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Streaming Media: Music - US - January 2014

“At $1.5 billion in advertising and subscription sales, the total revenue for the US streaming music market is small, and with high costs for music licensing, market leader Pandora has yet to show two consecutive quarters of profitability. In spite of these issues, leading tech companies are flocking to join the market, with an eye toward sales that might be a decade away, or a long-term transition from hardware and software sales to on-going services.” – Billy Hulkower, Senior Analyst, Technology and Media

This report looks at the following areas:

  • Is there a barrier to entry?
  • Why are the world’s largest tech firms in Pandora’s box?
  • Is the ownership model for music dying?

Personalized streaming radio services (such as Pandora) are becoming one of the main ways people listen to music in their homes, at work, and in their cars, and the titans of tech are now crowding into this space. Apple and Google launched services in 2013, and major auto manufacturers are facilitating by building internet service into their latest models. Internet radio also provides a new means for brands to reach the digital consumer. This report examines how internet radio services can attract more subscribers, and how brands can best take advantage of this burgeoning media format via examining the efficacy of advertising in it.

This report covers internet-based streaming music programming, including personalized streams utilizing a thumbs up/thumbs down automated recommendation system, manually created (on-demand) playlists, and curated music stations online (which may also include terrestrial radio stations being rebroadcast online). Purchases for personal ownership are discussed as well, but the primary focus of the report is on personalized online streams.

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data sources
          • Sales data
            • Consumer survey data
              • Abbreviations and terms
                • Abbreviations
                  • Terms
                  • Executive Summary

                      • The market
                        • Rapid growth behind, rapid growth ahead
                          • Figure 1: US sales and fan chart forecast of ad sales and subscription revenues for streaming music, 2009-18
                        • Competing for ad dollars and consumer dollars with terrestrial and satellite radio
                          • Key players
                            • Pandora: twice the penetration of any competitor
                              • Figure 2: Streaming music services used in past week, October 2013
                            • The consumer
                              • Traditional radio still dominates, followed by internet radio and then satellite
                                • Figure 3: Listening to music via terrestrial, satellite, and internet radio, and personally owned music, October 2013
                              • Similar time spent with internet radio as personally owned music
                                • Figure 4: Hours spent in past week listening to music via terrestrial, satellite, and internet radio, and personally owned music, October 2013
                              • Younger listeners spend more time with internet radio than terrestrial radio
                                • Efficacy of internet radio ads above terrestrial radio
                                  • Figure 5: Response to radio ads, October 2013
                                • Home usage the norm for internet radio, cars carrying AM/FM
                                  • Figure 6: Locations where satellite, terrestrial, and internet radio are used, October 2013
                                • What we think
                                • Issues and Insights

                                    • Is there a barrier to entry?
                                      • The issues
                                        • The implications
                                          • Why are the world’s largest tech firms in Pandora’s box?
                                            • The issues
                                              • The implications
                                                • Is the ownership model for music dying?
                                                  • The issues
                                                    • The implications
                                                    • Trend Applications

                                                        • Trend: Click and Connect
                                                          • Trend: Guiding Choice
                                                            • Mintel Futures: Access Anything Anywhere
                                                            • Market Size and Forecast

                                                              • Key points
                                                                • Annual sales at 37% growth
                                                                  • Figure 7: US sales and forecast of ad sales and subscription revenues for streaming music, at current prices, 2009-18
                                                                  • Figure 8: US sales and forecast of ad sales and subscription revenues for streaming music, at inflation-adjusted prices, 2009-18
                                                                • Fan chart forecast
                                                                    • Figure 9: Total US sales and fan chart forecast of ad sales and subscription revenues for streaming music, 2009-18
                                                                • Competitive Context

                                                                  • Key points
                                                                    • Terrestrial
                                                                      • Poaching listening hours from terrestrial radio
                                                                        • Figure 10: Reduction in use of terrestrial radio because of internet, October 2010-June 2013
                                                                        • Figure 11: Attitudes to streaming media and reduction in use of terrestrial radio because of internet, by age, November 2012-June 2013
                                                                      • Satellite radio
                                                                        • Music sales
                                                                        • Market Drivers

