What is happening in the audio streaming market: discussing the development of streaming platforms

    Last year, streaming services announced the main way to consume music in the West. As the user base grows, the platforms try to reduce costs, get rid of the “damnation of loss” and try to find new ways to earn money.

    We tell what and who has already managed to do in this regard. Photo Tobias Scheck / CC BY

    Platforms get closer to musicians

    One of the most common reasons for criticizing streaming services is the small payouts to musicians and composers. To earn something substantial, the author must collect 200 thousand plays on Apple Music or 366 thousand on Spotify in a month. The task is not easy. Famous musicians also express dissatisfaction with the situation, which allows us to talk about the inevitable revision of approaches to working with authors.

    The first step towards was made by Spotify. The company immediately decided to be proactive and offered to conclude direct transactions bypassing labels. Such a model will allow Spotify to pay fixed fees at the start of exclusive collaboration with musicians and save subsequent deductions for streaming their works. A similar model suggestedSoundCloud: the company will not pay the starting fee, but will allow authors to earn on advertising blogs (similar to the YouTube model).

    New initiatives are being developed not only by companies, but also by governments. The most famous American Music Modernization Act. The law prescribes the creation of a new regulatory body in 2020, which will agree with streaming platforms on the amount of payments to musicians. A similar situation occurs in Europe, where they adopt the new Copyright Directive: online platforms are required to implement “filters” that will remove all unlicensed content upon download.

    Politicians believe that the Directive will help increase licensing fees for authors and composers. However, according to representatives of the music industry, the law will harm young performers who begin their careers by creating cover versions. With the adoption of the law, the use of other people's works for such purposes will be unacceptable.

    Another bill was created in Canada. The local organization for the protection of the rights of composers proposed introducing an additional tax on the use of streaming services - moreover, they decided to levy it on everyone who spends more than 15 GB of Internet traffic per month. The initiative was sharply condemned: by law, even those who did not use streaming platforms, such as gamers, would have to pay.

    Streaming wants to get a plus

    Despite the fact that the annual revenue of large streaming services exceeds one billion dollars, they still incur a loss due to high license fees. Organizations have to look for new ways to make money. For example, in the spring of 2018, Spotify decided to place shares on the stock exchange. After the transition to public status, the value of the company's securities grew steadily - but even this did not help Spotify become profitable.

    Only at the end of 2018, the streaming platform finally announced the first ever profit. However, it turned out that the main reason was the reduction in costs. The company has not found a fundamentally new model of earnings and is losing money, like other services, such as Apple Music.

    Due to the lack of profit, streaming platforms have to change their monetization methods. For example, SoundCloud abandoned the traditional subscription model after it was on the verge of bankruptcy. Now she focuses on selling services for musicians and advertising revenue.

    Another new way to monetize is podcasts. The production of conversational audio content requires small budgets, and the advertising market in podcasts is growing. Major streaming services - Spotify, Pandora and Yandex.Music - are already working with podcasts and plan to develop this direction.

    Photo Tobias Scheck / CC BY-SA

    New giants appear

    Difficulties with monetization do not stop the development of streaming platforms. At the end of 2018, Tencent Music (TME), which owns the largest music streaming applications in China, entered the international market. She placed shares on the New York Stock Exchange.

    The most interesting was not the IPO of the company itself, but its unusual business model for the West. TME does not earn on subscriptions, but on the social aspects of applications, such as virtual gifts. It is likely that the placement of Tencent Music shares on the exchange will be an occasion for other streaming platforms to think about introducing such functionality.

    Also to enter the market audiostriminga saidWinamp. In 2019, the release of a completely new version of the player is planned - it will be turned into a single aggregator for other streaming services with music and podcasts. It is not yet clear whether this idea will succeed - other platforms may simply refuse to cooperate with a competitor.

    What do we have

    Russia has its own market for streaming services. Of the major international platforms, only Apple Music and Google Play have gained popularity . We should not forget about Spotify, which at the end of 2018 once again promised to launch its platform on the Russian market. But until this has happened, the widespread use of the service can only be discussed in relation to the IT community and people working in the media.

    Other projects we have known - Yandex.Music, Boom, Zvooq - home development. They found their listener. Like in the rest of the world, the number of their subscribers is growing: Yandex.Music and Boom pay for usingalready more than a million people. It remains only to observe the development of domestic streaming companies and how the introduction of new opportunities for subscribers will affect the growth of the user base of services.

    What we write about in our “Hi-Fi World”:

    We discuss Hi-Fi trends: a transcript of the “Sound” show
    What it is: the Russian market of streaming services
    Eight audio technologies that will fall into the TECnology Hall of Fame in 2019
    How to turn a computer into a radio, and other ways to extract music from comput. of systems

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