Technology | Media | Telecommunications

Monday, August 12, 2013

Cloud Music Services will Reach 191 Million Subs

Fans of recorded music that are already paying for on-demand streaming services will total 29 million people worldwide at the end of 2013, according to the latest market study by ABI Research.

Accounting for 32 percent of the premium music service subscribers, Spotify is expected to close the year as the leader -- trailed by Deezer, SK Telecom’s MelOn, and rounded out by Rhapsody and Sony.

Moreover, the high-growth cloud music services subscriber base is forecasted to reach 191 million by the end of 2018.

"The past two years have seen a remarkable international expansion of streaming as a distribution model, but in terms of its long-term potential we’re still only scratching the surface," said Aapo Markkanen, senior analyst at ABI Research.

That’s also something to stress when discussing the role of cloud music services as a potential source of recording artist income.

At end-2013 the cumulative revenue from premium service subscriptions will amount to less than $5 billion, yet ABI expects this all-time pot to exceed $46 billion in the next five years.

Some two-thirds of it will be going to the music right-holders -- although how they will split it is then a whole another matter.

Regarding the streaming provider's competitive landscape, ABI Research anticipates some level of consolidation to take place once the current land grab stage starts slowing down.

Streaming is a high-volume, low-margin industry, so to become and stay profitable the providers need scale. Further competitive pressure will come from the consumer technology giants investing in cloud music.

Google’s and especially Apple’s moves in this space have been cautious, for a number of strategic reasons. Microsoft and Sony have been bolder, mainly because of their involvement in gaming consoles.

Sony, in particular, makes an interesting case with its future cloud strategy. Obviously threatened by its position as a pure-play hardware firm, Sony could use the cloud as the fabric for its own services ecosystem.