                                                                          • Key points
                                                                            • Internal drivers
                                                                              • Recommendation systems, new music discovery, and library size
                                                                                • Figure 12: Attitudes to personalized radio stations, by age, October 2013
                                                                                • Figure 13: Attitudes to personalized radio stations, by time spent listening to music in past week, October 2013
                                                                                • Figure 14: Attitudes to personalized radio stations, by hours spent listening to internet radio in the past week, October 2013
                                                                              • Limitations on skipping
                                                                                • Figure 15: Terminating listening sessions because of skipping limitations, by age, October 2013
                                                                              • Mobile usage held back by costs of data, fees, UI
                                                                                • External drivers
                                                                                  • Home internet subscription
                                                                                    • Figure 16: Household penetration of internet service subscription, October 2011-June 2013
                                                                                    • Figure 17: Household penetration of internet service subscription, by household income, November 2012-June 2013
                                                                                    • Figure 18: Household penetration of internet service subscription, by age, November 2012-June 2013
                                                                                  • Mobile device ownership and mobile internet speed
                                                                                    • Figure 19: Smartphone and tablet ownership, by type/brand/OS, by age, June 2013
                                                                                    • Figure 20: Personal and household ownership of computers, July 2010-March 2013
                                                                                  • In-car electronics
                                                                                    • Figure 21: Interest in in-car electronic features when purchasing next vehicle, June 2013
                                                                                • Leading Companies

                                                                                  • Key points
                                                                                    • Pandora clear leader
                                                                                      • Figure 22: Streaming music services used in past week, by age, October 2013
                                                                                      • Figure 23: Streaming music services used in past week, by household income, October 2013
                                                                                  • Innovations and Innovators

                                                                                    • Songza: handcrafted and local
                                                                                      • Figure 24: Songza YouTube Video, 2013
                                                                                    • Rewarding users for social media capital
                                                                                      • Jango limits ads for listeners linking social media accounts
                                                                                        • Friends as DJs and content creators
                                                                                          • Posting and checking likes limited
                                                                                            • Figure 25: Social media usage in relation to internet radio, by age, October 2013
                                                                                            • Figure 26: Social media usage in relation to internet radio, by time spent listening to music in past week, October 2013
                                                                                        • Marketing Strategies

                                                                                          • Overview
                                                                                            • iHeart, Google just lay it out
                                                                                              • Figure 27: iHeartRadio ad, 2013
                                                                                              • Figure 28: Google Play Music ad, 2013
                                                                                            • Slacker takes aim, fires
                                                                                              • Figure 29: Slacker video promotion, 2013
                                                                                            • eMusic, Last.FM: Retro ads for high-tech services
                                                                                              • Figure 30: eMusic video promotion, 2013
                                                                                              • Figure 31: Last.FM video infomercial, 2013
                                                                                            • Rdio: a song a week and link to Facebook
                                                                                              • Figure 32: Rdio weekly music promotion I, 2013
                                                                                              • Figure 33: Rdio weekly music promotion II, 2013
                                                                                            • MySpace: high-quality ties to individual musicians
                                                                                              • Figure 34: MySpace Bunny Holiday promotion, 2013
                                                                                              • Figure 35: MySpace Riff Raff promotion, 2013
                                                                                              • Figure 36: MySpace Amadeus Leopold promotion, 2013
                                                                                          • Usage

                                                                                            • Key points
                                                                                              • Penetration for terrestrial radio still tops
                                                                                                • Figure 37: Listening to music via terrestrial, satellite, and internet radio, and personally owned music, by age, October 2013
                                                                                              • Younger listeners spend more time with internet radio than terrestrial radio
                                                                                                • Figure 38: Hours spent in past week listening to music via terrestrial, satellite, and internet radio, and personally owned music, by age, October 2013
                                                                                                • Figure 39: Frequency of use of internet radio in past 30 days, by age, November 2012-June 2013
                                                                                              • Highest-income group shows decreased radio usage
                                                                                                • Figure 40: Listening to terrestrial, satellite, internet radio, and personally owned music, by household income, October 2013
                                                                                                • Figure 41: Hours spent in past week listening to music via terrestrial, satellite, and internet radio, and personally owned music, by household income, October 2013
                                                                                              • Location
                                                                                                • Internet radio usage primarily occurs at home
                                                                                                  • Figure 42: Locations where terrestrial, satellite, and internet radio, and personally owned music are used, October 2013
                                                                                                  • Figure 43: Home usage of terrestrial, satellite, and internet radio, and personally owned music, by age, October 2013
                                                                                                  • Figure 44: Home usage of terrestrial, satellite, and internet radio, and personally owned music, by household income, October 2013
                                                                                                • Usage in cars
                                                                                                  • Figure 45: In-vehicle usage of terrestrial, satellite, and internet radio, and personally owned music, by age, October 2013
                                                                                                  • Figure 46: In-vehicle usage of terrestrial, satellite, and internet radio, by household income, October 2013
                                                                                                • Usage at work
                                                                                                  • Figure 47: At work usage of terrestrial, satellite, and internet radio, and personally owned music, by age, October 2013
                                                                                                  • Figure 48: At work usage of terrestrial, satellite and internet radio, and personally owned music, by household income, October 2013
                                                                                                • Usage at gyms or while exercising
                                                                                                  • Figure 49: Use of terrestrial, satellite, and internet radio, and personally owned music at gyms or while exercising, by age, October 2013
                                                                                              • Response to Terrestrial and Internet Radio Ads

