipated events from the economic and technological world. It is a highly symbolic event: the music industry (and all entertainment) has definitely changed.

Streaming market evolution

The company led by Daniel Ek has chosen a different and in some ways risky way: direct quotation to the New York Stock Exchange, and not to the Nasdaq technological list, eliminating the intermediaries: for this reason it has been defined as “non-ipo”.

But that of Spotify has always been a difficult road, from its foundation in 2008 to today: the initial diffidence of the record companies, the progressive opening in various markets (in the United States in 2011, in Italy in 2013), the controversy with the artists on payments. Then the recognition: today the music streaming has over 100 million paid users all over the world and has brought the market back to life. It is the present and the future. In this new ecosystem, Spotify has become synonymous with streaming, just as iTunes is for downloading. But the competition is fierce, and the controversy is not over.

Market data

Digital is worth 50% of the entire recorded music industry, and streaming is the main part of it: it has brought the market up again, after having lost 40% in 15 years. The latest official consumption figures are those disseminated in Ifpi’s Music Consumer Insight Report 2017 (the international association that brings together the various national music associations, including the Italian Fimi).

THE 96% of active users listen to music, and of these 45% use legal streaming platforms (+ 8% compared to 2016). Percentage that rises to 85% among the very young (13-15 years).

The most used platform, however, is YouTube: 85% of its users listen to music. And the discography continues to complain that Google pays too little compared to other platforms: it is the so-called value gap.

Spotify alone, today boasts 70 million paid subscribers. It is, in fact, the only one of the main platforms to have free access based on advertising. YouTube, which is not specifically musical, is obviously free and has a paid version, Red, only available in some countries and that has never really taken off.

The competitors of Spotify are not insignificant: Apple Music is at 30 million, strong integration with the iOs / Mac system. Then Pandora, Tidal, Deezer, Amazon, Google Play.

The Italian situation

The data disseminated by Fimi reflect those of Ifpi locally: in Italy 98% of network users listen to music, of which 46% use an audio streaming service. Percentage rising to 85%, considering who uses a video platform to listen to music.

Spotify is very active in Italy: it has a branch that has expanded, marketing on the territory, sponsoring and organizing events (it has contributed directly to the launch of Ghali, organizes showcases of young artists in collaboration with the record companies), and advertising ( use billboards in important and symbolic places, such as Piazza Duomo or the navigli in Milan).

Very active on marketing TimMusic, service of the Italian mobile operator (Tim is the only sponsor of the Sanremo Festival for the second year: has a free Silver profile included in the mobile subscription, and forms of premium subscription at reduced prices compared to competitors). Apple Music and Tidal have specific curation for our country with a local team. Deezer, after a big job in Italy, is a bit ‘far away. And the streaming sections of the big names of the technology are active: Amazon, Google.
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An open question: the digital rights

It’s not all roses and flowers, for streaming. The listing on the stock exchange will put further pressure on Spotify, on its profitability after years of closing in loss of blans, and on the long-term sustainability of its business model. The streaming will continue to be attacked both culturally and economically, in short.

On the cultural side will continue the controversy on payments to artists, who claims that this model does not sufficiently protect the origin of music, if not with crumbs. The artists receive the money from the record companies, which grant the catalogs under license: the contracts have just been renegotiated, in view of the IPO.

On a purely economic side, the level of confrontation on another front has risen: that of editorial rights. A first attack came from some musicians, who accused Spotify of not having paid the song composition licenses (different from the rights of the recordings, in the hands of the record companies): Spotify closed it with a payment of 43 million dollars, in May 2017.

But last December, Wixen Music Publishing (which runs licenses for Tom Petty’s songs, Black Keys, Steely Dan, Neil Young among others) filed a $ 1.6 billion lawsuit for the same reason. Spotify has not commented (but a few days later announced the exceeding of 70 million users, to appease future investors).

music streaming and VAT

And just a few days ago, the US Copyright Royalty Board (Crb) has decreed that the authors and publishers will have to be paid more by the streaming services, in the next five years: the National Music Publishers’ Association (Nmpa) sang victory.

Another open question: consumption model, playlists and songs

The streaming has further accentuated a form of consumption already favored by the download: the single song, compared to the album. Which is far from disappeared: it remains important for the artists, to demonstrate their credibility.

But in the meantime playlists are increasingly important: they are the new portal for access to music. To say: the top 100 global of Spotify has almost 12 million subscribers, the Top 50 Viral 750 thousand. Spotify is also testing an application, Stations, dedicated only to playlists (for now it is only available for Android).

That the new ecosystem has really changed is reflected in the general rankings: once they were sales, now I understand several indicators, including streaming.

In Italian ones (compiled by Gfk on behalf of Fimi) 130 streams are equivalent to a download, and 1300 streams are equivalent to an album (with some corrections: a single song can not count more than 70%); the conversion rate is reviewed every four months. Recently, free streaming has been excluded from the Italian charts (with consequent protest by Spotify).

The rankings remain an important indicator of consumption and success, for artists, for operators in the sector and for the public. Just a few days ago, the release of Rockstar by Sfera Ebbasta has replicated in Italy what happened in the world at the release of Ed Sheeran in 2017. The rapper has placed the 11 tracks of the new record in the first 11 positions of the ranking of Spotify . In the overall Top Top singles of Fimi (which includes all digital platforms, even downloads) the 11 songs occupied the first 12 positions. Is it still a ranking of individuals, and still there are singles? Can we really consider 1300 streams equivalent to 10 downloads and then to an album?

There is only one for vinyl, why not make a specific ranking only for streaming, which includes all platforms, separate from that of the purchase and physical download, and that reflects the peculiarities of the various ways of listening to music?

Shortly, streaming has definitely changed the way we consume music. Users have said theirs, making Spotify and streaming the most important platforms of recorded music. Now the word at the stock exchange and at the market.


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