Key trends in the music streaming market
The digital music industry is seeing a trend shift from owning music through downloads and “Over-the-Air” AM/FM radio to low-cost subscription services such as the Internet Radio. Pandora (P) is a leading player in the Internet Radio market, and tech giants such as Apple (AAPL), Google (GOOGL), and Amazon (AMZN) are the upcoming players to leverage the fast growth potential of music streaming market. According to a report from Kleiner Perkins Caufield Byers and as the following chart shows, in 2013, physical music sales declined 13% and digital music sales declined 6%, while streaming music consumption increased 32%.
PCs the most used mode for listening Internet Radio
According to an Edison Research report, people listen to Internet Radio the most from their laptops and desktops compared to their smartphones and tablets. This is surprising considering the personal computer (or PC) market is one-fourth that of smartphone market. The main reason for this could be that people tend to use their PCs at home or work where the Wi-Fi connectivity is easily available to listen to Internet Radio. People tend to carry their smartphones or tablets when they’re moving. They don’t prefer to use their 3G or 4G data to connect to the internet because of the cost involved.
Music streaming market is undergoing a lot of consolidation
To leverage the fast growth potential of the music streaming market, companies are acquiring smaller niche players in this field. It all started a few months ago Spotify acquired Echo Nest. Apple then acquired Beats Electronics and Beats Music for $3 billion in May. A few days ago, Rdio acquired TastemakerX. Also, Google recently acquired Songza.
Amazon entered this market to popularize its Prime service
Amazon announced its intentions of entering into the music streaming market by offering it free to Amazon’s Prime members. Also, it won’t have advertisements. Amazon’s main strategy in offering this free service was to attract more customers to buy its $99 per year Prime subscription, which in turn would boost its core business of e-Commerce. Although the collection of songs in its catalog is currently very limited, Amazon can still become a potent player in the music streaming market in the future by acquiring more content just like it did in the video streaming market. Amazon’s aggressive strategy paid off when it surpassed Hulu and Apple in the video streaming market. It’s now only behind Netflix (NFLX) and YouTube.