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Streaming platforms are on their way to dominating the global music industry. There hasn’t been a significant shift in how listeners consume music since the evolution of the mp3 audio files in the mid-90s.
The mp3 format allows songs to be burned onto a CD, played on an mp3 player, or transferred to a computer. Then, in the early 2000s, Apple launched its iTunes store, offering most songs for under one dollar, greatly increasing the accessibility of music. From there, Pandora was one of the first companies to provide music streaming through various personalized radio stations, allowing subscribers to access a multitude of artists without having to pay for each song they desire to listen to.
Since then, the music streaming industry has become a highly competitive market. 32% of music listeners do so via a streaming service, making it the most popular form of music consumption. The top 5 countries that consume the most music through streaming services include Sweden, the United States, the United Kingdom, Germany, and Mexico, all of which include over 50% of their population. While various streaming platforms are offered, Spotify, a Swedish company, currently controls the market with 600 million users, 236 million of whom are paid subscribers. Additionally, Spotify has the largest growth rate of subscribers and accounts for 31% of the global market share. Followed by Apple Music (15% market share), Amazon Music (13% market share), Tencent (13% market share), and Youtube Music (8% market share).
The music streaming industry is essential to the global economy. It accounts for 67% of the total music industry revenue. Goldman Sach estimates global music streaming will bring in 22 billion dollars in 2024 and reach over 41 billion by 2030. The popularity of music consumption continues to grow. The average person listens to music for over 20 hours every week. Latin America is the region with the highest music streaming time, averaging 86 minutes per person per day. Additionally, Gen Z accounts for the highest streaming of any age group, consuming an average of 96 minutes a day.
So where is the money being generated from? The majority of revenue is generated through subscription fees. Ad-supported revenue holds significance and continues to grow as well. In terms of how artists generate money, their profits are dependent on streaming numbers. One stream generates as little as a cent, meaning that millions are required for artists to receive substantial returns; however, some labels that represent artists negotiate more lucrative profits per stream. Building off this, labels are becoming decreasingly popular; they used to control music distribution, and now, with this shift to streaming, many artists are independently representing themselves. Streaming services also provide great marketing opportunities for artists by updating users about new music releases and upcoming concerts, even including direct links for users to purchase tickets.
When it comes to music listeners deciding which streaming service to subscribe to, the determining factor is user experience. The use of AI is pivotal in this regard. It can be used to create personalized playlists and recommendations of new artists and genres for users. Many different strategies are utilized to provide users with a customized experience. One strategy is collaborative filtering, which analyzes how often a song is played or added to a playlist and how frequently a user visits an artist’s page. Another strategy implemented is natural language processing (NLP), which analyzes various texts such as artist lyrics, playlist titles, and online listener discourse.
One of the features Spotify provides users with that is advantageous to their popularity and unique to their streaming platform is the Spotify AI DJ, which acts as a personal assistant of sorts. It provides narration similar to a radio host and takes into account real-time feedback of likes and dislikes, as well as historical listening patterns. Additionally, as music consumption increases, there has been a growing popularity of listeners wanting to reflect on their listening patterns. Spotify Wrapped is a personalized analysis of users' listening habits throughout the year and a fan favorite among users. It is a major competitive advantage as Spotify's competitors are not offering their users an equivalent.
The rise of streaming platforms has revolutionized the music industry through innovative advances in improving listener experience. As competition intensifies and technology continues to evolve, the future of music consumption will continue to be shaped by streaming’s ever-expanding influence.
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