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shutterstock_207220999According to some, Pandora and Spotify will lead to the tragic downfall of the music industry. Recently, Taylor Swift made bold claims about Spotify, calling it a “grand experiment,” and pulled her entire discography from the site, just one week after her wildly anticipated album was released. On the other hand, others believe streaming services will save music. Regardless of where you stand, the music industry is changing at a rapid pace, and streaming services are the ones pulling the majority of the strings.

The Rise of Subscription Services

Global recorded music sales in the U.S. totaled $15 billion in 2013 with digital revenues responsible for 39 percent of total sales, reports the International Federation of the Phonographic Industry (IFPI). This increase in revenue allowed music subscription services to flourish, both in user numbers and sales.

Free-to-consumer and paid-for tiered music subscription services grew by 51 percent in 2013, says the IFPI. This growth predicts the fall in CD revenues, claims Midia Research. However, this does not necessarily mean the end of music. In fact, it feels very similar to the downfall of compact cassettes.

Additionally, the subscription model is leading to more payment for music by consumers, which creates a positive shift from pirate services to a licensed music environment, says the 2014 Digital Music Report conducted by IFPI. Should this unexpected result reach the beloved TayTay’s ears, she might start singing a different tune.

Digital Downloads Pave the Way

Not everyone has access to music subscription services, though. Developing markets such as South Africa, Hong Kong and Philippines, are being exposed to the digital music terrain via digital downloads, explains the IFPI. Downloads might be dwindling in the U.S. by 12 percent, according to CNET, but they’re booming in other countries and are setting the stage for subscription services.

In fact, it is already becoming quite clear that subscription services like Spotify and Pandora are more popular than traditional download services like Amazon’s Digital Music Store. Apple seems to agree—Beats Music, its subscription-based online music streaming service for the iPhone and iPad, seems to be a carefully calculated precautionary measure in case iTunes fails.

From Ownership to Access

One key change in the foundation of the music industry is the move from ownership to access. In other words, consumers are quickly becoming comfortable with the idea of not physically owning a copy of their favorite artist’s album and instead they simply have digital access to it. Great value and convenience are some of the factors that have made monthly subscription fees so appealing to the masses.

Fortunately, the change from physical to digital doesn’t have to bring losses to the music industry. TechCrunch mentions the possibility of windowing the creation of exclusivity around format, time and geography. Spotify, Rdio and other on-demand music subscription services can take advantage of windowing by unlocking exclusive music releases to paying customers before they become available anywhere else. Giving exclusive access is a great way to gain new paying subscribers and offer artists a greater cut. This way, everyone wins—the avid music fan gets the music, streaming services gain subscribers and the musicians are rewarded.

Author: Andy Quayle

Andy was born in the Isle of Man and currently lives in Pittsburgh.
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