Costs Test Streaming Business Model

By on Jul, 28 2016 with Comments 2

SNLChartEven though subscriptions to streaming music services are up, the business model has “yet to make sense,” according to SNL Kagan.

Subscriptions for the leading services nearly doubled the subscriber bases in 2015 compared to 2014.

However of the five leading services — Pandora, Rhapsody, WiMP, Spotify and Deezer — “non has recorded positive cash flow in the last four years,” according to SNL Kagan in “Economics of Mobile Music.”

Additionally, Deezer ditched its IPO plans last fall, then Rdio filed for bankruptcy (since acquired by Pandora) and Samsung’s MilkMusic is rumored to be on the block.

Increasing music copyright licensing fees are a big culprit, as Pandora paid 52% for the fees as a share of total revenue in 2015, while Spotify paid 70%, and Deezer 80%, according to the report.

The music industry is hoping costs for these services “will grow more slowly than the top line,” given that physical music sales and even downloads are dropping. The report cites two ways services are trying to diversity their revenue stream with Pandora’s acquisition of Ticketfly and Spotify’s efforts to monetize casual music fans.

About The Author: Leslie Stimson has been a reporter for 35+ years, starting in radio news. She’s spent the last 20 years reporting for radio trades.

  1. Leslie, interesting article. However listen to Pandora. I’ve been a listener for years now. I’ve seen their programming improve dramatically. They’ve done a lot of work to increase time spent listening. They have gone from being a music box to where they’ve extensively tagged their music. The music flows well and they are a real music entertainment system.

    They are showing a lot more advertising. They’re doing in as non-intrusively as possible. And of course the advertiser gets a huge advantage because the listener can click and respond immediately.

    I say these things not to be hurtful to the Industry.

    20 years ago when my company Radio Profits Corporation told our clients to embrace and dominate the Internet, only Mark Cuban saw the vision. When he spoke at RAB or NAB (can’t remember which) nobody got it.

    I would respectfully submit that Pandora is not going to go away. It will get stronger.

    • And I’d add that just as Google has localized by IP address, Pandora does the same thing. When I log on in CT and drive to VA, the local advertisers follow me.