Music Streaming Industry Analysis

Music Streaming Industry Analysis

Bosorg Etemad Phirith Pheak

Melissa Torres Javier Valdeavellano

Eening Yeoh

GBUS 600 March 15, 2016

Music Streaming Industry Analysis 2

Table of Contents 1. Music Streaming Industry: An Overview…………………………………………………..………....…………… 3

1. Industry Definition ………………………………………………………………………..…..…………………. 3 2. History ……………………………………………………………………………………………………..…….…..….3

2. Music Streaming Industry: Porter Five Forces Analysis ……………………………..………….………. 4-16 2.1. Threat of Entry …………………………………………………………………….…………………………….4-6

2.1.1 Access to Supplies 2.1.2 Customer Acquisition 2.1.3 Major Incumbents and Switching Costs 2.1.4 The Apple Case 2.1.5 Result: Low to Moderate

2.2 Bargaining Power of Suppliers …………………..……………….………………………….…..………….… 6-9 2.2.1 Power of Major Labels 2.2.2 Power of Artists and Publishers 2.2.3 Buyer Power of Streaming Services 2.2.4 Result: High

2.3 Bargaining Power of Buyers ………………………………………….………………………………………….9-11 2.3.1 Buyer Profile 2.3.2 Price Sensitivity 2.3.3 Quality Sensitivity 2.3.4 Product Differentiation 2.3.5 Competitors and Substitutes 2.3.6 Result: High to Moderate 2.4 Threat of Substitutes ………………………………………………………………….……………………………12-14 2.4.1 Physical and Digital Records

2.4.2 Television and Radio Channels 2.4.3 Satellite Radio 2.4.4 Video Streaming Services 2.4.5 Piracy

2.5 Rivalry Among Existing Competitors ……………………………………………….……………………….14-16 2.5.1 Competitor Quantity 2.5.2 Competitors Varying in Size and Power 2.5.3 Industry Growth Rate 2.5.4 Industry Exit Barriers 2.5.5 Zero-Sum Price Competition 2.5.6 Result: Medium to High

3. Conclusion ……………………………………………………………………………………………….………..………..…. 17 4. Appendix …………………………………………………………………………………………………………………. 18-23 5. Work Cited ………………………………………………………………………………………………………………….. 24-30


1. MUSIC STREAMING INDUSTRY: AN OVERVIEW

1.1 Industry Definition

The music streaming industry is comprised of organizations that offer non-physical

audio playback through the Internet, this does not include online music downloads and satellite

radio broadcast. Its main sources of revenue are paid customer subscriptions and advertising

space sales. Music streaming services license content from copyright and master rights holders

in order to stream it to its users. Its services can be further categorized into interactive

(playback of tracks on demand) and non-interactive streaming (programmed or semi-random

playback algorithm). Within the scope of this industry, record labels, aggregates, artists, and

publishers are seen as suppliers.

1.2 History

Before 1998, the only way to distribute music was through physical formats, CDs being

the most popular ones. Digital distribution began with MP3.com, a site that allowed customers

to download compressed MP3 files of CDs they owned (Alves and Michael 3). It took less than a

year for Napster to provide a new platform to illegally share audio files (Johson, McGuire and

Willey 1). The popularization of this free distribution model led to a huge drop in CD sales.

Napster, like other similar platforms, was shut down after a series of lawsuits (Knopper 113-

149). With no legal way to download music, Apple Inc. launched the iTunes Music Store in

2003 to feed this need (Knopper 157-161). Thanks to this new form of distribution, the industry

reignited with the rise of digital music. However, music consumers prefer having access to a

large amount of music rather than owning just a small part of it (Wikstrom 9-10). This is why

pioneers like Rhapsody, MusicNet, and Pandora made online music streaming one of the most

popular forms of music distribution and consumption.


2. MUSIC STREAMING INDUSTRY: PORTER’S FIVE FORCES ANALYSIS

2.1 Threat of Entry

The threat of new firms entering the industry can be defined as moderately low. New

companies entering the market have to acquire a catalog comparable to the ones provided by

established music streaming services. Further, established companies have already generated a

large number of active users and the corresponding economies of scale. Lastly, to acquire a

respective catalog and generate users, new entrants have to build business relationships from a

much lower bargaining leverage than already established companies.

