Berklee Online

Streaming Gains (Even More) Ground

How artists and songwriters make money through digital streaming is a complicated and constantly evolving area of the music business. Because of the rapid changes occurring in this market, it’s important that musicians take a critical look at the growth of the digital-subscription business and how to use playlists to promote their music.

While no one can guarantee that the transition from music sales to streaming will totally restore the recording industry, many industry observers are optimistic that, with rising numbers of paid subscribers to digital service providers such as Spotify and Apple Music and the continuing growth of worldwide mobile phone access and use, there is great potential for musicians to profit.

Worldwide Growth of Digital Streaming Services

As of the end of 2018, market leader Spotify had more than 207 million monthly active users, with 96 million of them being paid subscribers. This enabled the company to reach an elusive milestone: its first operating profit. The expansion of consumers adopting paid music subscription services was evident in 2018, when music industry revenue reached $18.9 billion, an 8.2 percent increase from 2017. Streaming revenue generated about half of that—a 29 percent larger share than in the previous year.

This boom in subscriptions is a result of two things: Subscription services are expanding music consumption to new regions of the world, and a new generation of music fans is being weaned off digital sales and illegally consumed music. Since 2013, music piracy has decreased 50 percent, and the International Federation of the Phonographic Industry has reported “encouraging growth in a number of markets which historically have been overwhelmed by piracy,” citing Russia, Turkey, and China as examples.

At the 2018 SXSW (South by Southwest) conference, Eddy Cue, Apple’s senior vice president for internet software and services, said a huge number of streaming music subscriptions are still up for grabs, noting the world has about 2 billion potential subscribers who have both the access and the means to pay for streaming music.

This sentiment was echoed at the 2018 MIDEM conference, where longtime music streaming proponent Tom Silverman of Tommy Boy Music noted that the 196 million paid music subscribers worldwide make up only 8.2 percent of the world’s smartphone population, leaving ample room for expansion of the exponentially growing worldwide smartphone market.

But music streaming services aren’t only focused on the smartphone market. The rapid expansion of the smart-speaker market, dominated by Amazon’s Alexa and Google Home, and the integration of streaming apps in cars are creating avenues for streaming services to gain customers.

Streaming Playlists

Because streaming services offer playlists (a list of tracks, often curated by a third party) subscribers have discovered more diverse genres, particularly hip-hop, which captured 17 of the top 25 spots—and all of the top four—on Billboard magazine’s 2018 Streaming Songs Artists chart. A 2017 chart with Spanish-language videos comprising six of the top 10 videos on YouTube also illustrates this diversity. These factors now have the music industry poised for future growth, and many industry observers see a reversal of the decline in recorded music revenue over the past decade.

Music streaming service playlists have not only created greater diversity in the kinds of music subscribers listen to, but also have narrowed the number of gatekeepers to these invaluable promotional vehicles. Terrestrial radio has hundreds of station programmers that artists can approach to get a song added to their playlists; but when it comes to major streaming services, there are only 12 or so curators. But there’s an upside to this: Streaming services have shown a particular interest in adding recordings of undiscovered or do-it-yourself artists, whose works are not usually heard on terrestrial radio.

For example, Spotify playlist curators like Tuma Basa—who oversaw programming for RapCaviar and several other influential playlists before leaving the company in early 2018—have become the new radio DJs and programmers, today’s tastemakers with the power to create the next new big act.

Leveraging this trend, Spotify now offers a quick and easy way for artists and labels to submit tracks for playlist consideration. SubmitHub is a submission service that many independent artists use but, just as in the terrestrial realm, record and artist promoters should be ready to approach streaming-playlist programmers with broad marketing plans for radio, TV, live performance, press, and other planned promotional activities.

Rather than approaching major music streaming services, DIY musicians seeking to break internationally may find it more beneficial to cultivate their local markets first by soliciting playlist programmers in their home countries. Several countries and cultural regions have developed their own music streaming platforms, such as the Arab region’s service, Anghami; India’s Gaana and Saavn/JioMusic; France’s Qobuz; Russia’s Yandex Music; and Chinese conglomerate Tencent’s Tencent Music.

Once musicians succeed in getting their music on one or more of these services, the potential of being added to the more influential worldwide streaming service playlists is increased, meaning that their music will reach more people. Eventually, this will mean that more money is streaming into their bank accounts.

Kellogg is the director of the Berklee Online Master of Arts in Music Business Degree Program and author of the best-selling book Take Care of Your Music Business.