Spotify champ and CEO Daniel Ek
Spotify champ and CEO Daniel Ek

Cowen Study: US Music Industry Rebounding With Spotify

Spotify leads the on-demand music business today, but it is increasingly facing challenges from a host of competitors, including Amazon, Apple, Pandora Media and Alphabet-owned YouTube, Cowen & Co. said in a report Wednesday.

After a decade of decline, the US music industry is expected to see a compound annual growth rate of 4% from 2016 through 2021, led by rising adoption of streaming services, Cowen said. Revenue from on-demand music services will double by 2021 and will rise from 18% of industry revenue this year to 40% by 2021, Cowen predicted.

US music sales are predicted to rise nearly 25% from about US$7 billion this year to $8.7 billion in 2021. On-demand streaming music is seen more than doubling, from $1.7 billion in 2016 to $3.5 billion in 2021, Cowen said.

Based on its monthly survey of 2,500 US consumers, Cowen estimates that 12 million households pay for at least one music streaming service. The number of streaming music subscriptions is about 16 million when accounting for consumers who subscribe to multiple services.

Cowen forecasts 18 million paid on-demand streaming music subscribers in the US in 2016, rising to about 31 million in 2021.

Cowen's May survey found that terrestrial radio is the top music listening platform. Some 74% of respondents listen to terrestrial radio, followed by YouTube (59%), Pandora ad-supported music (37%), Sirius XM satellite radio (22%) and Spotify ad-supported music (19%).

While YouTube trails terrestrial radio among all respondents, YouTube is the leading source of music for millennials, the report states.

Spotify is among the market's top candidates to make an initial public offering. Cowen estimates Spotify will exit 2021 with 81 million global subscribers and $7.6 billion in revenue, up from 28 million subscribers and $2.2 billion in revenue in 2015. But Spotify is not profitable, losing $194 million last year.

Cowen noted that three of the big new players in the music industry -- Alphabet, Amazon and Apple -- aren't using music as a profit driver. Rather, they use their respective platforms -- YouTube, Prime Music and Apple Music -- as high-frequency consumer touch points that reinforce the brand, build an ecosystem and generate traffic to higher-contributing offerings. – Investor’s Business Daily

 

 

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