Streaming Music: Saving the Industry

A couple of months ago, I wrote about the music industry and how players such as Spotify and Pandora were not getting as much value from the industry as I thought they deserved.

As 2016 has ended and we get final reports on the industry, I think this becomes more blatantly so:

Based on the BuzzAngle report on the USA music industry:

• People are listening to more music than ever before….4.9% more than last year. And this is fueled by, you guessed it, streaming consumption which is up by 83% YOY. Another good sign for the industry: paid subscription is up by 124%!
• Overall album sales down -15.6%. digital album sales -19.4%, song download sales were down -24.8% and physical album sales down -11.7% .
• The only bright spot is that vinyl sales were up 25.9% but besides German Herebia, CEO of RedMas, I don’t know of anybody else who is buying vinyl albums. Vinyl album sales accounted for only 8% of total physical album sales.

So clearly, streaming music is the way of the present and the future – it’s how people will consume music from now on (until the next invention cycle).

That’s why I say that Pandora, Spotify, Deezer and the other services are not getting the full value of their contribution. They are the ones saving the industry, but are barely profitable or not profitable despite very significant revenues.

On another note, these players now have massive reach and can also help the music industry monetize by selling advertising. However, advertisers are not taking full advantage of these platforms. According to a new study by Group M and Spotify, mobile music streaming now represents a $220m opportunity for advertisers. Rob Norman, CDO for GroupM and chairman of GroupM North America, admits that the opportunity for brands and advertisers is huge since the data provides a good understanding of the individual consumer. He says:

“With streaming data, you don’t just get a basic demographic snapshot, you get to know what songs, artists, and playlists people are listening to – which can help you determine what they’re doing, how they’re feeling, or even what they’re thinking at the exact moment you want to reach them. This level of contextual data could take segmentation to an entirely new level, letting advertisers reach a hyper-specific, targeted audience at key points throughout their day.”

Alex Underwood, VP and head of global agency & partnerships at Spotify explains that streaming is a more personal experience and as such yields more powerful data.

“That’s another huge reason the future of the industry presents such remarkable opportunities for brands and marketers—it’s a new chance to connect with consumers on an inherently personal, intimate platform. Whether it’s a streamer listening to Drake with noise-cancelling headphones on their commute, or watching the next season of Stranger Things in their bed, streaming provides an entirely new format for users to engage with the media content they want, in the setting of their choice. As a result, marketers have a unique opportunity to reach individuals with direct messaging, tailored specifically to the person streaming and the context they’re in.”

At Cisneros Interactive we own Audio.Ad, the first audio advertising network in Latin America and the US Hispanic market, and we are seeing the same trends in our region. Significant audiences in streaming services and growing year over year, but still timid response from advertisers. We’ve seen it again and again, first with the internet, then with mobile advertising, and now I think the next frontier is audio advertising. Advertisers are slow to catch on to consumers but eventually they get there. At Audio.Ad the team is ready: they have the audience reach, segmentation capabilities, and attractive ad formats.