Regardless of industry backlash, it looks like free ad-based (often called ‘freemium’) music streaming will be around for awhile. Revenue from ad-based music streaming as a whole will cross the $1 billion mark by 2017, according to a new report from Juniper Research. The research firm expects ad-based music streaming to reach $782 million in global revenue this year, and to continue increasing in 2016. This expected growth is in spite of new music streamers Apple Music and Tidal refraining from offering any ad-based subscription option.
Not only will freemium services add more revenue, but according to the report, they will continue to drive more people to sign-up for paid subscriptions, as leading on-demand service Spotify has contended.
“The new research found that while freemium services will continue to entice a growing number of users, the model will enjoy a greater influence in funneling consumers towards the more profitable subscription options,” said the report.
Spotify’s business model is largely based around that basic principle. The service offers a free, ad-based music streaming option, aimed at enticing listeners to try the free service in hopes that they will eventually upgrade to Spotify’s ad-free $10 per month subscription.
Still, many major label execs aren’t willing to wait for the tide to turn more profitable. “We need to accelerate the growth of paying subscribers — that’s a slightly more positive way of saying we need to limit free,” said an unnamed exec to Rolling Stone earlier this year. And recent reports suggest that labels may be on the way to convincing music streamers to limit options for free, ad-based music streamers.
But this latest study suggests that ad-based streaming music will continue to thrive even as major subscription music players shy away from freemium. Right now, subscription numbers tend to agree with the study. Nearly three-quarters of Spotify’s 75 million users are freemium subscribers. While Apple Music boasts that it has acquired 11 million subscribers, they are all currently in the service’s free, three month trial period.
Free, ad-based streaming will continue to be a significant part of the streaming music industry until more streamers (like Spotify and YouTube) drastically limit the ability to listen to music for free.
We’re not sure what will happen, but this study suggests that the shift from freemium to paid subscriptions may not take place as quickly as record labels would like.