Ad-Supported Streaming = 4.2% of Global Recording Revenues…

Here’s more proof that ad-supported streaming doesn’t support much of anything.  According the IFPI, total global recorded music revenue in 2014 was $14.824 billion. Of that, total ad-supported streaming revenue was just $617 million, or 4.2%.

globalindustrysalesbreakdown2014

Source: IFPI, Digital Music Report 2015.

 

15 Responses

  1. Bandit

    You should also include for comparison a pie chart showing the percentages of the type of format which consumers use to listen to music.

    I suspect a very large slice of the pie will be ad supported streaming

    Reply
  2. Chris H

    Interesting to note the more you get into “customizing” the experience (Streaming, Mobile Personalization), the less money it earns. From both the industry and the consumer POV, that is an overrated concept;

    Reply
  3. jw

    Ad-supported streaming is promotion first & revenue generation second.

    Maybe ad-supported streaming is $617m right now, but next year how many of those become premium subscribers? And without ad-supported streaming, what does subscription look like? It certainly doesn’t look like $14.8b, that’s for damn sure.

    As usual, this article doesn’t even begin to tell the whole story.

    Reply
    • Faza (TCM)

      “[H]ow many of those become premium subscribers?”

      IIRC, Spotify has stated that 80% of its premium users started on the free tier. Given that Spotify have a 25/75 premiumum/free user split this translates to:
      5% – users who started out with premium
      20% – users who started out free and upgraded
      75% – users who started out free and stayed there

      Of the 95% total users who started out free, only 21% chose to upgrade.

      Isn’t maths fun? You’re welcome.

      Reply
      • John

        Great calculation, very good summary. The only thing you miss is the factor “time”. It might be that people convert after a certain period of time. Or, that is probably an accurate assumption to make. As we do not know how many of the 75 % that are within that initial time period, we don’t know how many that finally will convert. The interesting data to have would be: How many free tier users have been using the service for over 12 months and has still not converted to premium subscribers. These will probably not convert in the future either.

        If we had that data we would definitely know if ad supported subscriptions is the way to go to get music fans to put 9.99 of their monthly salary on music. If more than 50 % of them do, the music industry will be in much greater shape than it ever has been. Maybe Paul kindly can ask Spotify for that data? We know they have it.

        Reply
      • jw

        You can say definitively what percentage of premium subscribers started out on the free tier. But you cannot definitively say what percentage of free users will or will not upgrade in the future. Not without more information.

        So by “started out free and stayed there,” you actually mean “started out free & haven’t yet upgraded.” Like John was quick to point out, we don’t know what conversions look like at 3 months, at 6 months, at 9 months, & so on.

        We can also compare Spotify to services without a free tier (Rdio, Beats, Rhapsody, Tidal, etc), & the 20% (using your figures) of Spotify users who are premium subscribers dwarfs the premium subscribers of these other services. This makes me think that the free tier is essential to having a successful premium tier during this period of format transition. I don’t think that the impact the free tier has on the success of the premium tier can be understated.

        Reply
      • Ariel

        I’d also add that even at face value, 21% upgrades doesn’t seem so bad. That’s Spotify competing successfully with file sharing.

        Reply
  4. Truth

    First of all, its 14.8% streaming. Ad supported and subscription are not (at the moment) separate sources since they are primarily the same companies offering one to encourage the other. And second of all, where is FM radio on this chart. Did that earn more than streaming has?

    Maybe we should take a little more time considering the model of the past and begin to constructively work on the model of the future. This type of propaganda isn’t helping any one.

    Reply
  5. pVd

    I don’t get how these numbers are correct… the IFPI says that ad-supported is $617M (4.2%) yet Pandora alone did $732M in advertising alone (excluding Pandora’s $188M in ad-free subscribers).

    The reason ad-supported streaming has not made a meaningful impact globally is that there is only one major company that had invested in building out a scalable ad infrastructure / sales force and that company basically only operates in the US – Pandora. The reality is that if Spotify, SoundCloud and all of the other guys that have a free tier monetized their free listening at Pandora levels / RPMs this would add ~$2B in additional revenue for the industry. But those services don’t care to add advertising in a meaningful way to their service because they perceive it as impacting the listener experience and they want to drive usage so that once users are entrenched they can entice them to pay for a subscription.

    Ad-supported streaming has the potential to be ~20% of the market but this will only happen if companies invest in a meaningful way in their ad businesses. Unfortunately few companies are doing this…

    Reply
    • Anonymous

      I don’t see any way the numbers can be correct. The majority of revenue from Sound Exchange comes from ad supported services. Plus there is revenue from Spotify, Rdio, iTunes Radio, and Youtube.

      Reply
    • Ejede

      Question about Pandora. What percentage of their revenue is from paid users and what percentage is ad revenue? And do you have a source of this data you could point me to? Thanks.

      Reply

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