Streaming music: The meteoric rise of digital music platform services

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  Quantumrun Foresight
• January 6, 2022

Insight summary

The music industry underwent a significant transformation in the early 21st century, shifting from physical sales to digital platforms due to the challenge of piracy. Initially, the industry leaned towards digital sales of individual songs, but the emergence of streaming services marked a pivotal change, offering users access to vast libraries of music and podcasts. These changes have not only reshaped the music industry's economic landscape but also hold profound implications for artists, consumers, and the broader society, including shifts in labor skills, environmental impacts, and cultural exchanges.

Streaming music context

In the early years of the 21st century, the music industry found itself grappling with a formidable challenge: piracy. The advent of peer-to-peer sharing platforms, such as Napster and Limewire, had ushered in an era where music could be shared freely and without consequence, leading to significant revenue losses for both music labels and artists. The industry, unprepared for this digital onslaught, struggled to find effective strategies to counteract this issue. The traditional model of selling physical copies of music was becoming increasingly obsolete, and a new approach was urgently required.

In this turbulent landscape, Apple Inc., a company renowned for its consumer electronics, emerged as a potential savior. In 2001, Apple introduced a legal alternative to the rampant piracy: the iTunes application. This platform allowed users to purchase individual songs, which could then be played on their iPod device, a portable music player that had quickly gained popularity. This approach seemed to be a promising solution, providing a legal, digital platform for music consumption that benefited both consumers and the industry. It appeared, for a time, that this model would define the future of music distribution.

However, the landscape was soon to change again with the emergence of Spotify, a digital service provider (DSP) based in Sweden. Spotify introduced a streaming service that provided affordable access to a vast global library of music and podcasts. This model, which allowed users to listen to music without purchasing individual tracks, represented a significant shift in how music was consumed. Furthermore, it provided a platform for both established and upcoming artists to earn revenue through streams, creating a new paradigm in the music industry. 

Disruptive impact

The advent of DSPs like Tidal, QQ Music, Kuguo, and Kuwo, marked a significant shift in the music industry's landscape. These platforms challenged Apple's dominance in the digital music space, offering both free and paid subscription tiers, songwriting credits, and even direct donations to artists. Furthermore, Spotify introduced a personalized, shareable year-end review, providing subscribers with a unique insight into their music consumption habits. This feature not only enhanced the user experience but also fostered a sense of community among music lovers as they could share and compare their musical journeys.

The rise of these DSPs and their continued growth in subscriber numbers indicate that streaming music is not just a passing trend, but the future of music consumption. This shift has had a profound impact on music copyright revenue, which saw a significant increase from USD $29.5 billion in 2018 to a record USD $31.6 billion in 2019. Streaming services accounted for nearly half of this revenue, underscoring their growing importance in the music industry. 

Looking ahead, the music streaming industry's growth is expected to be driven largely by emerging markets in Asia and Africa. These regions are forecasted to account for up to 80 percent of the industry's growth by 2030. This presents a tremendous opportunity for DSPs to expand their reach and tap into these burgeoning markets. However, it also poses challenges, as companies will need to navigate diverse cultural landscapes, regulatory environments, and consumer preferences. 

Implications of streaming music

Wider implications of streaming music may include:

• Artists adapting the music they create in ways that will find greater success on DSPs, as compared to other mediums like CDs or vinyl records. 


• Some DSPs copying the Netflix model and attempting to become record labels. In this scenario, DSPs may sign their own artists who produce music that matches what their data indicates is the most popular forms of music on their platforms. 


• DSPs providing more interactive features that would allow artists and fans to have more meaningful connections beyond simply listening to songs.


• More negotiations between artists and DSPs in terms of copyright and royalty shares, as streaming platforms become increasingly popular and lucrative.


• More targeted ads for both artists and subscribers to supplement DSPs' earnings.


• Increased demand for digital skills and data analysis capabilities resulting in a more technologically adept workforce


• A decrease in physical music production, such as CDs and vinyl, leading to a reduction in the environmental impact associated with the manufacturing and disposal of these items.


• Greater cultural exchange and understanding as listeners gain access to a diverse range of music from different countries and cultures, promoting global unity and appreciation for diversity.


• New regulations to ensure fair compensation for artists leading to a more equitable distribution of revenue within the music industry.

Questions to consider

• If you’re a streaming music platform subscriber, what do you think are the benefits of DSPs over previous methods of consuming music?


• Would you consider buying physical copies of music ever again, such as CDs or vinyl?