Despite a decline in full-track downloading, overall growth in streaming music, both paid and ad-funded free services, are hitting sixth gear and will likely capture 95% of the global market by 2022, compared to 76% now.
Strategy Analytics forecasts the number of users will more than double to reach 950 million in five years.
On the demand-side the growth in mobile streaming is being driven by increasing consumer demand for anywhere and anytime access to tens of millions of tracks via streaming music services, like Apple Music, Google Play Music, Spotify, and YouTube, instead of downloading or side-loading.
On the supply-side higher smartphone penetration, as well as competitive data plans offered by operators, including zero-rated and unlimited data plans, are removing consumers’ concern for data overage when listening to music on the move. Furthermore, the ability to store tracks for listening in offline mode has become an option that appeals to consumers in markets where networks may be patchy, or data cost high, or data allowance low.
Important markets like Japan, which transitioned late from consumption of physical music to digital music, have largely bypassed download and gone directly to streaming. We have seen competition between services driving prices downwards.
For example, when Apple Music was launched, being a late comer to the market, it applied a more flexible pricing policy in selected markets to challenge incumbents like Spotify. For example, Apple Music’s individual subscription priced $0.20 lower than Spotify in Hong Kong, while its family package is more competitive than Spotify’s in all the markets served by both.
The majority of streamers use free, ad-funded offers, and will remain so until the end of the forecast period. In markets like Eastern Europe and Latin America, advertising income is already comparable to premium payment. However, much to the chagrin of the music industry, in most advanced markets, e.g. Western Europe, North America and advanced APAC, the advertising income is still very small. This discrepancy will continue to drive music labels and other right owners to go for higher licensing fees from OTT services. The battle between paid subscription and ad funded will keep everyone in the mobile music industry on the edge of his seat.