T.L.D.R. By the end of 2020 the majority of streaming music services available in 2016 will be gone, either bought by rivals or out of business. The services that do survive, Amazon, Apple, and Google, will survive because they have revenue sources in addition to what they bring in from music.
This is just a prediction. The opinions here are mine and do not reflect the opinions of my employer.
Today there are a lot of streaming music services. Spotify, Apple Music, Google Play Music, Tidal, Deezer, and Rhapsody (a.k.a. Napster) to name a few that give users access to most music anytime they want. There are also services like Pandora that give users some control to what they listen to but work mostly like radio stations. At the time I’m writing this SONOS lists 44 supported streaming services just in the US. Not all of 44 services are for music, mlb.com plays baseball radio, but the point is there are a lot of music services out there today.
I think many of the services are going to be bought or go out of business in the next few years, leaving just three big players: Amazon, Apple, and Google. I also think that Pandora will survive. I’ve come to this conclusion because all of those companies have revenue from other sources that can subsidize their music service.
Streaming music services have a history of losing money, so without a revenue source to subsidize the music service, companies are going to struggle. One article from May 2016 says that Spotify lost $194 million in 2015, in what the company calls it’s best year ever because their revenue grew faster than their losses. A different article from March 2016 claims Rhapsody lost $35 million in 2015 and calls streaming music a trainwreck. I’ve seen no signs that this will change in the near future.
Apple and Google will subsidize their music services because they have mobile platforms with millions of users each that demand music services closely integrated with their phones. If either were to shut down their services then many users would be angry and may consider switching. Amazon (which doesn’t have a major streaming service today, but is expected to soon) will subsidize their music service as part of Amazon Prime. Prime members tend to buy more from Amazon, a music service is a good complement to Amazon’s existing video service, and it could provide a platform for their hardware like Kindle Fire and Echo.
Pandora is going to survive because they were very smart to buy Ticketfly in late 2015. This will give them a new revenue source. I don’t know how they plan to make use of Ticketfly but I can imagine listening to a track on Pandora and after the song ends hear a short ad telling me the band is coming to my town. An embedded link in the app could let me buy tickets and Pandora takes the ticket fees as revenue. While I don’t like ads when I listen to music I don’t think I’d be too upset about a quick mention that a band I like is touring. Pandora isn’t a lock to survive though. An article from February 2016 asks if it is the end for Pandora as their losses are mounting. I expect them to survive.
What about Spotify? Spotify is currently the largest music service in the world and their users love them. They have the discovery weekly playlist that is tailored made for each user, and it is really good. Everyone I talk to about it loves discover weekly. Spotify also has a network effect of users creating and sharing playlists which makes it a must have for teenagers. However I still think that they will need to find an additional revenue source for them to remain number one.
So my prediction. I think that by the end of 2020 Amazon, Apple, and Google will be running the world’s biggest and most popular music services, and they will mostly be identical in terms of their catalogs. I doubt any of these companies will break out the revenue for those services when they report earnings, but they will either provide very little profit or will lose small amounts. Tidal, Deezer, and Napster will all either be out of business or have been acquired by one of the big services. Pandora will still exist as an independent company, but more than 50% of its revenue will come from ticket sales instead of ads or subscriptions.
There are also streaming music services out there like RockBot which provides music for businesses and are not aimed at end users. I expect these companies to also consolidate, perhaps under a single company or perhaps as part of one of the big three. Expect SONOS to list 10 to 15 streaming services they work with in 2020.
Of course, I may be completely wrong about lure of platforms subsidizing music services. Perhaps a service that works equally well on all devices will win because people can easily create and share their own playlists. I’m just not betting on it.
Finally, I think that Netflix is going to struggle to survive as the leading streaming TV/movie provider for the same reasons. I think it is more likely that Amazon will become the leading provider and Netflix will be a company that produces high quality content that people really want, like HBO.