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Music streaming service

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For a list of services, see Comparison of music streaming services.

A music streaming service is a streaming media service that focuses on digital audio, including music, podcasts, and Internet radio, sometimes with a social media component. These services usually have a subscription business model and allow users to stream music on demand, including digital rights management, from a centralized library. Some services may offer free tiers with limits on use, funded by online advertising. They typically incorporate a recommender system to help users discover other songs they may enjoy based on their listening history and other factors, as well as the ability to create and share public playlists with other users.[1]

Services were launched in the late 1990s, and after legal wranglings and shutdowns in the 2000s, they grew significantly during the 2010s, and overtook music downloads as the largest source of revenue in the United States music industry in 2015,[2] and accounted for a majority of revenue since 2016.[3] Streaming services, along with streams of music-related content on online video platforms, were incorporated into the methodologies of major record charts; the "album-equivalent unit" was also developed as an alternative metric for the consumption of albums, to account for digital music and streaming.[4] The services led to a cultural shift for consumers renting rather than buying music outright.[5]

Consumers favoring streaming platforms over physical media attributed convenience, variety, and affordability as advantages.[6]

Streaming has been criticized by some artists for making them earn less from their music and artistry compared to physical formats, especially with pay-per-stream systems. Some critique that this system makes it so artists get paid as low as $0.001 per steam, while streaming services like Spotify report record profits.[7][8][9][10]

History

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Early examples

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Digital distribution of music began to achieve prominence in the late 1990s and early 2000s.

In January 1999, "MP3" became the top search term online, overtaking "sex."[11]

In October 1999, MP3.com launched MP3radio.com in partnership with Cox Interactive Media after Cox invested $45 million in the company.[12][13]

In November 1999, PeopleSound was launched by Ernesto Schmitt in the United Kingdom. It allowed consumers to listen to music for free or buy and download complete albums.[14]

In 1999, MP3.com offered Beam-It,[11] allowing users to rip and upload music files from CDs they owned into a personal library they could stream via their accounts. In 2000, the service was the subject of a lawsuit, UMG Recordings, Inc. v. MP3.com, Inc. by Universal Music Group, which ultimately ruled that the service allowed for the unauthorized distribution of copyrighted sound recordings.[15] Although users were required to acknowledge that they owned the music, it was not practical to verify. The lawsuit proved detrimental to MP3.com, and it was acquired by UMG's parent company Vivendi Universal in May 2001, and sold to CNET in November 2003, which shut down its music distribution platform in December 2003.[11][16]

In December 2001, Listen.com launched Rhapsody (now rebranded as Napster), becoming the first service to offer subscription-based streaming access to a library of music online.[17] It was initially limited to content from independent labels such as Naxos. In July 2002, it reached agreements to stream music from the "big five" major labels.[18] In 2003, Roxio acquired the assets associated with the former file sharing platform Napster. It was combined with assets from a second acquisition—PressPlay—to form a new service under the Napster brand, which included an online music store and subscription music streaming.[19][20]

Music streaming using the Pandora Radio service

Pandora launched in August 2005; the service initially allowed users to create and listen to internet radio stations based on categories such as genres, which could then be personalized by giving "thumbs up" and "thumbs down" ratings to songs and artists the user liked or disliked.[21][22] The service's recommendation engine, the Music Genome Project, analyzes and determines songs based on various traits.[23][24] Pandora initially operated within the royalty framework enforced by SoundExchange for internet radio in the United States, resulting in operational limitations:[25][26] users could not choose individual songs to play on-demand, and could only skip a limited number of songs per-hour (although users could later receive more skips by watching video advertisements).[27][24][28] In 2008, Pandora threatened to shut down when SoundExchange raised rates.[29]

In 2001, Yahoo acquired Launch Media, which operated an internet radio platform.[30][31]

In April 2003, Apple launched the iTunes Store with 200,000 songs, which could be purchased individually for streaming.[32]

In 2005, Yahoo Music launched a subscription service that allowed songs to be streamed in DRM-protected Windows Media Audio (WMA) format.[33][34]

YouTube was launched in April 2005 by former employees of Paypal as an outlet for music videos to compete with music television. A year later, it had 25 million videos uploaded and 100 million video views per day.[35][36]

By 2006, MySpace became a prominent outlet for streaming music.[37][38][39]

Launch of Spotify, increasing competition

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Spotify co-founder Daniel Ek in 2011.

