The article is taken from an 205 article on Fast Company blog
But 2015 was insane. It started off with, of all things, Jay-Z buying and relaunching his own streaming music service, Tidal. Grooveshark shut down. Apple launched Apple Music. YouTube announced YouTube Music. Spotify put its acquisition of the Echo Nest to good use with addictive new discovery features.
Not to be left in the dust, Pandora bought Next Big Sound. And then it acquired TicketFly. Oh, and then it snapped up the assets of Rdio, the Spotify rival which announced it was shutting down in November.
To close out an eventful year, The Beatles finally made their catalog available on all the major streaming services worldwide.
Well, if you think this year was an interesting time in digital music, don’t put away the popcorn just yet. This time next year, we’ll be rattling off a whole new list of changes to the way we interact with music. So, what’s ahead? Here are our five big predictions for streaming music in 2016.
When Pandora was founded a decade ago, the notion of having personalized radio stations based on an artist or song was mind-blowing. Today, the service is far less novel, having been mimicked widely and challenged by other types of digital music curation, each one using its own blend of machine and human intelligence. And thanks to hefty royalty payments to labels and artists, running an Internet radio service like Pandora is very expensive. In 2016, expect to see the service evolve rapidly.
Pandora has no plans to abandon the personalized radio model it pioneered. Instead, it’s bolting on new features and revenue streams. Most notably, it’s branching out into on-demand streaming using the recently acquired assets of Rdio, the now-shuttered Spotify competitor. That means that in addition to personalized stations, listeners can hand-pick songs and albums from a library of millions of tracks. For Pandora, it adds a new revenue stream, albeit one that is still not economically bulletproof. But unlike online radio, whose royalty rates are decided by legislators and judges, on-demand streaming will let Pandora negotiate licensing costs directly with labels.
Pandora will also become a much more useful service for artists. In May 2015, the company acquired Next Big Sound, an analytics service that gives artists a comprehensive, high-level look at the health of their online presence using data from YouTube, Spotify, SoundCloud, Facebook, and others. This is a natural—and extremely powerful—extension of what Pandora was already plotting with its Artist Marketing Platform (AMP), an analytics toolkit it launched for musicians in 2014. Next Big Sound has become the go-to resource for tracking digital music—Billboard uses its data to power one of its charts—and the fact that Pandora now owns it is a big deal.
The company’s quest to become a one-stop shop for artists doesn’t stop online. Pandora will also become a competitor to TicketMaster, having gobbled up TicketFly for $450 million in October. Pandora was already dabbling in the concert business, using data to help artists plan their tours and even hosting its own shows. Pandora hasn’t said much about its plans for TicketFly, but it’s hard to imagine the company won’t plug its new ticket sales business right into its gigantic pile of data about artists and listeners.
Now that the all-you-can-stream music subscription library is pretty much commoditized, companies like Spotify, Apple, Tidal, and Deezer are finding new ways to duke it out. One of these new competitive frontiers is sound quality. In 2015, we saw the (admittedly underwhelming) launch of Jay-Z’s Tidal, which offers lossless, high-resolution audio for $20 per month (in addition to the usual $10 tier). Meanwhile, European streaming giant Deezer finally made its way to the U.S. with the launch of Deezer Elite, a high-fidelity streaming service that’s only available on Sonos wireless hi-fi speaker systems (for now).
Now Apple is reportedly working on a new high fidelity streaming audio format of its own. The as-yet-unnamed format would let Apple Music users stream songs at 96kHz with a bit depth of 24 bits. That resolution goes beyond the 16-bit audio found on compact discs and moves closer to the fidelity of the original studio masters, in theory helping to preserve the intent of the artists and engineers who made the music in the first place. There’s some debate among audio nerds over whether hi-res 24-bit truly exhibits a notable, worthwhile difference in sound quality when compared to CD-quality audio. The results tend to vary somewhat, but audio purists like Neil Young swear by 24-bit audio.
