You only need look at the number of streaming services on offer in Australia to see that it’s a growing market. With an already crowded market featuring the likes of Spotify, Deezer, Pandora, Rdio, MOG, and more growing this month with the addition of major players Google and Sony – who launched Google Play Music All Access and Music Unlimited respectively.
But with the growing popularity of streaming services comes news that they could be taking a bite out of Apple’s iTunes and in turn one of the biggest generators of revenue for major record labels.
As the Australian Financial Review reports, revenue growth from iTunes in Australia is expected to halve in 2013 as more music users flock to streaming services and their ad-supported free models, attracted by their accessibility and growing music libraries that offer a cheaper alternative for consumers to traditional models like paid downloads and physical CDs and vinyl.
While record label majors continue to earn money from streaming services – a contentious issue that’s been thrust into public debate via the Spotify/Atoms For Peace face-off – they earn much less from streaming services in comparison to paid downloads, and according to many industry figures, revenue growth from iTunes has dwindled in recent years and especially in comparison to 2012.
“If you asked any label this time last year, they would have expected at least 25 per cent growth from iTunes for 2013,” an anonymous senior music industry executive told Australian Financial Review. “The fact is iTunes is now (only) growing somewhere between 8 and 12 per cent. But iTunes has been growing at 20, 30, 40 per cent for a long time (previously), depending on which [music] company you are.” “The signs have been around for some time now… We are starting to see listeners move from music ownership to a rental or lease model.” – Jane Huxley, Pandora
While Apple has enjoyed a long, nearly ten-year reign with iTunes as the top paid download service in Australia, it appears that competition from streaming services has seen more consumers converting to other digital music platforms for their music. Something that arguably kickstarted with the launch of Swedish-based Spotify over a year ago and popular French-based service Deezer not long after, while streaming services eventually helped push Australian digital sales into registering a 6.8% leap last year.
One service that’s seen significant growth is Rdio, which recently struck a 50-50 equity joint venture deal with the DMG Radio Group, the Lachlan Murdoch-owned company responsible for the Nova and Smooth radio networks, whose Chief Executive Cathy O’Connor says, “it’s early days for most of these [streaming] services but we are starting to see it accelerate.”
“When we launched Rdio here in 2012 we saw very little growth,” she adds. “What we’ve seen in the past three months is certainly an acceleration point. My sense is that it will be increasingly accepted as a way of consuming music. We’re just starting to understand the potential of cross-promotion and how broadcast [radio] and Rdio can support each other.”
Another radio group taking the ‘can’t beat ’em join ’em’ approach is Southern Cross Austereo, the Triple M and 2Day network representatives entering the streaming market earlier this year with Songl, via a partnership with record labels Universal and Sony in a joint company called Digital Music Distribution (DMD).
“Everyone is trying to future-proof their business,” says DMD’s Mark Shaw; “It’s why iTunes is launching a streaming service. Apple is seeing that trend and trying to get to the next horizon.” “Everyone is trying to future-proof their business… it’s why iTunes is launching a streaming service.” – Mark Shaw, DMD
Indeed while Apple’s own equivalent to the streaming service market, iTunes Radio, is just around the corner, they were very slow on the uptake, chiefly through a combination of stumbling blocks in securing royalties schemes and licensing from record label majors, as well as its failure to launch the service with iPhone 5.
The growing number of users swapping from Apple’s iOS smartphone to those that use Google’s Android operating system has also seen cracks in Apple’s typical dominance and could hit iTunes hard. With more and more users taking to their mobile devices for their music consumption, more than half of smartphone and tablet users according to a previous NPD Group report on listening habits.
Curiously, many Australian streaming services don’t make a habit of disclosing their subscriber numbers – perhaps because it highlights the splitting difference between those that are paid monthly subscribers and those that use ad-supported free models – but Pandora Australia Managing Director Jane Huxley revealed last April that they were aiming for 1 million Australian users to contribute to their 200+ million world tally, and one year on from their Australian launch.
“I don’t share the surprise about iTunes,” said Ms Huxley. “When you watch the end user, the signs have been around for some time now, particularly in the US. We are starting to see listeners move from music ownership to a rental or lease model,” she remarked, echoing statements by VEVO’s CEO saying the future of music was “access not ownership”, and Deezer’s CEO calling out the “end of music downloads.”
Pandora’s Australian Managing Director adds: “Whoever has a business which caters to that shift is likely to pick up numbers just by being in the right place at the right time. When we talk to people, they are talking less about owning music through iTunes and more about listening through streaming. But I guess I would say that.”