Friday, May 20, 2016

(The Big Disrupt) Music Streaming: Why the music streaming market is going to explode yet shrink at the same time

2016 so far has been an interesting year for the music streaming market as it officially has become the dominant form in which consumer access content. The steady shift to streaming has bore impressive results across the board with music streaming earning the music industry first year of growth in over a decade and odds on to repeat the feat in 2016. streaming has been good for labels as music streaming has beaten downloads to become their biggest market with giants Warner music and Universal Music Group reporting that music streaming has outstripped revenue from downloads. 

Participants in the music streaming such as Spotify, apple and tidal have also had stellar moments so far with artists such as Beyonce and Drake going platinum within week releasing album with little or no real promotional push behind them. For years  members of the fourth estate of have wandered aloud about what would save the music industry and with the explosive growth music streaming and new entities entering the crowded and hypercompetitive marketplace, it's safe to say that music long talked about is hear in the flesh. 

However, for all the success of the music streaming market has offered the music industry, there are some losers as music streaming becomes the music industry biggest market. While artists like Apple Music's Drake and Tidal's Beyonce can command views, streams and sales almost at will, most artists may find themselves at once short changed and marginalized as music streaming services tend to reward artists at the top disproportionately. The music streaming market itself is structured to crush smaller players who either lack the capital or catalogue to compete. 

Given the fact that almost all music streaming services don't make a dime and are notoriously capital intensive, it's only a matter time before what is a very crowded market starts to thin. No one knows this better than the music streaming services outside of Spotify, Pandora, Tidal (perhaps) and Apple Music who seem to be sputtering along waiting for a greater fool or another 200 pound gorilla to buy them out.   

Spotify knows that who wins the music streaming market is going to come down to who has the most capital which is why there's has been talk of the Swedish based company preparing for an IPO. Spotify rightly predicted that Apple's entry into the market would be good for them but what Spotify CEO Daniel Ek didn't say but knows all too well is that Apple's entry would also force Spotify to look for extra cash just to compete. And with Facebook rumored to be interested in entering the fray, Spotify may find itself cornered by deep pocketed companies who'll suck up most the new growth in the market. 

While it's hard to predict what will happen in a marketplace that's as dynamic as the music streaming market, it's just as hard not see the events described above not coming into fruition. To avoid this fate Spotify must at once grow beyond its current market and become a sustainable and profitable business able to fund itself. Spotify can and must do both but doing both at the same time is going to be difficult to say the least. 

In sum, music streaming may be great for music industry but it may not be the great in the long term as the market slowly but surely becomes dominated by a concentrated number of players.   

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