Written by: Amanda Graves
It isn't up for question that music industry has not been financially successful for quite some time. Digital copies are being sold less and less; 65% of US music revenue is in music streaming accounts2. Music streaming accounted for most of the audio consumption in 2017, 400 billion streams to be specific, according to Nielsen Music. Millions and millions of people stream music every month through Apple Music, Spotify, Pandora, and other services. With all of these people streaming every month, why are all the top-dog streaming services still not profiting?
The main reason for this deficit is the amount of money they are spending on music royalties and licensing fees they are required to pay in order to play these copyrighted songs. Spotify has spent nearly $10 billion in licensing1 since 2006, while alongside suffering $2.9 billion in costs over the same period. The money they are spending on licensing is so much greater than these services are receiving from their premium subscribers and advertisers.
There is no way around licensing fees, but streaming services can only hope to lessen their losses by reeling in more advertisers and paying subscribers. So far, Spotify, in particular, has struggled to do so. In 2017, Spotify grew its revenue 38% year-over-year, bringing in $5.04 billion. These losses more than doubled during the same period, expanding from $664 million to $1.52 billion1.
Considering 65% of music revenue is in streaming services, yet even the biggest companies are continually in a deficit, they will need to change their business models, and quickly, in hopes to better the financial stability of the music industry.
1). http://www.businessinsider.com/spotify-has-spent-10-billion-on-music-licensing-and-revenue-since-it-started-2018-2
2). http://www.businessinsider.com/music-streaming-services-like-spotify-leading-music-revenue-us-charts-2018-3
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