In 2006, Swedish businessman Daniel Ek and Martin Lorentzon founded Spotify, which launched in 2008; aiming to create a legal alternative to file sharing platforms such as Napster and Kazaa, the service allowed users to stream songs on-demand using peer-to-peer technology, and would be offered in subscription-based and ad-supported tiers. Ek stated that he wanted to "create a service that was better than piracy and at the same time compensates the music industry."[40][41]

In 2006, Blogmusiq, a French music streaming website, was shut down after copyright complaints by the local royalty agency SACEM. After reaching agreements with SACEM, in August 2007, the site relaunched as Deezer.[42] It had 10 million users in Europe by 2009, most of which were in France.[43]

Also in 2006, Viacom, owner of MTV, partnered with Microsoft on Urge, an online music platform that included a music store, music videos and online radio stations, and a subscription music streaming service, "Urge To Go". Urge was briefly integrated with Windows Media Player as a competitor to Apple's iTunes and iTunes Store, but was discontinued in 2007 amid cannibalization by Microsoft's Zune platform (which was positioned as a competitor to iPod, and used its own separate DRM and music store that was incompatible with Urge). Viacom then entered into a partnership with Rhapsody owner RealNetworks to form Rhapsody America and transition Urge subscribers to Rhapsody.[44][45]

Yahoo Music Unlimited was discontinued in July 2008, and Yahoo also directed users to Rhapsody.[46][47]

In the 2010s, online streaming displaced radio broadcasting as a significant factor in the commercial success of music.

Spotify launched in the United States in 2011, and Billboard began to include streams into the methodologies of its record charts.[48]

In 2012, Psy's K-pop song "Gangnam Style" became a major international hit, driven primarily by its viral video; "Gangnam Style" was the first music video on the list of most-viewed YouTube videos to reach one billion views.[35] "Harlem Shake"—a song by trap producer Baauer that had become associated with a viral dance meme—reached number-one on the Billboard Hot 100 chart in February 2013 after U.S. YouTube views for music content were added to its methodology.[49][50]

Microsoft Groove Music (formerly Xbox Music) launched in October 2012.[51]

Google Play Music, a branch of a service also offering downloads and a music locker, launched in May 2013.[52][53]

Beats Music, which was backed by headphone maker Beats Electronics, launched in January 2014.[54][55] Beats Electronics was acquired by Apple Inc., which discontinued Beats Music in 2015 and replaced it with a new Apple Music service.[56][35]

Tidal, a streaming service oriented towards high-fidelity audio, launched in April 2015 with backing from rapper Jay-Z and a focus on exclusive content.[57][58]

In October 2015, after initially offering "Music Key"—a subscription bundling Play Music All Access with ad-free viewing of music content on YouTube,[59][60] Google launched YouTube Red— which extended ad-free access to all videos on the platform, and added premium original video content in an effort to compete with services such as Netflix.[56] Concurrently, YouTube introduced YouTube Music, a mobile app dedicated to music content.[56][61]

Amazon Music launched in October 2016.[62][63]

In 2016, Rhapsody was renamed Napster; Rhapsody had acquired Napster in 2011.[64]

In 2017, Pandora launched a "Premium" tier, which features an on-demand service more in line with its competitors, while still leveraging its existing recommendation engine and manual curation.[65] In October 2017, Microsoft discontinued Groove Music Pass, and directed its users to Spotify.[66]

