- Triggered by shifting music listener consumption patterns, an outstanding assembly of cross-channel broadcasters and pure-play internet programmers, services and platforms, combined with exploitation of the audio avail plus consumer comfort with affordable pay-as-you-go subscription fees, collectively powered a 56.7% jump in 2016 revenue.
- Topline analytics in the market study Internet Music Programmers 2016 - 2018: Ad-Supported and Subscription Listening Hours Chart a Monetization Groove, shows subscription revenue grew by 93% and captured 61.9% of market revenue (U.S.) in 2016, while ad billings ramped 19.5%, to $1.7 billion.
- Going forward, advertising and subscription Internet music radio and track play programmers are currently forecast to achieve $5.4 billion in 2017, an 18.2% marketplace increase following the muscular 2016 surge.
- According to baseline data contained in this report, each 1,000 hours of listening (RPM) across the spectrum of services online is forecast to clear $100 by YE 2018.
- Catalysts for RPM increases include synchronizing audio CPMs across platforms (desktop, mobile or dedicated connected device), improving audio avail targeting (national and local audience profiling), adtech specialist innovations, upping ad loads per programming hour, and integration with major clearing/serving platforms like Google’s DoubleClick.
- In addition, paid subscribers currently standing at 30 million (YE 2016) are spread across an impressive cluster of very polished and library-deep music services that successfully caught the wave of adoption 2012 - 2016, adding paying users at a red hot rate.
- The growth in subscriptions coincides with a static to sliding packaged music market (retail), as well as digital download-to-own revenues. The pick-and-play model is a powerful inducement swinging the market toward rental music.
- Ad-supported services generate 61% of total listening hours, and that segment of the marketplace contributed some 38.1% of revenue, expected to rise past 40% in 2018.
- Radio broadcasters are analyzed in listening hours, subscription services in song plays that are converted into total consumption hours for direct comparisons.
- Advertising (all format executions, including in-stream audio, video and display) are projected to bill approximately $2.1 billion in 2017.
- Subscription services (including hybrid ad-supported and subscription operations and SiriusXM online sub revenues) are forecast to deliver $3.3 billion in 2017 receipts.
- Revenue projections include domestic services that may also have international operations, (i.e.; Apple, Google, Amazon, Microsoft and Viacom’s Rhapsody), plus revenue booked by international brands with significant domestic operations, including global subscription leader Spotify.
- Listening/song-play hours (ad-supported and subscription) increased 9.2% in 2016 to 49.19 billion, or 4.1 billion per month.
- That’s an indication the attention ad-supported services are paying to managed listening growth balanced against monetization imperatives and licensing costs.
- The CRB rate restructuring improved bottom line performance in 2016, though programmers still face profitability challenges. An estimated 34.8% of revenues went to licensing organizations in the past year, compared to 47.8% in 2015.
- Pandora captured an estimated 47.3% of the U.S. market, and Spotify held an 11.5% slice of total listening.
- Listening hours delivered by Internet music programmers exhibits a 12-year (2004 - 2016) CAGR of 29.6%. Listening hours through 2018 are currently forecast at a 26.3% CAGR.
- This report includes a database of broadcasters and services for full year 2016, listening hours or equivalents for each entrant, comparable historical listening hour statistics, forecasts, advertising inventory by format (audio, video and display inventory), CPMs, a complete anthology of pay music services, subscribers and revenue 2003 - 2016, and combined market forecasts through 2018.
SECTION ONE: DIGITAL MUSIC RADIO AND TRACK PLAY SERVICES AND MARKETPLACE
2012 – 2016: A BUILDING WAVE OF ADOPTION
2017: INTERNET MUSIC RADIO AND TRACK PLAY LISTERNERS CREST ACROSS MULTIPLE DEVICES AND DAYPARTS
- State of the internet music radio and song-play services sectors 2016 – 2018: More music, larger music audiences
- Free, pay and freemium models catch on: A groundswell of millennial music listener patronage
- The market is riding waves of both ad-supported audience and revenue growth, but profitability remains elusive
- The office daypart is still vibrant, though widespread deployment of Wi-Fi has triggered the shift to mobile platforms
- Strong subscription services uptake indicates increasing consumer appetite for pay-as-you-go online music rentals vs. packaged media sell-through / digital download
- Media consumption and advertising monetization basics: Ad-supported formats paced by the audio avail
MONETIZATION OVERVIEW: ADVERTISING
- Terrestrial broadcasters less tentative to monetize with higher ad loads online
- Pure-play broadcasters plot path to profitability: Increase audio avails and drive higher CPMs
MONETIZATION OVERVIEW: SUBSCRIPTION
- Subscriptions services allure: Elegant navigation, powerful search, discovery, playback and portability tools
- Scrambling to catch the Wave: Major internet brands launch glossy subscription services boasting large libraries into a marketplace coinciding with an avid listener base
THE STATE OF MUSIC LISTENING TECHNOLOGIES AND VENDORS
- 3rd party technologies, solutions, pricing, business models and monetization mechanisms play important roles
- Vendors capture a CPM share rate of anywhere from 25% - 35%
- Fees are often usage based (insertion/serving CPMs)
- The market is buying all-in-one solutions, including server side ad insertion, impression serving and DSP/SSP programmatic technology
- Google advantage: Audio advertisers have, in some cases, switched from AdMob to straight HTTP requests because there is an HTTP interface into the DoubleClick media platform
- Choosing/licensing a multi-format adtech vendor vs. an audio technology specialist: Pros, cons and getting media cleared
- Transacting audio avails and technology options for clearing media
AD-SUPPORTED BROADCASTER BUSINESS IMPERATIVES: 2017
- Programmers are focused on managing listening hour growth while increasing exploitation of the most opportunistic and pertinent cross-platform format: audio
- The mobile platform is contributing significantly to listening hour consumption, audience reach, and triggering a shift in consumption patterns
LISTENING HOUR ANALYSIS: FULL YEAR 2016
INTERNET MUSIC RADIO AND TRACK PLAY LISTENING HOUR CAGR AT 29.6% 2004 – 2016
- Listening hour CAGR (total ad-supported and subscription) tracking at 26.3% 2004 – 2018
- Pure-play broadcasters balance growth, market maturity and audience reaction to advertising
- Listening hours surpass 49.1 billion in 2016 (U.S.)
