Storms Ahead For Music Streaming’s Growth?

Streaming services have been introducing more new features this year to entice new users and keep established ones engaged. 

But will 2024 be the year when the steady growth of music streaming enters churning waters? 

In the first six months of this year, global on-demand audio streams increased by 15.1 per cent to 2.29 trillion, up from 1.99 trillion at this point last year and at a faster pace than ever before.

However, during the same period, the US, the largest music market, which has a flow-on effect on the rest of the world, saw a massive slowdown. 

This compounded fear younger audiences are most feeling the financial pinch or suffering user fatigue and pulling subscriptions.

Whether this trend affects Australia will not be known until the Australian Recording Industry Association (ARIA) releases its Q1 2024 figures.

Its last one, released this March, covers 2023, when streaming and vinyl were mostly responsible for the industry’s 11 per cent growth from 2022 to a record $676 million. 

Streaming made up 69 per cent of local revenue. Free users were the fastest-growing sector, and paid subscriptions were worth $467 million.

It will be interesting to see how the spending on music streaming has been affected this year.

After all, 7.8 million Australian households subscribe to at least one video-on-demand service. Some services have this year reported a drop in new subscriptions.

Global Growth

Figures from London-based marketing data and analytics company Kantar showed that global growth in 2024 was driven by the growth of YouTube Music and Spotify and services expanding into podcasts and audiobooks.

In Q2 2024, 14 per cent of new premium subscribers were lured by a wide range of podcasts and 11 per cent by exclusive content. “Interest in podcasts and audiobooks continues to rise, with 29 per cent of streamers now considering podcasts an important part of their life, up from 26 per cent last year,” Kantar said:

Kantar research uses input from users in Britain, the US, Australia, Germany, Spain and France.

According to its latest Entertainment On Demand (EOD) report, YouTube Music was the Number 1 most adopted music streaming service in Q2 2024. It retained its “strong influence on music discovery, which remained consistently high across all demographics.”

In February, YouTube Music and Premium subscribers hit 100 million. Most are male: 66.8 per cent in Australia and 61.3 per cent worldwide.

Globally, YouTube Music and Premium’s largest age group is 25—34. In Australia, the largest is 18—24 at 36 per cent and the 25—34 group at 35.7 per cent. Last November, Premium upped its subscription to $16.99 per month.

This year, Spotify reported a 2 per cent global growth in all age groups. In Q2 2024, it added 7 million extra subscribers to reach a total of 246 million, with a 20 per cent rise in revenue to €3.81 billion (AU$6.20 billion) and a net profit of €274 million ($446 million). Last year, its Australian user numbers were 12.5 million, making it the local market leader.

According to Deloitte's Media & Entertainment Consumer Insights 2023, Australians, on average, listen to nine hours and 15 minutes of audio content each week. Most of this is spent on listening to music or radio (seven hours and 20 minutes), with 48 per cent of households having a paid music subscription.

The remainder is spent on podcasts and audiobooks. Australia leads the world in podcast listenership, with 41 per cent consuming at least one hour of podcasts and audiobooks a week.

US Experience

Figures released last month by the Recording Industry Association of America (RIAA) showed that while the US market rose by three per cent to  $5.5 billion, streaming was only up 2.7 per cent. In the first six months, only 2.5 million began subscriptions. 

This was a stark contrast to the 6.6 million new subscribers in the first half of 2023, the 7.9 million in 2022, the 9.4 million in 2021, and the 14.4 million in the same period in 2020. Subscriptions account for 84% of US music revenue.

This year, revenue from on-demand ad-supported music streaming grew 2.4 per cent to $899 million, and accounts for 10 per cent of recorded music revenues.

In comparison, sales of physical formats like vinyl and CD rose 12.7 per cent to $994 million.

The last US Census had 131.43 million households. The RIAA reported 99 million paid music streaming subscription accounts.

Put these two figures together, one analyst surmised, “the US appears to be officially nudging closer to saturation point for music subscriptions – i.e. the moment when the maximum possible amount of paying American music subscribers has been reached.”

New Features

To keep free users and subscribers engrossed, streaming services have been adding features.

Spotify began testing its personalised listening data-generated "day list" in select markets in January. This month (September), it expanded it to all free and paying users in its 180 markets. A new feature is that, aside from English, it is supported by 14 new languages.

