According to the Recording Industry Association of America, the first half of 2017 saw music sales soar to $4bn in the US, the world’s largest music market. This is a jump from an 8% rise a year ago to a 17% jump this year with music streaming services like Spotify, Apple Music, among others playing a massive role. Closer home, India has seen tremendous growth in music streaming services like Apple Music, Gaana, Saavn, Wynk, Hungama, etc where subscribers are willing to pay monthly or yearly subscriptions for unlimited access to music from across the world. Keeping aside the factors of pirated music or video platforms like YouTube (you cannot listen to music in the background till date), more people are signing up for music streaming apps because they enable them to connect globally with upcoming and new music.
While the industry is growing with more people signing up to music streaming apps, we also need to understand the sustainability and scalability of keeping these platforms afloat. One of the largest channels for these platforms to make money is, naturally, through subscription. Users are most likely to continue using these platforms based on factors like sound quality, user interface or user friendliness of the app/website, buffering speed and so on. Hence it is important to constantly upgrade the interface and provide a seamless experience to users.
Music streaming apps also generate revenue via brands and artists that want to push their work or their message through these platforms. They can agree to pay a certain amount to push their latest hits. For example, Bacardi can promote its content by being featured on the playlist when the user opens the app or an artist can book a space to be featured in a prominent area.
Another stream of revenue is from advertisements. This route has immense potential to drive revenue as long as there is more focus on making ads that are interactive and snackable. Considering that a large amount of usage happens through mobile phones, ads can become more mobile-friendly and immersive for the user to enjoy the process.
There are other alternatives to monetise the apps like native audio ads that appear between two music tracks while a user is listening to songs or through selling data to brands and advertisers to make contextualised third-party ads. These avenues, if explored aggressively, can help digital streaming platforms monetise on their existing subscriber base.
Lavin Punjabi is CEO and co-founder, mCanvas