Christian P. Pewitt Blogs: Paid Audio Streaming Gowing 9X Faster Than Ad-Supported To Drive U.S. Music Consumption In 2016

Thursday, January 5, 2017

Paid Audio Streaming Gowing 9X Faster Than Ad-Supported To Drive U.S. Music Consumption In 2016

Paid subscription audio streaming grew almost 9 times faster that free ad-supported audio stream last year. That's encouraging news for a music industry concerned with the revenue that streaming generates. Pandora's Glenn Peoples breaks down the stats.

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By Glenn Peoples of Pandora

2016 figures show the U.S. music industry grew at a good clip thanks mainly to growth in premium streaming services. The results were released this week by BuzzAngle in its “2016 U.S. Music Industry Report” (download PDF here). Keep in mind these numbers represent consumption, not revenue.

Here are the metrics and trends that stand out:

Total consumption rose 4.9 percent. Total consumption, BuzzAngle’s equivalent of Nielsen’s “album equivalent units,” is calculated as album sales plus 1/10th of track downloads plus 1/1500th of track streams.

On-demand audio streaming growth is coming mostly from audio services, not video services, and mostly from premium services, not free services. Subscription audio streams grew 124.3 percent to ad-supported audio streams’ 14.3 percent growth. Subscription audio streams also outnumbered ad-supported audio streams by a 191.4 billion to 181.3 billion margin.

Total on-demand streams rose 41.2 percent. On-demand audio was the greatest growth contributor with a 82.6-percent jump. On-demand video streams increased just 7.5 percent. What’s more, on-demand audio streams swung from a 22.8-percent deficit to a 27.7-percent advantage over on-demand video streams. This suggests consumers are reacting positively to premium services.

Purchases suffered a sharp yet predictable decline. Album sales declined 15.6 percent. Those album sales include physical albums, down 11.7 percent, and digital albums, down 19.4 percent. Vinyl sales, accounting for just 8.0 percent of total album sales, increased 25.9 percent. Purchases of single tracks, the format most exposed to the rise of streaming services, fell 24.8 percent.

Differences between genres became clearer. Urban, a combination of hip hop/rap and R&B, topped total song consumption and accounted for 30 percent of all streams but just 4.3 percent of album sales. Rock genres accounted for 34 percent of album sales—63 percent of vinyl sales—but just 6.7 percent of audio streams.

People are still streaming lots of old songs. New and release releases—releases eight weeks and older—account for 8.5 percent of streams but 20 percent of album sales. The most probable cause is the popularity of playlists and the prominence of catalog titles on playlists. To be fair, there are far more catalog titles than new release titles and each release period’s share barely budged from 2015. Even so, the 11.5-point gap between new releases and catalog streams suggests an opportunity to services to find more streams for new releases .