A recent Digital Music News headline claimed, “There Are Nearly 90 Million People Paying for Streaming Music.” Its numbers add up to 87.5 million if you buy into two assumptions. First, that Apple Music will shortly grow from 11 to 15 million subscribers. That may be plausible, but the service has had trouble with churn so it is probably optimistic. Our analysis suggested the churn rate for first wave of Apple Music subscribers was 47%. Second, and more importantly you must buy into the conclusion that Satellite subscribers are streaming subscribers.
Is Satellite Streaming?
By conventional analysis, satellite radio such as SiriusXM is not considered streaming. It has historically not been an on-demand model and didn’t flow over the Internet. However, every SiriusXM subscriber gets access to the mobile app which means all 30 million are eligible – even the six million that are still benefiting from the access that comes as part of vehicle purchases. Google Play shows that between 5 and 10 million people have downloaded the app. If we take the mid-point and assume iOS has similar penetration, that would be 15 million downloads or about 50% of the current subscriber base. That’s a large streaming audience and is an impressive conversion rate from in-car audio to app-based listening.
Digital Music News (DMN) could change the language of its claim and make an equally powerful point by simply saying nearly 90 million people pay for audio content access. That has been a question all along. Would people subscribe to access audio content? The answer is clearly yes. We can also help the DMN team out and suggest they consider other large services with subscription users such as Slacker, Saavn, Amazon/Audible, YouTube Red and Google Play. Then the global subscriber base for audio access clearly tops 100 million users. Consumers clearly like streaming audio and access through mobile devices has only accelerated its adoption.
IFPI data that came out this week tells a different story. It suggests there are just 68 million streaming subscribers worldwide. With this number they are clearly not including SiriusXM in their calculation.
IFPI’s estimate probably concludes there were about 53 million subscribers at 2015 year-end using Spotify, Apple Music, Deezer, Pandora, Rhapsody/Napster and Tidal and another 15 million spread across other services. That could be right, but is probably a low estimate. If true, it does suggest that Spotify commands 44% market share of streaming music subscribers worldwide.
What Does This Suggest About Ad-Supported Listening?
As large as the streaming audio subscription audience has become, it pales in comparison to ad-supported streaming. Think about some numbers. SoundCloud claims 175 million monthly users on its ad-supported service. Spotify has about 70 million and Pandora 75 million ad-supported listeners. Many of Saavn’s 18 million monthly listeners choose ad-supported listening. All of iHeartRadio’s 29 million monthly listeners are accessing ad-supported Internet radio. That is about 370 million ad-supported listeners across just five audio publishers. If you want to include YouTube, you can consider IFPI data from 2015 which reveals that 27%, “listen to music on YouTube without watching the video.” IFPI data from 2016 puts the number for ad-supported user-upload sites (i.e. YouTube and may also include Soundcloud) at 900 million.
Not only is the size of the ad-supported streaming audio audience large, but it has also been growing quickly even when you eliminate YouTube from the numbers. IFPI data suggested it grew 38.6% in 2014, up from only 16.6% in 2013. In 2015 the numbers rose again somewhere between 11% and 59%. The organization is reporting its numbers differently this year so it is difficult to make a straight comparison on this metric.
Strategy Analytics estimated in 2015 that no more than 11% of consumers would ever subscribe to an audio service and that the vast majority would opt for ad-supported options. If we estimate audio streaming subscriptions at 68-100 million worldwide with a 85 million midpoint, that suggests that the ad-supported streaming music audience ranges between 618-909 million monthly users with a midpoint estimate of 772 million. When added to subscription users this delivers a total streaming market of 686 million to 1 billion listeners with a midpoint of 857 million monthly users.
One Billion Streaming Listeners, 89-95% choose Ad-Supported
It is safe to say that streaming music isn’t a fad. One billion or nearly 1 billion consumers can’t be wrong. For all of the hype and media coverage of subscription growth, the bigger story is the mass migration of global consumers to ad-supported streaming. Many are increasingly displacing their traditional radio and owned-music listening habits in favor of audio access on smartphones. Streaming audio represents a global audience today that is closing in on Facebook and Google scale and already surpasses Facebook’s U.S. audience. That represents a big opportunity for advertisers and unprecedented listener access for artists.
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