2.1.1 Access to Supplies

Major suppliers have significant control over the music streaming industry because

music streaming services value highly depends on the size of its song catalog. Before launching

a music streaming service, entrants need to negotiate licensing agreements with publishers,

aggregators, and labels (Blau 23), the latter having extremely strong negotiating leverage

(Winogradsky). Since deals with suppliers only cover a specific territory, individual deals have to

be negotiated for each market expansion (Rethink Music 8). Additionally, each preliminary

licensing negotiation with a label takes around a year (Keating, 2015), and incumbents have the

advantage of experience. A new company making its way into the industry would need high

investment capital to cover the initial costs of building a competitive song catalog.

2.1.2 Customer Acquisition

High demand and a large number of active users increases the quality of music

streaming services and provides the economies of scale advantage. Since social interaction and

the ability to share playlists are essential features of a music streaming interface, the amount of


active users is an important success factor (Marchand and Shaw 2). A high amount of active

users leads to increased sharing and interaction activity.

New entrants are forced to find creative and effective ways of enrolling and satisfying

early adopters. The most common way of acquiring customers is to offer free trials with the

prospect of turning free subscribers into paying subscription-based customers (Marchand and

Shaw 1). In contrast, established streaming services have already built relationships with large

customer groups and benefit from economies of scale.

2.1.3 Major Incumbents and Switching Costs

New entrants are competing with major incumbents, who negotiated their agreements

with labels and aggregators before a precedent deal of this nature had existed (Keating, 2015).

Hence, suppliers have the benefit of being ahead in the learning curve, and therefore have a

significant advantage when negotiating with less experienced market entrants.

Furthermore, switching costs can be high for active users that have created their own

playlists, preferences, and built relationships with other users. In an interview with Tech Times,

Gary Sinclair commented “I don't mean switching costs in terms of financial, but in terms of the

amount of work they put in to develop their playlists, maybe their friends are on Spotify, and

even the hassle of switching providers" (Keating).

2.1.4 The Apple Case

The market entry of Apple Music in June 2015 exhibited that despite all of the described

market entry barriers, large and diversified companies can still threaten established music

streaming services. After their initial three-month trial period, Apple had generated 15 million

paying subscribers, which ranked them among the industry’s top competitors (Peoples). Jan


Dawson, an independent technology analyst stated that, “They have the demographic that is

most likely to pay for music pretty well locked up” (Sisario). As a large corporation-like

company, Apple is not dependent on the streaming service revenue (Greenberg) and can

merely use it as a hub for its other product lines. Apple’s loyal customer base in conjunction

with the described factors makes it an exception to the typical case scenario.

2.1.5 Result: Low to Moderate

Among others, high supplier power, incumbents with superior experience, and large loyal

customer bases define the threat of entry for the music streaming industry as low. But the

threat of large diversified companies like Apple being able to overcome those entry barriers

creates a tendency towards moderate.

2.2 Bargaining Power of Suppliers

2.2.1 Power of Major Labels

The major label conglomerates, Sony Music Entertainment, Universal Music Group, and

Warner Chappell Music own 80% of the music industry’s market share and consequently own a

large majority of the global music catalog. When a music streaming service seeks to acquire the

license to distribute a major label’s master recordings, the labels have extremely high

bargaining power. Music attorney Steve Winogradsky confirms that they have the power to

“…say no, and by having the ability to say no they have stronger negotiating leverage.” Since a

streaming service can only succeed with a relevant catalog, the supplier power of major labels

can be considered as the music streaming industry’s biggest barrier to success.

This leads to the conclusion that streaming services can only gain bargaining leverage if

they significantly distinguish themselves through market share and popularity. Of course,


supplier power decreases the smaller the label, but it is the major label’s song catalog that

music streaming services are dependent on.

