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Music streaming has finally hit the mainstream, but the services that provide the sound are failing to convert music into money.
Approximately two-thirds of adult Internet users around the world stream music at least once a month, but just one in 10 digital consumers pay for streaming music, according to a GlobalWebIndex study.
But the news is not all bad, as the study found that people age 16 to 24 were the most likely to purchase a subscription to a music streaming service. This creates a tremendous revenue opportunity for companies that can convince younger users to sign up because it generates stable and long-term revenue streams as these young users grow older and form habits around the service.
Advertising is another significant revenue stream, even for those companies that are struggling to convert paying subscribers. To tap into this stream, several companies in this space have accelerated their ad strategies.
Spotify said at the Cannes advertising festival earlier this month that it would double down on its free, ad-supported offering that delivers advertisements to non-paying users between songs. The company also recently let brands sponsor playlists, some of which receive billions of listens each week.
SoundCloud launched a paid subscription tier called SoundCloud Go in March and subsequently increased the number of ads it serves on the free tier. And last month, the company expanded SoundCloud Go into the U.K. and Ireland, which means non-paying users in those countries received ads for the first time. Finally, SoundCloud has been experimenting with video ads for mobile app users in the U.S., which pop up in between audio play when the screen is active.
Pandora overhauled its visual ad offerings on its mobile app earlier this month to facilitate more native and interactive ads, according to Adweek. To move away from pop-up ads, Pandora implemented a responsible mobile display ad that automatically resizes to fit within a square space that typically hosts album art. The company also introduced muted video ads that users can unmute and watch full screen. Pandora runs approximately 18,000 ad campaigns each month and can target up to 1,000 separate audience segments.
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