Its new AI Playlist beta is initially rolling out to Spotify Premium subscribers on mobile devices in Australia and the UK. Last year, it experimented with AI playlist generation in its DJ feature.

The highly anticipated new ‘deluxe’ tier is expected to include high-fidelity audio, “superfan clubs,” and new playlisting and song management tools. 

CEO Daniel Ek predicted it would cost $17 or $18 a month and would be for “huge music lovers who are primarily looking for even more flexibility in how they use Spotify and the music capabilities that exist on Spotify.”

Apple Music teamed up with Manchester, UK-based global club series The Warehouse Project to exclusively release spatial-audio DJ sets. “We believe they are the future of live content, offering a whole new world of sound,” the company said.

Apple Music now provides artists with insights into their radio play by monitoring 40,000 radio stations globally, helping them identify where to tour and market.

In recent weeks, TikTok has been testing its Sound Search update with select users, where a song can be identified by singing, humming, or playing it. Unlike YouTube Music’s similar song detection feature, it goes a step further by linking the songs to TikTok videos.

Tencent Music’s tech features, including a Super VIP tier (which offers higher sound quality, priority access to content, long-form audio, online karaoke services, and live event tickets), interactive streaming features, virtual DJ, and a multi-device synchronized playback feature, translated into a huge boost in subscribers that outpaced Spotify’s growth. 

Both added 10 million subscribers, with Tencent Music's subscriber base reaching 117 million by the end of June 2024, compared to Spotify’s 246 million.

YouTube announced on September 5 that it is developing tools to detect AI-generated voices and likenesses of people in its videos and a mobile app, YouTube Create, similar to TikTok’s CapCut, for editing short-form videos on the move.

It is also said to be working on a tool that will allow musicians, actors, athletes and content creators to “detect and manage” AI-generated content that shows their faces.”

Better algorithms from AI provide greater personalisation—what type of music you’d prefer to listen to at different times of the day, for instance, and what matches your changing moods—which makes for greater stickiness.

Where’s The Growth?

The scope for growth is still considerable. In America, for instance, Latin, country and EDM are catching up with hip hop and rock, which were early streaming adopters. 

The three genres have new, young audiences that are streaming-savvy. Country music had a 23.7 per cent increase from 2022 to 20 billion on-demand US audio streams last year. Latin music escalated by 15.1 per cent to nearly 51 billion streams as of June 27.

Also with strong growth numbers are children’s and religious music, and listeners of these two tend to finish listening to tracks right to the end. There are some who believe they should receive greater royalties for that.

Hard Graft

Economist and DJ Will Page suggested on the Trapital platform, “If we assume that the first 100 million music subscribers in the United States were largely, predominantly iPhone users, then that has to mean that the next hundred million are going to come from Android.

“And that's a great example of peak oil. Those Android customers are going to be harder to acquire and their lifetime value might be less over time. 

“So the next hundred million is going to be a lot tougher to get out of the ground. So we have that influence on the market, and I think you can look back at the streaming services and ask, Which of these services is best placed to tackle the Android market?”

Missing Out

Kantar insists that streaming services are continually missing opportunities to expand by not catering to music consumers’ needs.

For instance, its global figures show that 85 per cent of people who currently don't stream music express interest in listening to music. But what’s stopping them is that 42 per cent don’t want to pay a regular fee. This goes back to value for money as the number one driver behind new premium subscriptions across all demographics.

The exception is Gen Z, whose decision to choose a streaming platform depends on friends’ use.

Free trials remain the most influential factor in starting a subscription, but recommendations from friends and family are just as important.

Craig Armer, Global Strategic Insight Director at Kantar, commented: “The music streaming landscape is being reshaped by the growing diversity of audio content, from podcasts to audiobooks. 

“There’s a significant opportunity to engage older demographics who are less involved but show considerable potential. The challenge lies in convincing these audiences of the value of paid subscriptions. 

“With many non-streamers interested in music but hesitant due to costs, services should focus on harnessing recommendations from satisfied users to attract this untapped audience.”

He continued: “As YouTube Music leads in adoption and Spotify continues its growth, the ability to amplify the right relevant content personalised for younger or older listeners will be key. 

“Younger audiences show a greater interest in the recommendations the service algorithms generate, whilst older audiences utilise pre-made playlists. Services that can effectively meet the needs of diverse audiences while offering compelling content beyond music will be well-positioned for sustained success in this dynamic market.”