Steve Winogradsky pointed out that major labels often use their bargaining power to

gain equity share from music streaming services. “Labels often license their catalogs at sub-

market rates in exchange for a share of ownership in the company, based on the concept that

streaming services need lower rates to grow and reach critical mass” (Rethink Music 17). Major

labels with equity ownership in music streaming services “currently own stakes in companies

like Spotify…although percentages may change with each company’s round of funding”

(Rethink Music 17). In many cases, record labels take stakes for free or cheap, and then give

themselves the right to buy larger chunks at deep discounts to market later on (McIntyre). In

early 2009, it was reported that major record labels had received roughly 18% in Spotify shares,

with Sony BMG at 5.8 %, Universal Music at 4.8 % percent, Warner Music at 3.8 %, and EMI at

1.9 % (Nylander). Owning significant equity share in a company enables the shareholder to

influence and control various aspects and decisions of that company (Child 230-231).

Consequently, major labels owning significant shares of music streaming services increases

their already high bargaining power.

2.2.2 Power of Artists and Publishers

Record labels that own the master catalogs, can also exercise their power over the

artists they represent by leaving them out of negotiations with music streaming

services. “…When acquiring a label’s catalogue, a streaming service like Spotify negotiates

direct licenses with major rights holders using nondisclosure agreements that leave artists out

of the conversation entirely…” (Rethink Music 15). Only few artists with very large clout have


the negotiating power to, for example, pull their catalogs from free advertisement based

streaming services. This was the case in November 2014, when Taylor Swift and her label Big

Machine, removed her catalog from Spotify after the streaming service refused to limit her

catalog to paid subscribers.

In addition to artists, music publishers also have very little to no power when

negotiating with music streaming services. Music publishers must have their songs associated

with a performance right organization (PRO) such as the American Society of Composers,

Authors and Publishers (ASCAP) or Broadcast Music Inc. (BMI), and cannot simply withdraw

catalogs to make direct deals with record labels or streaming services. Although some deals

between publishers and PRO’s are non-exclusive, which allows them to make certain

negotiations with music streaming services, they do not have the power to negotiate royalty

rates. Royalty rates received by publishers are those set by rate courts for PRO’s, and are

typically low percentages of the streaming service’s revenue, minus a certain percentage that

goes to the PRO’s (Winogradsky).

2.2.3 Buyer Power of Streaming Services

With decreasing CD and download sales and the remaining threat of piracy, music streaming

services present the record label’s only option for legal music distribution. Therefore possibly

increasing the bargaining power of music streaming services. Steve Winogradsky states, “Labels

can and were making money from downloading for a while but now nobody is downloading

because you can hear all the music on demand…” In 2015 alone, Nielsen reported that digital

album sales had decreased by 2.9% from 106.5 to 103.3 million units, while CD sales decreased

by 10.8% from 140.8 million to 125.6 million units. Meanwhile, music streams from on-demand


services increased by 83.1% from 79.1 to 144.9 billion streams. With consumers growing

preference of access over ownership, the bargaining power of music streaming services has the

potential to become stronger.

2.2.5 Result: High

Even though the bargaining power of two suppliers, publishers and artists, is fairly low,

the strong bargaining position of major record labels is enough to define the force ‘Bargaining

Power of Suppliers’ as high. Of course, the growing market share and importance of certain

streaming services may ultimately lead to a power shift. Further, artists may become more

independent and publishers stronger negotiators. But until some or all of these factors

dramatically increase, record labels alone will hold high supplier power.

2.3 Bargaining Power of Buyers

The buyers of music streaming services can be divided into two categories, the end

consumers of music and the business-to-business clients that either buy advertising space, or

seek to add a streaming service to their product(s) (Edwards). To not go beyond the scope of

this paper, the following section will concentrate on the end consumer by analyzing and

evaluating their bargaining power.

2.3.1 Buyer Profile

Data ascertainments from 2015 show that the majority of current music streaming users

are between the ages of 18 to 34 (Digital Market). They largely represent Millennials – as of

2015 defined by the ages 18 to 29 (Sneider) – a generation that was “born into a technological

and wireless society” (Williams 8). Digitization, Internet proliferation and piracy have

accustomed Millennials to the free and instant access to music through a multitude of legal and


illegal music services with medium income households representing the largest streaming user

segment (Digital Market).

The Post-Millennial generation, defined as younger than 18 years, makes up a significantly

smaller share of current streaming consumers, but will logically grow into being the next

majority. Where Millennials were conditioned into a digital environment later in life, Post-

Millennials experienced early adaption and are therefore even more defined by a digital

lifestyle (Heine).

