Music is bought by streaming it. Generally music is provided at $10 a month or at this times nothing. Amazon and Pandora Media introduce new versions of streaming services, charging as little as $ 5 a month. This will put pressure on existing players Spotify and Apple Music. When Apple iTune store opened in 2003, it charged 99 cents for song downloads. However, even $ 10 a month or $ 120 a year is too high for casual listeners. In the US, the average customer now pays for recorded music on CDs etc. about $ 67 in 2016, up from $55 in 2015 but down from $ 80 in 1999.
The streaming market is divided between internet radio services like Pandora which offer songs tailored to listeners’ tastes but offer no choice to listen exactly what they want and the so-called on demand services like Spotify and Apple Music, which let the users pick specific songs and create playlists.
Streaming Music Digital Firms
According to a Ficci-KPMG report, the size of music industry which stood at Rs. 1080 crore in 2015 is expected to grow to Rs. 2060 crore by 2020. Of the total revenues earned by music industry, 55 per cent is accounted for by the streaming apps, and the rest by sale of music rights to FM radio, live events etc. The largest chunk of revenue ( 80-90 per cent ) is accounted for by advertising. Ad on music apps such as Gaana or Hungama are either an image or video, and is charged at the rate of Rs 150-250 per thousand impressions ( CMP ). The cost of roadblock advertising ranges between Rs. 2.5-3.5 lac per day. A roadblock advertiser runs the campaign along multiple placements on the app for the whole day. For audio advertisements, music streaming apps sign long term deals for a month with advertisers who pay Rs. 2.5 lac for a month.
Paid subscribers of the apps are few. Of the total user base of Gaana, only 1 per cent are the paid subscribers but still they generate a revenue to the extent of 20 per cent. In order to increase their contribution, the apps are trying to improve their paid subscriber user base, say from 1 per cent to 5 per cent.
Digital music firms which offer streaming music are also trying to create original content so as to build a loyal customer base. This has become necessary as international player Spotify is entering the Indian market with a huge music library of 30 million songs. Original content will help in bringing new users. However, it will increase the operating costs.
Another revenue stream could be access revenue. Here a particular music app becomes a default app on user’s phone by an arrangement with a telecom company who agrees to share revenue with the music firm.
Spotify
This is a Swedish music streaming company. It works on two models — subscriptions and advertising. In India, the company relies only on advertising, and has opened its app to mass brands with focus on segments such as FMCG, retail, lifestyle and entertainment. In global markets, there are many who listen to music on subscriptions — about 54 per cent users are on ad supported model globally. It operates in 79 markets. It has 248 million users of which the subscribers are 113 million. As YouTube is available here for free, it is difficult to persuade the audience here to pay for music.