By: Avi Lekowsky  | 

Sounds Good! How Streaming Services Came to Be

As Generation Z-ers, we have experienced many forms of music listening. Born into the rise of the CD era, now, the current Gen Z-er likely has at least one music streaming subscription filled with playlists for every imaginable mood. For many streaming enthusiasts, the platforms have become almost social media-like, where fellow users can follow one another and broaden their auditory interests. But current streaming platforms are a culmination of years of innovation and creativity. These services, once thought to be the end of the lucrative music business, now account for the majority of the music industry’s revenue.

While proto-streaming services originated in the ‘90s, the industry really began to take off in the early 2000s, when radio stations made their streams available online. Over time, online stations catered specifically to a user’s music genre started to emerge. But the biggest shock to the music industry happened during a 60-hour coding marathon: Napster. The program allowed people to freely share their favorite songs from any artist they wanted — putting a huge dent in the music industry’s profits and forever changing the way people conceived of music. Eventually, after a series of tumultuous lawsuits, Napster was forced to close their operations. But Napster’s novelty paved the way for future streaming services

Shortly after the fall of Napster, The Pirate Bay launched to assist users to easily acquire music. The Pirate Bay offered users the ability to illegally acquire copied entertainment ranging from games to music. While many lawsuits have been filed throughout the years, The Pirate Bay continues to operate today. 

However, for users seeking a legal route to acquiring music, iTunes allowed people to easily purchase music for $0.99. The quickness and simplicity of iTunes alone drew many people away from the file sharing life. Within the first week of launching, over a million songs were sold and iTunes quickly became the preferred way to buy music. 

While CD sales reached a peak of $13.2 billion in sales in 2000, in 2019 sales were down to $1.8 billion; however, while iTunes offered a legal way to acquire music, piracy was still the easiest way to grow a music library with minimal effort and no hit on a user's wallet. 

Enter 2008, when listening to music through sites like YouTube and Pandora was already gaining momentum. More significantly, however, 2008 marked the beginning of a new era of music: Spotify.

Founded by Daniel Ek and Martin Lorentzon, Spotify began development in Stockholm, Sweden in 2006 as a response to the growing piracy problem the music industry was facing. The concept behind Spotify was to offer users a sleek interface and an à la carte option of playing music. Initially, Spotify was only available in European countries but quickly expanded to the global market. Today, they boast of having over 270 million active monthly users.

But Spotify's success ushered in a new era for the music world: the streaming wars. While YouTube and Pandora are established streaming competitors, newer services such as SoundCloud offered a slightly different service catering less to established musicians and more towards the up and coming artists. Many big names grew out of the platform, lending the term “SoundCloud Generation'' to refer to artists such as Bryson Tiller, Lil Pump and Chance the Rapper. However, Spotify’s biggest competitor came in the form of a service formerly known as Beats Music. 

After being acquired by Apple in 2014, the Beats Music platform was repurposed for the launch of Apple’s newest music platform: Apple Music. Featuring a star-studded launch, major ad campaigns and initial exclusive streaming rights to albums from artists like Taylor Swift and Frank Ocean, Apple Music, like its predecessor iTunes, came out the door swinging. However, even with the capital that has been poured into Apple Music, Spotify has still been able to maintain its lead through innovative marketing campaigns and creative new ventures. 

The competition amongst streaming services has led to rising revenues for music label companies. In the first 6 months of 2019, music streaming brought in $4.3 billion of revenue, an increase of 26% from the prior year. That accounts for about 80% of the music industry’s money!  

Streaming music has been so successful that according to a recent filing from Warner Music, many services will be looking to raise their prices soon. Why would streaming companies feel comfortable doing this? Well, because they can! All-in-all, $10 a month is not a lot to spend on music (a number cut in half if you’re a college student). A quick search online shows that CD’s generally sell for around $10-$15, so to have virtual access to millions of songs pretty much anywhere is still a bargain. Plus, once people get used to that convenience, it’s hard to go back. While the extra few dollars may be marginal to subscribers, streaming services will be increasing their annual revenues by the millions.  

Photo Caption: Streaming services are becoming a major source of revenue for the music industry.
Photo Credit: Pixabay