2.3.2 Price Sensitivity

Consumers can choose from a vast selection of interactive and non-interactive music-

streaming services (IFPI 5, 17), which promotes high price sensitivity. However, this price

sensitivity is moderated by the growing influence of Post-Millennial consumers. Research

suggests that Post-Millennials show lower price elasticity and an increasing acceptance of

online ads and higher streaming prices (New Study; Heine; ClearVoice 29-30). While current

price sensitivity is high, it is becoming more moderate with the increasing influence of Post-

Millennials.

2.3.3 Quality Sensitivity

With the consumers advancing tech-savviness and the large amount of competition and

substitutes, consumers become increasingly critical towards streaming services individual

features. Advanced customization, content, ease-of-use, and mobility are the decision-making

factors defining the choice of a streaming service. Research shows that these factors are

becoming more important than price (New Study; ClearVoice 31-33).


2.3.4 Product Differentiation

Even though the demand for product differentiation grows, most music streaming

services still offer similar qualities and features. The only major differentiation lies between the

interactive and non-interactive streaming function. Realizing this trend, some streaming

services are working on differentiating themselves through additional musical and non-musical

content, customized algorithms and an increased integration into mobile phones and

automobiles (Cellan-Jones; Winogradsky; Internet Radio 13).

2.3.5 Competitor and Substitutes

As described in chapters 2.4 and 2.5, the streaming industry offers consumers a wide

variety of competitors and substitutes. Research shows that the free video streaming platform

YouTube is still the most popular Internet platform with Post-Millennials (Heine). This, of

course, strengthens the end-consumers buyer power.

2.3.6 Result: High to Moderate

Preceding analysis display that the buyer’s bargaining power is high with a tendency

towards moderate. The consumer’s price sensitivity and increasing demand in quality forces

streaming services to differentiate their products, while maintaining competitive prices. This

bargaining power is intensified through a high number of competitors with similar qualities, as

well as substitutes in the form of free video streaming services, illegal downloading, and

streaming platforms. However, through the growing segment of Post-Millennials, consumers

are increasingly accepting advertisements and higher prices in exchange for more differentiated

services.


2.4 Threat of Substitutes

Substitute products can affect a competitive environment, driving down profit by

causing consumers to purchase the substitute instead of the industry’s product (Porter 8).

In the current music industry, music streaming services are confronted with various substitute

products including physical records, digital media, TV and radio channels playing 24-hour music,

satellite radio, video streaming services, and piracy (see diagram 1).

2.4.1 Physical and Digital Records

Even though Long Play (LP) vinyl albums are experiencing growth, the record industry’s

former industry driver – the compact disc (CDs) – is declining in sales (Rivera 8). In his IBISWorld

Report, Rivera reports that physical record sales will decline by 4.6% to 1.4 billion over the four

years to 2020, with a 4.3% decrease expected in 2016. Digital downloads are still a relevant

medium but are at threat of being replaced by streaming services (IFPI 21). With vinyl unlikely

to become the new mass consumption medium, and CD and digital sales declining, these

mediums do not represent strong substitutes for streaming services.

2.4.2 Television and Radio Channels

Cable service providers such as Time Warner offer music channel programming as an

additional TV package feature (TimeWarnerCable.com). Although their prices are higher than

the music streaming industry’s standard, consumers may be attracted by the two-in-one deal.

Terrestrial radio on the other hand is free, but limited to a preset program the listener cannot

influence. In any light, these substitutes may take away from profits and customer base.

2.4.3 Satellite Radio


Satellite radio companies like Sirius XM offer a choice of three premium packages for

consumers (see diagram 2). These packages are very attractive because consumers can choose

various programs between music, sports, and talk radio. This substitute outlet also steals

advertisement revenue from the music streaming industry. Nick Petrillo, author of IBISWorld

Industry 51511 Radio Broadcasting in the US reported and projected sales from advertisements

to major companies such as Sirius XM will generate a revenue increase at an annualized rate of

1.0% to $19.8 billion in the five years to 2015 (7).