While Tidal, Deezer, and Neil Young’s Pono have failed to make high-fidelity audio a big mainstream business, Apple could manage to make it a selling point among everyday listeners using the usual just-because-it’s-Apple blend of product polish, massive reach, and enviable marketing skills. That would inevitably put pressure on Spotify to move past its 320kbps “extreme” streaming bit rate for premium users (not to mention its crummier-sounding 160kbps and 96kbps defaults for non-paying listeners).
Of course, the hardware is just as important as the source: A high-quality music file only goes so far on crappy earbuds. Brands like Sonos and Bose are helping to make sound quality a selling point as we move past the era of the white earbud. Speaking of which, it’s easy to forget that in addition to the guts of Apple Music, the company’s Beats Audio acquisition also gave it a line of high-end (if still overpriced) headphones. Could the next iPhone ship with a pair that sounds a tad better?
The average consumer may be satisfied with the way digital music sounds these days, but a combination of evolving technology competitive tension may open our ears to something clearer in 2016.
How much longer can 10 music subscription services survive side by side, offering slight variations of the same, economically tricky product? Now that four giants (Apple, Google, Microsoft, and Amazon) are operating music subscription services alongside the likes of Spotify and Deezer, it’s only a matter of time before at least one of the smaller players gets squeezed out.
In 2016, we may learn that Tidal’s underwhelming launch just months before the arrival of Apple Music was fatally ill-timed. Or perhaps that streaming pioneer Rhapsody (and the remaining assets of Napster, which it acquired in 2011) just couldn’t keep up with Apple and Spotify. Or if it’s not one of the big-name subscription players, it wouldn’t be shocking to see a service like SoundCloud or BandCamp get gobbled up by a bigger streaming company looking to boost its catalog with independent and unsigned artists, especially as YouTube moves toward becoming a full-fledged music subscription service.
Music industry revenue may be on the decline—it sunk just below $15 billion in 2014 and has seen a 43% drop overall since 1999—but some segments of the music industry are still growing. Next year, labels will see a notable rise in revenue from music subscriptions. This trend is already underway: Worldwide subscription revenue climbed 39% in 2014, according to IFPI. We won’t know the 2015 numbers until IFPI releases them in late January, but there’s little reason to doubt that this trend will continue. Listeners were already shifting toward streaming in droves before Apple put a new, well-executed and human-curated subscription option on every iOS device.
Apple’s entry into the market can only help further the cause of music streaming in general: Its launch puts unprecedented competitive pressure on all the other players to fine-tune their offerings and lure in new users. If nothing else, it helps mainstream-ify the mere idea of shelling out $10 per month for access to millions of songs.
Crucially, Apple Music does not have a free tier like Spotify does. Once you’re done with the trial period, you have to pay. And we already know that at least 10 million more people have opted to do exactly that. Which brings us to our next prediction…
One segment of digital music that did not drive big revenue numbers in 2014 was ad-supported, free music streaming like Spotify’s unpaid tier, YouTube, and SoundCloud.
Spotify is fiercely dedicated to its freemium model and we shouldn’t expect to see that disappear in 2016. But it may start to evolve: The company is reportedly considering giving artists the option to “window” their new releases, temporarily keeping them off the free tier and making them available only to paying subscribers. This may run counter to the founding spirit of Spotify, but it makes total sense if you follow the money: Paid subscriptions are simply a better business than ad-supported streaming. This is exactly why Taylor Swift pulled her catalog from Spotify and why Adele’s “25,” the biggest-selling album since 2004, was not available on the streaming service. The fact that Adele did so phenomenally well despite not being available on the services that so boldly claim to be the future of music is just a wee bit embarrassing for the streaming business.
So what about the other biggest free streamers? The free, ad-supported YouTube we all know and love isn’t going anywhere, but the company is clearly trying to squeeze more dollars out of its massive trove of content, including all that music. That’s why it’s started roping off special perks like ad-free viewing, offline videos, background listening on mobile and exclusive content and offering those things only to people willing to pay for its new YouTube Red subscription service. Similarly, SoundCloud is rumored to be eyeing its own subscription model, which would help explain the new licensing deals the company keeps securing and its controversial copyright crackdown.
This isn’t to say that the Internet’s reservoir of free music is going to dry up in 2016, but listeners should expect to start feeling more pressure to pay up.