In 2018, YouTube Red rebranded as YouTube Premium, and YouTube concurrently introduced a redesigned YouTube Music platform, along with a separate YouTube Music subscription at a lower price point. The YouTube Music platform can be used without a subscription, but carries video advertising, and does not support background playback on mobile devices.[67][68] The YouTube Music service eventually replaced Google Play Music entirely in 2020, and Google no longer operates a digital music store.[69][70][71]

In 2019, Beatport, an online music store primarily targeting DJs and electronic music, announced music streaming services Beatport Cloud and Beatport Link. The latter is designed to integrate directly with DJ software such as Serato, Rekordbox, Traktor,[72][73][74][75] and its first-party web application Beatport DJ (which launched in 2021); the service targets professional DJs shifting to streaming-based models for their music libraries, as well as amateur DJs.[76][75]

Impact and figures

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A smartphone docked on a speaker, streaming music from the Spotify service

By 2013, on-demand music streaming had begun to displace online music stores as the main revenue stream of digital music.[35] In 2019, streaming services accounted for the majority of music revenue globally for the first time.[5]

In 2023, the International Federation of the Phonographic Industry (IFPI) reported that growth in revenue in the music industry had increased by 11.2% compared to the previous year. In 2021—its largest increase in the past 20 years—with paid music streaming services accounting for $12.3 billion in revenue ($2.2 billion YoY), and ad-supported streaming $4.6 billion ($1.1 billion YoY). Revenue from music streaming services had more than doubled since 2017, and the estimated number of users of paid services was 667 million in 2023[77].[78]

Music streaming services have faced criticism over the amount of royalty payments they distribute, including accusations that they do not fairly compensate musicians and songwriters.[79][80] In 2013, Spotify stated that it paid artists an average of $0.007 per stream. Music Week editor Tim Ingham commented that while the figure may "initially seem alarming," he noted: "Unlike buying a CD or download, streaming is not a one-off payment. Hundreds of millions of streams of tracks are happening every day, which quickly multiplies the potential revenues on offer – and is a constant long-term source of income for artists."[81] Amidst those rising number of streams, Spotify has also confirmed that they will require tracks "to get a minimum of 1,000 listens every year to receive royalties" starting early 2024.[82] Additionally, some have expressed concern about the focus of streaming metrics as the primary source of monetary compensation for musicians and songwriters as streaming fraud[83] gains traction.[84]

When music services already face critiques for taking large cuts from artists, some say their business models help record labels profit even more.[85] Streaming services take the revenue from songs on their platform and send it back to record labels and management companies that own the rights to the songs. These companies then take another cut before sending it to the artists. However, in the past, there were ‘royalty models’ that would allow for artists to get a share of physical albums sold, but with the creation of streaming services, those models have now become obsolete.[85] This is the case for smaller artists, who take up a large portion of the music industry. Without an extensive fan base, these artists aren't able to make a sufficient amount of money.[85]

To increase the diversity and value of their services, music streaming services have sometimes produced or acquired other forms of music-related content besides songs, including music documentaries[86] and concert presentations.[87][88] Spotify made investments into podcasts, buoyed by acquisitions such as sports publication The Ringer and exclusive rights to The Joe Rogan Experience.[89][90][91][92]

In the 2010s, record charts began to increasingly include listener data from streaming platforms into their methodologies. In March 2012, Billboard launched a new "On-Demand Songs" chart, which was added to the formula of its flagship Hot 100 chart.[35] In January 2013, On-Demand Songs was broadened into "Streaming Songs",[93] and YouTube views in the United States on videos containing music were added to the Hot 100 formula the following month.[49][50] In 2014, the UK Singles Chart similarly changed its methodology to include streaming.[94] To account for streaming and the decline of album purchases, album charts began to adopt a metric known as "album-equivalent units" (AEUs), which are based on purchases of the album, and how many times individual songs from the album have been purchased or streamed.[95][96]

In 2016, the GfK Entertainment charts in Germany also added streaming to its methodology; however, the metric is based on revenues generated from a song's availability on paid platforms only, thus excluding free ad-supported services.[97][98][99]

See also

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References

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