2.4.4 Video Streaming Services

Together with piracy, streaming services like YouTube likely present the streaming

industry’s biggest substitute. Among other reasons, music videos played an important role in

more than doubling YouTube’s revenue between 2013 and 2016 (Chatter 1). International

Business Times editor Micheal Learmonth states, “Music videos and music-related content are

easily YouTube's most-popular single genre… accounting for about 72% of music videos… UMG

artists account for 24 million views on YouTube on average per day and Sony artists account for

another 13 million, or nearly 3% of YouTube's 1.3 billion total views a day” (2).

2.4.5 Piracy

The authors of “Music as a Service as an Alternative to Piracy?” agree, “(…) global music

industry revenues decreased between 2004 and 2010” and that in 2012 only 35% of members

of illegal networks paid for music” (Dorr, Thomas and Thomas 383). These unlicensed music

platforms also decrease the revenue of streaming services, especially because many illegal

platforms offer comparable functions and features.

2.4.6 Threat of Substitutes


In summary it can be said that while physical, digital records, and terrestrial radio sales

are no significant threats. It is more likely that streaming services will ultimately replace

physical records and downloads completely. On the other hand, video streaming services and

piracy offer similar functions as licensed streaming services, but free of pay. Their strong

influence on the streaming market leads to the conclusion that the factor ‘threats of

substitutes’ can be evaluated as high.

2.5 Industry Rivalry

2.5.1 Competitor Quantity

As the music streaming industry was launched abruptly, it is not easy to identify which

of the services existed first. However, Pandora is known to be “the biggest early music

streaming service” (Albright). Starting the timeline with Pandora, it is safe to say that the music

streaming industry has existed for 16 years, as of 2016. Today, Spotify and Pandora hold the

majority of the music streaming industry’s market share (The CD is Dead). As the industry

became more popular, it attracted more dominant players from large technology companies

like Amazon, Google and Apple (Shaw). Currently, aside from Spotify and Pandora, consumers

can choose from a long list of interactive and non-interactive music streaming services,

including iHeart Radio, Tidal, Rhapsody, Deezer, Apple Music, Amazon Prime and Google Play.

2.5.2 Competitors Varying in Size and Power

Since the streaming industry is fairly new and interactive services are rated differently

than non-interactive services, it is difficult to define a streaming service’s success. However,

according to a New York Times article by Ben Sisario, music executives, competitors and

investors measure a streaming service’s success mostly by number of subscribers. Using this

measurement factor, the size of the major streaming competitors of ranges from 1 to 75 million


subscribers, with Spotify having the most number of subscribers (Alexander). This suggests that

competitors in the music streaming industry strongly vary in size and power, which is

additionally displayed in diagram 5.

2.5.3 Industry Growth Rate

During an interview with Reuters in 2007, Steve Jobs said that consumers were not

interested in subscription-based model services and that “the subscription model has failed so

far.” However, 9 years later, statistics show that consumer behavior has changed and that the

subscription is currently one of the music industry’s main sources of income. According to the

online statistics portal Statista (see diagram 6), music streaming revenues officially surpassed

physical format sales in 2015. The music streaming industry is growing as the sales of music

streaming continuously increased by 55% from 2013 to 2014 and by 93% from 2014 to 2015

(Statista). As of 2015, the global streaming revenue surpassed $1 billion (Music Streaming Just).

With the continued emergence of cloud technologies, high-speed Internet and other

technologies, the dynamic streaming industry is predicted to continue its growth and by 2022,

reach revenue of $9.7 billion (Music Streaming- A Global).

2.5.4 Industry Exit Barriers

Even though the music streaming industry is growing rapidly, statistics show that most

music streaming companies are struggling with profitability. According to the app analytics firm,

App Annie, Spotify is the worlds’, and Pandora is America’s most popular music streaming

service. Despite their statuses and high revenue, both of these major players are experiencing

losses year after year. However, moderately high exit barriers, which are mostly caused by high

fixed costs, hinder them to file bankruptcy. While another factor that increases the exit barriers


of music streaming services is that these companies acquired specialized skills and equipment

that cannot be utilize in other industries.

In 2009, when Spotify had 5 million users, it was estimated that they spent over

£826,000 per month solely on streaming, music licensing, and storage/hosting costs. These

costs did not factor in other costs like marketing, software development, and staff maintenance

(Arthur).

