On the Fox network’s hip-hop soap opera “Empire,’’ mogul Lucious Lyon mortgaged his entire fortune to buy a company that streams music over the Internet. It struck me as a bad investment, but who knows? Maybe a fictional character will be the first to get rich streaming music to our computers and phones.
It’s not happening in the real world. And it won’t until something dramatic happens — either higher prices for music lovers, or a tidal wave of bankruptcies and buyouts featuring industry try-hards who couldn’t make it happen.
For now, there’s no quit in these guys.
Pandora, the granddaddy of music streamers, just this week launched an upgrade of its radio-like service, making it easier to skip songs. Later this year, Pandora will introduce unlimited full streaming that lets you listen to whatever you want for $10 a month. In June, Apple Inc.’s Apple Music got a facelift that included a sing-along feature that displays song lyrics. And France’s Deezer, once available only on Cricket Wireless cellphones and some Internet-connected audio gear, recently launched a full-fledged US service with access to 40 million songs.
There are even unconfirmed rumors that Amazon.com will start a subscription music service by year’s end.
They’re facing off against the top music streamer, Sweden’s Spotify, with over 40 million paying subscribers worldwide and another 100 million who listen to the free ad-supported version. And don’t forget Google Inc. The company’s $10-a-month Play Music service is practically invisible; Google won’t say how many people use it. But Play Music is a strong offering that includes a subscription to YouTube Red, an advertising-free version of the world’s most popular video site.
Streaming’s a red-ink business these days. Spotify, for instance, lost $194 million last year, and Pandora $170 million. But streaming’s bound to pay off for someone, sooner or later. The overall market is booming. US streaming revenues climbed 57 percent to $1.6 billion in the first half of the year, according to the Recording Industry Association of America. Sales of CDs and of permanent music downloads fell by double digits over the same period. But streaming was so strong that total US music industry revenues grew 8.1 percent, the best performance since the late 1990s.
Apple and Spotify get most of the credit. In its first year, Apple Music service signed up 17 million subscribers worldwide, each paying $10 a month. During the same period Spotify picked up an additional 23 million subscribers. The giants aren’t cannibalizing each others’ markets. Instead, they’re winning over millions who’d never before paid for music by the month.
I’m one of them. I hooked up with Spotify last year, purely for the sake of research, expecting to log off after a month or so. Instead, I’m listening to some Syrian folk music right now. Spotify almost always has what I want to hear, anytime, anywhere, for $120 a year. I’m keeping it.
Yet few people are paying for music streams. The research firm MusicWatch found just 7.7 million American subscribers last year. A different outfit, Midia Research, put total worldwide subscriptions at just 83 million. So there’s plenty of room for growth.
But many people still like to listen without paying. Illegal file-swapping sites are being supplanted by “streamripper’’ services for making illicit copies of legally streamed songs, and pirate streaming services that work like Spotify but don’t pay a dime in royalties. According to MusicWatch, about 57 million Americans steal at least some of their music.
Besides, music doesn’t come cheap for legitimate streaming companies. They pay royalties to artists and recording companies everytime you play a song. This devours up to 70 percent of revenue, leaving little for marketing or technology upgrades. But dialing back on either would be fatal in a market full of fierce and wealthy competitors. The same goes for any attempt to boost revenue by raising prices beyond the industry-standard $10 a month.
Fans of “Empire’’ know what’s next. Somebody’s got to die. But who? Music streaming is a sideline for Apple, Google, and Amazon; they can lose millions on it for years. Not so for outfits like Spotify, Pandora, Deezer, and a horde of smaller companies such as Tidal, SoundCloud, and Rhapsody. Music is all they’ve got. A Pandora or a Tidal might get purchased by a bigger firm, but for most of the independents, it’s win or else. I figure one or two of them will be long gone by this time next year.
Indeed, there’s just one sure thing in the music streaming business — Lucious Lyon can’t lose. Not with those Nielsen ratings.
7.7 million
Estimated number of Americans who subscribed last year to a streaming service.
57 million
Estimated number of Americans who still steal at least some of their music.
Hiawatha Bray can be reached at hiawatha.bray@globe.com. Follow him on Twitter @GlobeTechLab.
