Is This the End for Ad-Supported Music Streaming?

There is no question that streaming is the future of music. The halcyon days of physical sales in the 90s are long gone and the downloads that were supposed to prop up the industry are fading fast too. But can streaming really bring in the kind of revenue that the industry wants? And is ad-supported music streaming a help or hindrance?

The latest figures for worldwide music revenue, released this week by IFPI, show an industry both in decline and in flux.

In terms of pure dollar figures, digital music and physical sales are now neck-and-neck. Yet revenue from the stalwarts in these fields – downloads and CD – are both down.

In contrast, streaming is bringing in 40% more than in 2013, meaning that subscription-based streaming services are accounting for a quarter of all digital sales.

But the key stats to watch here come for ‘free’, ad-based streaming. IFPI’s report showed that less than 10% of digital income comes from ad-supported streaming. GlobalWebIndex’s research shows that half of internet users are streaming music but it’s only about 15% who are forking out cash for a subscription, showing just how many internet users are streaming their music for free

Supporters might point to the broad user bases that streaming services have gathered by offering a free ad-supported tier but there is a big challenge here – adblockers.

A third of music streamers say they are regularly using adblockers, meaning that many ads are never reaching the consumers they are intended for and, perhaps most crucially, the user experience for these free users is hardly any different from that experienced by paid-up members.

If providers are really serious about converting free listeners into paid subscribers, they are going to need to get tough. Tidal has taken the bravest step by eliminating free streaming. The success or otherwise of Jay-Z and Co.’s project will be key to the future strategies of Apple and Spotify, and to the future of the music industry.