2.5.5 Zero-Sum Price Competition

In terms of price competition, the music streaming industry currently faces a zero-sum

competition. One reason for this is most music streaming services provide very similar services,

with the only major distinction being interactive and non-interactive platforms. Apart from

Tidal, who prides itself on superior sound and video quality, the majority of music streaming

services have catalogs similar in size and song selection (see diagram 5). Further, the similar

subscription fees of individual music streaming services reduce switching costs for buyers (see

diagram 5). Ultimately it can be said that the services provided by music streaming companies

are not perishable and eliminates the temptation to cut prices, thus, further contributing to the

zero-sum competition of the industry.

2.5.6 Intensity of Rivalry: Medium to High Risk

Michael E. Porter stated in his article that the intensity of rivalry is determined by the

industry’s structure, growth rate and exit barrier. With the music streaming industry having

numerous competitors of different sizes and power, high industry growth rate and exit barriers,

the intensity of rivalry that the industry is currently facing ranges from medium to high risk.


3. Final Evaluations and Future Perspective

Most consumers want access to music for free or at least for a very low cost. Since

consumers can switch to a free music streaming service or a lower price competitor, with fairly

low switching costs, they are in a strong bargaining position. Record labels, the main suppliers

of this industry, are also in a strong bargaining position. With many similar services in the

market, they can demand for high royalty rates, advances and equity shares. Streaming services

on the other hand cannot operate without major label catalogs. This weak bargaining position

forces them to accept the offers of major labels.

The future holds hope for streaming services to gain more profitability. For one,

preceding porter analysis highlighted the trend of certain streaming services investing in

differentiation through customization, ease-of-use and mobility. This differentiation increases

switching costs for both buyers and suppliers, putting streaming services into a stronger

bargaining position. Analysis also shows, that the the Post-Millennial, is likely to show more

acceptance to increasing prices and ad-times and also be more accustomed to the all-time

availability of consumer technology and Internet. Streaming services are utilizing these by

increasingly integrating their products into portable devices and automobiles.

These positive trends may shift some of the current power of buyers and suppliers to

streaming services. But predictions remain predictions and as Tiffany Devos stated in Indiestyle,

“Nothing stays the same. The world is an ever-evolving place and so is the music bizz”

(Thacker). It is unclear if streaming services might end up becoming a tool that big companies

like Apple and Google use as a hub for their other product lines, or if streaming service will

simply be replaced by a yet undiscovered future technology.


Appendix

Music Streaming Services Cost

Spotify $10/month

Apple Music $10/month, Family Plan = $15/month, six for six people

Pandora $5/month

Google Play $10/month

Tidal $10/month, Hi-Fi = $20/month

Diagram 1. Music Streaming Services Cost

Source: "Spotify vs Rhapsody vs Pandora vs Google Music vs Rdio." We Rock Your. Web. 2013. Web. 12 Mar. 2016.

Music Streaming Services

Cost

Spotify $10/month

Apple Music $10/month, Family Plan = $15/month, six for six people

Pandora $5/month

Google Play $10/month

Tidal $10/month, Hi-Fi = $20/month

Substitutes Cost Cheaper?

Digital Albums $10/album up to 16 songs Same

Digital single songs 99 cents to $1.29/song Yes

Vinyl (LPs) $18-$20 No

CDs $10 Same

Piracy Free Yes

Radio Channels Free Yes

Cable TV Music $20-40/month – Just TV subscription No

Video Streaming Services

Free – but has ads Yes

Satellite Radio

“Sirius/XM”

All Access $20/month – 150 plus channels

Select $15/month – 140 plus channels

Mostly Music $11/month – 80 plus channels

About the same

Diagram 2. Costs of Substitutes Compared to Industry’s Products


Music Streaming Services Sound Quality (bitrate kbps)

Spotify Streaming up to 320 kbps

Apple Music Streaming up to 256 kbps

Pandora Streaming up to 192 kbps


Google Play Streaming up to 320 kbps

Tidal Streaming up to 1411 kbps – Hi Fi Pricing

Substitutes Sound Quality (bitrate kbps) Equal or Superior?

