Will streaming sites dethrone iTunes as king of digital music?

Tech It Up!
This undated image provided by Spotify shows music artwork displayed on their mobile app. The music-subscription company is joining the ranks of Pandora, Slacker and Songza by offering a free radio service for mobile devices in the U.S. Until June 2012, the company did not enable people to use its mobile app unless they paid $10 per month. (AP Photo/Spotify Radio)
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This undated image provided by Spotify shows music artwork displayed on their mobile app. The music-subscription company is joining the ranks of Pandora, Slacker and Songza by offering a free radio service for mobile devices in the U.S. Until June 2012, the company did not enable people to use its mobile app unless they paid $10 per month. (AP Photo/Spotify Radio)

When iTunes burst onto the scene, getting virtually any song you wanted for less than a dollar was a game changer. For so long, consumers had grown accustomed to paying $12 to $15 for a whole CD, $0.99 felt like a steal.
 
Now that price could drop to nearly nothing.
 
With the growth of Spotify, Pandora, Songza, and other streaming music services, consumers now have the opportunity to treat the entire world of recorded music as their playlist. And as mobile devices transform the way we interact with our surroundings, it’s making the idea of paying to own songs look ever more expensive, even at $0.99.
 
The popularity of these streaming services has boomed with the growth of the smartphone. By offering free, limited versions of sites, and full-featured services for a monthly fee, it becomes a much cheaper option than buying music on iTunes. It’s also more portable, since you can listen to songs on multiple devices, and more social, which makes it easier to discover new songs. And streaming services don’t fill your hard drive with thousands of music files.

“Paying to own music has an uncertain future because subscription streaming services like Spotify deliver a better experience than holding on to a bunch of MP3s,” says Anthony Volodkin, creator of a music streaming site called Hype Machine. “As [streaming sites'] catalogs become more complete, mobile networks and phones continue to improve, owning media files will seem even stranger.”
 
And these streaming sites are already seeing remarkable growth. Pandora says it has increased the number of “active listeners” to 54.9 million people in July 2012, a 48% increase from the year before. At the same time, music industry blogger and former Juniper Research analyst Mark Mulligan estimates Spotify had 20 million monthly users as of May 2012.  And the research firm Strategy Analytics estimates global streaming revenues will also jump 40% this year.

Volodkin’s Hype Machine has actually been around since 2005. He originally sought to create a search engine for music, focusing on the experts who care most about tunes: music bloggers. Volodkin and his team select bloggers to follow. When they post a music MP3 file, Hype Machine grabs it and puts the song on its front page. You can then preview the tune before deciding whether to purchase.
 
It still relies on the old MP3 model, but Volodkin feels his service fits within the changing landscape of music.
 
“Hype Machine's focus over the years has been on guiding listeners,” said Volodkin. “We are excited that there are now more ways to consume music than ever before, but we also see a greater need for filters.”
 
That idea of filters has caught on, as people look for help to transverse all the tunes available to them. Songza, a service that streams music based on your mood, recorded more than 1 million downloads of its new iOS app in its first 10 days. The company creates lists based on different feelings you might have throughout the day. If you need a dance mix, it will offer one. Bedtime? There’s a playlist for that. If you’re in a relaxed state of mind, then the KLF’s "The White Room" might come up in the queue.

David Porter, creator of a streaming service called 8Tracks, says the mood capabilities offered by Songza is what drew considerable attention. “While not a new idea, it resonated with a broad audience accustomed mostly to Pandora's ‘similar artist’ approach. I think this sort of discovery may well grow.”
 
8Tracks adds an even greater social element to its offerings. Inspired by London DJs in the 1990s, Porter created a streaming service where users pick the songs. People can listen to other users' playlists, whether they’re friends, relatives, or strangers. All they need is a similar taste in music. Porter says 8Tracks will soon layer in recommendations, so people can better connect with relevant listeners based on their specific mood.
 
“Radio-style delivery is already the number one way people listen to music,” says Porter. “Radio is second only to television in its reach, and the radio sector is twice the size of the recorded music sector.”
 
With mobile technology, users can now use services like 8Tracks, Hype Machine, Spotify, and Songza wherever they are, creating a radio on the go. And capabilities like linking a mobile device to your TV speakers or stereo make it easier to listen however you want.
 
“Extending the music experience onto phones lets people stay engaged with your app throughout their day,” says Volodkin. “The users of our mobile apps are the most voracious part of our audience.”
 
But does this mean buying music tracks will become as outdated as cassettes? Porter, for one, doesn’t believe so.
 
“I think the idea of purchasing music could become less important, although I'm still not convinced the on-demand subscription offerings will become a mainstream service in the way that iTunes is today.”
 
He points to YouTube, which many may not realize is an enormously popular music player. And according to Nielsen, 64% of teens listen to songs on YouTube, compared to only 53% who listen through iTunes. Yet the popularity of YouTube hasn't led to a massive shift away from iTunes, which surpassed 200 million users last year.

But all iTunes needed to unseat the CD was a critical mass of users and a platform (the iPod). With streaming music services, the opportunity is there. It may just be a matter of making access to streaming music as simple as turning on the radio.

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