Streaming reaching the end of the line?

A new album from your favorite singer has just been released, so you go the nearest music store and buy it. Well, that's how it used to be. Today, you'd more likely stay right at home and stream the whole album to your smartphone within seconds.

You can access your music everywhere — at home or on the road, and it doesn't really cost you much. Welcome to the modern world!

A couple of years ago, the music industry seemed completely lost, with fewer and fewer people buying CDs or LPs. Revenues were in free fall, former major labels were in the red and some musicians had to look out for a second job.

The industry was almost dead until the end of the last decade when a new form of music use was born — streaming, which was faster, more innovative and easier to handle. Spotify, Deezer and YouTube brought about a resurrection of the music business and are now the top market players in terms of user bases and revenues.

The end of CDs and LPs?

According to the Music Consumer Insight Report 2018, 86% of people worldwide use streaming services to listen to music. It's clear that the era of physical recording media is drawing to an end. But does that mean that the music industry will in the future solely rely on current streaming models?

"If you look at what's moved the world of music use in the past 20 years, you can hardly expect music streaming to be the end of it all," says Florian Drücke, who heads Germany's Federal Music Industry Association (BVMI).

There can be no denying that audio streaming is people's most popular way of listening to music globally, with a worldwide user base of 255 million. CDs and LPs are facing extinction.

Only recently, Swedish streaming service Spotify announced it had reached a base of 100 million premium-service subscribers, talking about "an important milestone." Nonetheless, the company is still in the red despite revenues of $1 billion (€890 million) per month.

But when the market leaders reach impressive milestones and are still having problems turning a profit, what does that mean for the future?

No lack of competitors

Amazon could soon offer an alternative to fee-based streaming. The company is obviously planning to launch an ad-financed streaming service that can be activated by the user though the firm's own voice assistant Alexa.

But Florian Drücke doubts whether this might be a real threat to fee-based streaming models. "In 2018, 21% of Germans had a premium subscription, while only 11% used ad-financed services," he notes. Free services, he argues, are viewed as a complementary offer and not so much as fierce competition.

Austrian music industry researcher Peter Tschmuck sees services like Amazon Music having an advantage in the end, because they are integrated in large corporate structures. In his opinion, such providers can build up their services on top of a well-functioning system.

This means that Spotify will be up against the likes of Amazon, Apple and Google as the latter "are not dependent on revenues from the music streaming business exclusively." In other words, those giants could influence our music taste considerably in the not-too-distant future.

"It's not a given that Spotify will remain the market leader," says Tschmuck, noting that it's a standalone streaming service that hasn't turned a profit yet. He expects the market to consolidate, producing a few victims among standalone services.

What about YouTube?

YouTube's free music streaming service is still very popular among users. "According to the International Federation of the Phonographic Industry (IFPI), YouTube's free-of-charge offer has played no small role for a third of those polled not to sign any subscription-based contracts," says Drücke. YouTube itself can't complain about ad-related income and is believed to pay less to artists than other streaming services.

And then there's what people have come to call streamripping. Some 38% of listeners are engaged in illegal music downloads, which of course is a tragedy for legal streaming services and artists not getting any royalties.

The 'streaming economy'

Be that as it may, audio streaming looks set to dominate the music industry for some time to come, given that half of the total revenues secured by the industry are already generated by streaming-related businesses. Peter Tschmuck has no doubt that "we're on the way toward a streaming economy," where CD players and record players can be scrapped.

Streaming has breathed new life into the music industry, giving even relatively unknown musicians the chance to make a buck without a contract with a record label.

"Streaming will be with us for quite some time to come," concludes Drücke, "but we'll certainly also see some new forms of music consumption appear over time."