Quick Guide to Music Streaming Service Industry

Human evolution underwent several changes from the first melodic sound to compression of music file to make the MP3 in 1991, a discovery that will lead to the discovery of music streaming services.

The first musical instrument was a flute fashioned out a bird bones crafted by cavemen about 40,000 years ago. It was discovered in southern Germany by archaeologists who also found sophisticated tools which suggested that music was very much a part of the culture of early humans. Experts believed that this era—during the middle and upper paleolithic period—when human creativity really exploded (coincidentally, this is also when Homo Sapiens forced Neanderthals to go extinct). An older instrument, said to be dated 60,000 years ago, was also a bone with drilled holes resembling a flute. However, scholars are still divided over that one.

Music the Language of the Soul

You might have heard about this phrase so many times, but during the pre-modern man, this phrase held a significant meaning.  Experts suggested that humans aped animals in terms of determining any changes in the methodical sounds of the environment. The main purpose was survival, of course, as any anomaly in the noise could indicate danger. In the same vein, they could also discern the movements of prey.

Research suggests that the reason why Neanderthals perished is their lack of social unity. Homo Sapiens, as shown in their cave arts, have a higher appreciation of their relationship with their core group and the environment surrounding them. Although there’s no evidence to support it, paleoanthropologists believed that music even predates human language. People express themselves by banging, thumping, and grunting. Melody came a little later.

From Phonograph to Music Streaming Services

Thomas Edison was widely recognized for inventing the phonograph in 1877. The original purpose was to record and reproduce speaking voice—much like an add-on value for his telegraph. However, he was enough of a visionary that he recognized the potential of the device to record music.

Right after that records were already selling that are preloaded with music and played in the phonograph. Just before the turn of the 20th Century, people were already going to parlors where they can listen to some music recording for a nickel. If you think it sounded suspiciously like the jukebox, you were right. This was the grandaddy of the jukebox.

When you think about it, music streaming services, where you can choose your own playlist of your favorite songs, are actually not as novel as they sound. Back in the day, the record labels didn’t hold the power but rather the musical producers and the publishers. They made the songs they wanted to listen to. The fact that other people also wanted to listen to their songs was just a happy offshoot. Today, the power was given to the listeners themselves as they can pick and choose the songs they want.

However, the quality of music became clearer as the technology improved. As it became easier to reproduce music, record companies mushroomed and record labels discovered the power to make stars out of musical talents.

Record sales took a hit when broadcast radio became popular in the late 1920s but this could also be due to the Great Depression.

From Vinyl and Cassettes to CDs

Vinyl was a product of its time. During the World War II, shellac was in limited supply. But vinyl was easily manufactured and very cheap. So the records were pressed into this material and the music reached the US troops wherever they were stationed.

Cassettes followed soon after when Bill Lear introduced the 8-track tape. The mobility it offered more than trounced the quality of sound that the vinyl produced. It was a losing battle for vinyl because people were already inserting cassette tapes into their cars. They were also making their own mixtapes.

Enter the Walkman in 1979, which revolutionized how people listen to music.

When Sony introduced the device, people scoffed at the idea of a music-only player. There was no option to record music on the Walkman.

It must have been a sight back then to see people walking around with large headphones on listening to music and isolating the rest of the world. Of course, it’s a common enough sight today.

Just 10 years after its launched, Sony already breached 50 million in the number of units sold.

It must have been poetic justice for the vinyl when the compact disc was introduced and totally obliterated the cassette tapes off the shelves. The first song that was played on the CD was The Visitors by the Swedish group ABBA. This was in the 1980s. The era of all things gaudy, except for the music. The Walkman gave way to the Discman, which works exactly the same way.

It was natural for the CD to replace the cassette, which only traditionally play a limited number of songs. In 1982, Japan released the first commercial CD which was designed to play 74 minutes worth of songs. The number was symbolic as a tribute to Beethoven’s 9th Symphony.

But the CD was a technological breakthrough because it was when music transitioned from analog to digital format.

Still, people were still holding on to their Walkmans and cassette radios. The CD made a technological leap in 1985 courtesy of Dire Straits, which released its album Brothers in Arms, in pure digital format. In effect, it entered the annals of CD history for being the first to sell one million.

Twelve years after the commercial release of the CD, the video CD was introduced. Unluckily, the DVD was soon introduced and the video CD never really gained traction.

From CD to MP3

The fate of the CD followed the trend of music consumption across history. As far as sound quality goes, the MP3 wasn’t ideal. The technology was based on compressed and decompressed audio file, which allowed people to collect and save as many songs as they want into their library.

In fact, the MP3 as a format was supposed to have died in the mid-1990s. There were a lot of competitors back then, including the ACC and the WMA formats.

Ironically, it was Napster and music piracy that brought MP3 to public consciousness. In 1997, the MPMan—a portable MP3 music player—was launched in the market.

More and more people are going online to download songs or sharing them in peer-to-peer sites, totally violating the copyright laws.

The Era of Music Streaming

Record labels were deathly afraid of music piracy and for good reason. Although Napster was already shut down by the court, there were other peer-to-peer websites and apps like BitTorrent and Limewire. Nobody is shutting down the spigot after it was already opened.

In response, they secured the digital formats so they couldn’t be copied and shared.

But instead of seeing the online music as a threat, Steve Jobs recognized the potential and launched the iTunes Store in 2003.

Steve Jobs basically followed the Napster format, only this time his company and record labels are getting some form of income for each downloaded music. The Apple founder rightly assumed that people were drawn to Napster not only because music was free but because it was very convenient. Instead of going to the record store to buy an album, they can just search for their favorite song and download away.

