The Streaming Music Market

The Services

Music streaming services let users listen to almost any song or album without purchasing or downloading a file. Many of these services offer free plans that have advertising and limited capabilities, as well as unrestricted subscription services. We researched the four major services, and each of their different strategies to gain a better understanding of consumers’ preferences in this market.

  • Pandora is a radio-style service in which users can enter a favorite artist, track, or genre and Pandora creates a personalized station based on that pick.
  • Spotify allows users to browse music as well as search by artist, album, genre, or playlist. Spotify also offers users curated playlists and social sharing – the chance to see what one’s friends are listening to.
  • SoundCloud is an online audio distribution platform. It enables users to upload and share their originally-created sounds. It specializes in lesser known artists.
  • Apple Music is a platform that comes with Apple iPhones. Subscription users can select music to stream on demand and can access a curated radio station. Apple also offers iTunes radio which allows users to stream Pandora style radio ‘stations’ for free.

Popularity

Existing statistics indicate that SoundCloud is the most popular service with 175 million users, followed by Pandora with 80 million users, followed by Spotify with 75 million users, followed by Apple Music with 11 million users (NY Times).

However, our own data shows that Pandora is actually the most popular – it has been used in the last 6 months by more than 40% of the population. This is followed by Spotify, SoundCloud, and then Apple Music [see below]. There is a large discrepancy in reported and actual SoundCloud users demonstrating the number of accounts technology companies reference ¹ number of users they actually have.

WebStreamingMusicUsers

Consumers’ Considerations

Users indicated that price was the most important factor when choosing a service. Interestingly, we found in our data that while consumers most prefer free subscriptions, charging $5 does not seem to induce the “negative response” that charging $10 or more does. Advertisements were the second most important factor. The major services leverage the importance of these two attributes by offering users free options with commercials and subscription options without commercials.

Offline music downloading and music selection were found to be less important factors. Spotify Premium, Apple Music, and SoundCloud free allow for offline music downloading. There is a large range in music selection – with SoundCloud at 125 million tracks, Apple Music at 30 million, Spotify at 30 million, and Pandora at a disappointing 1 million (NY Times).

Price: The Most Important Factor

While the different services offer various features, price seems to be the attribute that drives consumers’ choices.

Free Version Premium Version Selective Streaming Radio Streaming Offline Downloading Upload Audio
Pandora 4.99/month X X X
Spotify $4.99/month (student) $9.99/month (general) X X
SoundCloud $7/month (pro) $15/month (unlimited) X
Apple Music $9.99/month (individual) $14.99/month (family) X

Notably, Spotify is taking advantage of consumers’ indifference to a $5 price point by offering it to college students, getting them “hooked” and hoping they will subscribe to a full subscription upon graduation. In addition, Pandora is likely the most popular service because users indicated that price was the most important factor and it is the cheapest.

Premium Users

The research finds that premium users tend to be more interested and committed music fans. Our data shows that premium users spend more hours a day using music streaming services, and have used them for more months on average. Interestingly, premium subscriptions seem to be worth the cost; we find that premium users are more satisfied than free users.

Research Insights

In light of what we know about consumer preferences, it would seem that Spotify, which offers the most features, pay and free subscriptions, allows for offline music downloading, and has a relatively large music selection, would be the most preferred platform. However, our data suggests Pandora actually has the most users. It may be that the simplicity of Pandora is especially attractive or their head start into the market may still be benefitting them.

Why are Apple Music’s numbers so low even though iPhones are already equipped with the application? Qualitative research suggests many consumers don’t even understand Apple’s music offerings, perhaps introducing an initial hurdle to signing up. Our data also indicates that Spotify and Pandora users are most satisfied, suggesting Apple’s platform may simply lag in some aspects. Falling further behind Apple was SoundCloud, which provides a possible reason for their discrepancy between the number of accounts they have and actual users.

Sonal Ahuja

Sonal is a sophomore in the McDonough School of Business majoring in International Business and Marketing. At Georgetown, Sonal is involved in various dance shows and Greek life and she also enjoys traveling.  At GICR, Sonal hopes to further explore her interests in behavioral studies and how it informs market research.

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