- Total listening/song-play hour growth under 10%
- Low double-digit rates of growth forecast through 2018
4 BILLION LISTENING HOURS PER MONTH IN 2016
AD-SUPPORTED MONTHLY LISTENING HOURS FORECAST TO RISE BY 11.5% IN 2017
SUBSCRIPTION HOURS TO RISE BY 15.4% IN 2017
- 2.8 billion ad-supported listening hours per month forecast in ’17
- 1.8 billion subscription/song-play hours per month projected in ’17
AD SUPPORTED LISTENING HOURS OUTPACE SUBSCRIPTION HOURS 2010 - 2016
NOTES ON THE TUNEIN APP
- The app is a bridge between audiences and broadcasters
- Listening through the app is not included in our station listening hour databases
INTERNET MUSIC MONETIZATION FINDS A GROOVE: PROGRAMMING SERVICES REVENUE JUMPS 56.7% IN 2016
$4.6 BILLION IN COMBINED SUBSCRIPTION AND ADVERTISING REVENUE
- In 2015, advertising and subscription revenues were at market share parity
- In 2016, subscription revenue grew by 93% and captured 61.9% of the market (U.S.)
- In 2016, advertising revenue grew by 19.5%, to $1.7 billion
- Subscription revenue led the market 2005 – 2010
- Ad revenue led the market 2011 – 2014
- Parity in 2015
- Subscriptions to lead the market through 2018
MONETIZATION PER 1,000 HOURS OF LISTENING (RPM) AVERAGED $94 IN 2016, INCLUDING PAY/SUBSCRIPTION SERVICES
- Subscription surge, comp listening offers supporting new pay service launches propel the market
- Each 1,000 hours of listening across the spectrum of music services online is forecast to clear $100 in 2018
- Catalysts for increases in per 1,000 hours of listening include monetizing against the audio avail and a growing subscriber base currently standing at 30 million (YE 2016)
INTERNET MUSIC PROGRAMMER ROYALTY PAYMENTS ESTIMATED AT $1.6 BILLION IN 2016
- CRB rate restructure improves bottom line in 2016, though programmers still face profitability challenges
- 34.8% of estimated revenues going to licensing organizations, compared to 47.8% in 2015
ECONOMICS 101: PRICE ELASTICITY OF DEMAND DRIVES MUSIC SUBSCRIBER UPTAKE 2012 - 2016
- Subscribers spike 89% 2012 – 2013
- Subscribers double 2014 – 2015
- Subscribers jump 40.5% in 2016
- Pay-as-you-go music rides a wave of generation millennial adoption
SUBSCRIPTION MUSIC SERVICE SUBSCRIBERS BY YEAR: 2003 – 2016
AD-SUPPORTED SERVICES CONTINUE DOUBLE-DIGIT GROWTH: A $1.7 BILLION INTERNET MUSIC RADIO MARKET
- Advertising revenue (all formats) generated $1.7 billion in 2016
- 21.9% growth forecast for 2017
- Double-digital rise in 2018
IN-STREAM AUDIO ATTRACTS 79.7% OF TOTAL AD SPEND IN 2016
- The in-stream audio avail exploits listener orientation
- Internet music broadcasters monetize against multiple formats
- Audio with a synched banner is by the far the most widely exploited execution
- Display media at 12.5%
- Video pre-roll at 7.8%
AUDIO INVENTORY INCREASED 11.5% IN 2016
AN AVERAGE OF 27.6 BILLION MONTHLY AVAILS
- Audio inventory expansion is forecast in the range of low double-digits through 2018
- Sellout is estimated at 65% for 2016, increasing to 75% by 2018
- 100% sellout hampered by scarcity of highly targeted inventory
TERMINOLOGY AND DEFINITIONS