The record industry back then was stuck in a rut. While they were afraid of piracy, they had no way of delivering the music to the intended audience and still ensure that their profits were protected.

When he introduced the iPod and successfully syncing it with the iTunes Store, he again changed the way music is consumed.

While the technology was sound, Jobs still had to convince labels into offering an incentive for people to go away from downloading illegally to paying for their music. He achieved a coup when the recording companies agreed to give the rights to the song for just 99 cents each.

In just a week after its launch, the iTunes store recorded its first million in sales.

More importantly, he changed the way digital music was distributed as people have more choices now than at any point in the history of music. Of course, Jobs cemented his reputation as a genius while the record labels saw their profits shrunk because the system didn’t allow for changes in the amount per download.

Opening the Pandora’s Box

The history of modern music streaming services can be traced back to 2005 when Pandora was introduced. It was billed to be your own very personal radio. By starting with your favorite music or artist, Pandora will take you to the rabbit hole where you will be introduced to new artists based on the algorithm it created based on your most used playlist.

Before Facebook, there was MySpace and nobody could argue its place in the promotion of music streaming services. Careers were launched on the online platform. Arctic Monkeys, for instance, can trace their success to MySpace.

But Pandora could never solve the problem for free-to-play users who were content to suffer through the ads in order to listen to music. The company was also immersed in several litigation cases over royalty fees.

For now, however, music streaming service is here to stay. For instance, streaming spiked 53% in 2017 when the revenue hit $3.4 billion compared to $2.2 billion in 2016.

Lala Streaming Services

Lala.com, founded by Bill Nguyen and Billy Alvarado, along with Anselm Baird-Smith, and John Cogan III, was among the first to allow music enthusiasts to create their own playlist which will then be uploaded into the system where it can be accessed by the other subscribers.

But unlike Napster, it was all aboveboard as the company made deals with record companies for the right to stream their music online. At its peak, the company had eight million songs that can be purchased and downloaded.

The music-on-demand service also went beyond the Internet as well. The company had a trading function where the subscriber can buy a disc pre-loaded with their favorite songs. Prices were wholesale so the subscriber can save a lot of money. They can also gift someone with the CD. By accessing the member’s playlist wish, they can get Lala to prepare the package which will then be sent to the recipient.

Apple, however, bought Lala.com in December 2009 for $80 million. The company’s initial funding was for only $20 million. Just months later, Apple totally shut down the music streaming service but the website stamped its mark on the industry. In fact, Billboard.com was totally reliant on Lala to provide it with the music preview in songs included in its Top 100 chart.

The music streaming service industry is quite stiff, although Spotify seems to dominate the market with 60 million paid subscribers worldwide. This is followed by Apple Music with 30 million subscribers, Deezer at far third with 6.9 million paid subscribers and Pandora with 5.2 million. Unlike what people may think, Napster is still very much alive and it currently has over four million paid subscribers.

The competition will only benefit the end consumers. For instance, subscription rates are down in order to get more clients into signing up. In addition, music streaming providers also typically give a trial period of one to two months where people can try the service for free and decide if they like it.

Of course, you can use these apps to listen to music for free but there are so many limitations about what you can do not to mention the annoying ads that pop out at inconvenient times. But then again, those who want their music for free are casual listeners anyway, and these are not the target market.

Premium subscribers have a range of options depending on the package they choose.

Are Music Streaming Services a Bane for Artists?

You’ve probably heard about artists complaining and even suing music services on copyright or royalty issues. For instance, Taylor Swift pulled out of Spotify as she wrote that artists should give more value to their art and not allow others to exploit their creativity. She said that the streaming service doesn’t have built-in settings to protect her songs from being played by users who play content for free.

But a 2016 research titled “Changing Their Tune: How Consumers’ Adoption of Online Streaming Affects Music Consumption and Discovery” authored by Hannes Datta, George Knox, and Bart J. Bronnenberg, revealed that music streaming services will give independent artists the much-needed exposure they deserve.

As already mentioned, Arctic Monkeys owe their exposure to MySpace, the same goes for Lily Allen.

Going back to Lala.com, new artists would be given a chance to connect with their intended audience due to the algorithm employed by the app based on the musical taste of the user. The person who loves Taylor Swift music, for instance, would be introduced to a new talented artist with similar stylistics than the pop singer.

The research found out that the number of independent artists being listened to in the music streaming service has increased by 36 percent. More than 6 in 10 of digital users prefer music streaming to other platforms, said the report from MSI. As for others, 17% of music enthusiasts still go to buy their records from physical stores while 15% prefer to download their music.

Not surprisingly, people’s musical tastes expanded as they crossed over to the other genres due to the recommendation of the app. Music consumption grew along with their taste in music.

For indie artists, this was a godsend. They now have a platform to promote their music when they don’t have the money to do so. Gone are the days when they had to peddle their mix tapes out there on the streets. However, the research pointed out that while indie artists got the exposure, taking the next step—which is being signed by a major label—is a much harder proposition.

Major artists like Taylor Swift have the responsibility to protect their craft. For instance, Swift writes most of her songs so those are essentially her creations. With that said, there’s no denying that the music streaming service is the preferred platform for digital music consumption right now. And it’s likely going to stay that way for a foreseeable future.

Second, music streaming services are actually very cheap in terms of subscription rate, which is good news for consumers. You can stream to your heart’s content for as little as 10 bucks a month so that type of value is vastly understated.

The one criticism leveled against the industry is that the music streaming service is paying the artists penny to the dollar, but they are paying 70% of the revenue to the labels, which own the rights to the music. The argument is that it’s between the label and the artist to hash out a win-win solution to the royalty problem.  Besides, experts believe that profits will come rolling in once the critical mass of 100 million subscribers is reached, and the industry is already there.