Digital Albums Playing at 256 to 320 kbps Equal

Digital single songs Playing at 256 to 320 kbps Equal

Vinyl (LPs) Playing at about 1,000 kbps Superior

CDs Playing at about 1,411 kbps Superior

Piracy Playing at 96 kbps to 320 kbps Equal

Radio Channels Playing at 96 kbps to144 kbps No

Cable TV Music Playing at 320 kbps Equal

Video Streaming Services Streaming at 128 kbps to 256 kbps Equal

Satellite Radio “Sirius/XM” Playing at128 kbps No

Diagram 3. Quality of Substitute’s Sound (bitrate kbps) Compared to Industry’s Products


Music Streaming Services

Performance Quality

Spotify Large library for unlimited music streaming

Clean and good user interface

Excellent audio quality 320Kbps

Compatible with iPod Touch, iPhone, iPad, Android, Windows and home audio systems

Offline mode

Great social media tools

Free mobile service

Podcasts and video clips

Taste Rewind feature plays songs from different decades

Apple Music Includes Beats1 live DJ radio

Available in 100 countries

Sync songs to offline mode

More than 30 million songs

Apple has a great reputation

Comes pre installed on Apple devices

Pandora Compatible with Mac, PC, iOS, Android, PS3, PSP, PS Vita, Blu-Ray players, and TVs

Shows lyrics to each song

Rate songs with a thumbs up or down which helps determine future songs recommended

Pandora Premiers allows listeners to access albums that haven’t been released from a variety of different artists


Decent audio quality, 192Kbps for Pandora One

Google Play Large library for unlimited music streaming

Clean and good user interface

More than 30 million songs

Excellent audio quality, 320Kbps

Compatible with Android, iOS, and Windows

Store specific songs on your mobile app and listen while offline

Share with others

Upload your own music from your library (up to 50,000 songs)

Tidal Import playlists to Tidal by using Soundiiz.com

Ad free

Great sound quality at 1411kbps

Great FAQ section

Highest royalty percentages for artists, songwriters and producers

Student discount

Substitutes Performance Quality Equal or Superior?

Digital Albums Own your purchases/downloads

Excellent audio quality, 256 to 320 kbps

Store songs on computer or external hard drive

Get exclusive songs with album purchases

Album Artwork

Share with others

Creates your library

Doesn’t use data to listen to

Compatible with any music playing media

Ad Free

Equal

Digital Single Songs

Own your purchases/downloads

Excellent audio quality, 256 to 320 kbps

Store songs on computer or external hard drive

Share with others

Creates your library


Compatible with any music playing media

Ad Free

Equal

Vinyl (LPs) Own your purchases

Rich sound experience


Collectors item

Vintage

Share with others

Album artwork

Equal


Superior audio quality, about 1,000 kbps

No need for computers

Plays on turntables

Ad free

CDs Own your purchases

Rich sound experience

Superior audio quality, about 1,411 kbps


Collectors item

Vintage

Album artwork

Share with others

Compatible with almost any media player with CD slots

Ad free

Equal

Piracy Own your downloads – but risk with the law


Uses P2P – not safe

Decent sound quality, 96 to 320 kbps

Share with others

No

Radio Channels Free

Access just about anywhere


Don’t need much equipment

Decent sound quality, 96 to 144 kbps

No need to store songs

No

Cable TV Music Access with cable TV subscription

Excellent audio quality, about 320 kbps



Curated channels

No

Video Streaming Services

Annoying Ads

Decent audio quality, about 128kbps to 256 kbps

Uses data or the Internet to access

Unlimited Access

Equal

Satellite Radio “Sirius/XM”

Annoying Ads

Decent audio quality, 128 kbps


Uses data or the Internet to access

Curated playlist

No

Diagram 4. Quality of Substitute’s Performance Compared to Industry’s Products



Diagram 5. Comparison of Major Music Streaming Services

Source: Alexander, Madi. Apple Music, Spotify and a Guide to Music Streaming Services. The New York Times, 8 Jan. 2016. Web. 14 Mar. 2016.


Diagram 6. United States Music Industry Revenues in the First Half of 2015

Source: Richter, Felix. The Rise of Music Streaming Continues. Statista, 12 Jan. 2016. Web. 14 Mar. 2016.


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Alexander, Madi. Apple Music, Spotify and a Guide to Music Streaming Services. The New York

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Documents

Music Streaming Industry Analysis