                                                                                                • Key points
                                                                                                  • Efficacy of internet radio ads above terrestrial radio ads
                                                                                                    • Figure 50: Response to terrestrial and internet radio ads, October 2013
                                                                                                  • 18-34s respond to internet radio ads
                                                                                                    • Figure 51: Response to ads heard on internet radio, by age, October 2013
                                                                                                    • Figure 52: Response to ads heard on terrestrial radio, by age, October 2013
                                                                                                    • Figure 53: Clicking on ads seen on internet radio stations, by age, October 2013
                                                                                                    • Figure 54: Response to ads heard on internet radio, by household income, October 2013
                                                                                                    • Figure 55: Response to ads heard on terrestrial radio, by household income, October 2013
                                                                                                    • Figure 56: Clicking on ads seen on internet radio stations, by time spent listening to music in past week, October 2013
                                                                                                • Purchasing Music

                                                                                                  • Key points
                                                                                                    • Purchasing discoveries
                                                                                                      • Figure 57: Purchasing music heard on internet radio, by age, October 2013
                                                                                                      • Figure 58: Purchasing music heard on internet radio, by time spent listening to music in past week, October 2013
                                                                                                      • Figure 59: Termination of listening sessions because of skipping limitations, by time spent listening to personally owned music in past week, October 2013
                                                                                                    • Continuing investment in personal libraries
                                                                                                      • Physical sales
                                                                                                        • Figure 60: Incidence of CD purchasing in past 12 months, October 2010-June2013
                                                                                                        • Figure 61: Number of CDs purchased in past 12 months, October 2010-June 2013
                                                                                                        • Figure 62: Incidence of CD purchasing in past year, by age, November 2012-June 2013
                                                                                                      • Digital music sales
                                                                                                        • Figure 63: Music downloads versus use of internet radio in past 30 days, by age, November 2012-June 2013
                                                                                                        • Figure 64: Music downloads versus use of internet radio in past 30 days, by household income, November 2012-June 2013
                                                                                                        • Figure 65: Number of music downloads purchased in past 12 months, by age, November 2012-June 2013
                                                                                                    • Race and Hispanic Origin

                                                                                                      • Key points
                                                                                                        • Elevated usage of internet radio among minority groups
                                                                                                          • Figure 66: Hours spent in past week listening to music via terrestrial, satellite, internet radio, and personally owned music, by race/Hispanic origin, October 2013
                                                                                                          • Figure 67: At home usage of satellite, terrestrial, internet radio, and personally owned music, by race/Hispanic origin, October 2013
                                                                                                          • Figure 68: Music downloads versus use of internet radio in past 30 days, by race/Hispanic origin, November 2012-June 2013
                                                                                                        • Response to ads
                                                                                                          • Figure 69: Response to ads heard on internet radio, by race/Hispanic origin, October 2013
                                                                                                          • Figure 70: Response to ads heard on terrestrial radio, by race/Hispanic origin, October 2013
                                                                                                      • Appendix – Service Features of Streaming Music Suppliers

                                                                                                            • Figure 71: Streaming music service features, by company, December 2013
                                                                                                        • Appendix – Additional Consumer Tables

                                                                                                          • Usage
                                                                                                            • Figure 72: Listening to terrestrial, satellite, and internet radio, and pre-recorded music, by race/Hispanic origin, October 2013
                                                                                                            • Figure 73: Streaming music services used in past week, by gender, October 2013
                                                                                                            • Figure 74: Streaming music services used in past week, by race/Hispanic origin, October 2013
                                                                                                          • Location of usage
                                                                                                            • Figure 75: Home usage of terrestrial, satellite, and internet radio, and personally owned music, by gender, October 2013
                                                                                                            • Figure 76: Use of satellite, terrestrial, and internet radio, and personally owned music, at gyms or while exercising, by household income, October 2013
                                                                                                            • Figure 77: Use of terrestrial, satellite, and internet radio, and personally owned music at gyms or while exercising, by race/Hispanic origin, October 2013
                                                                                                            • Figure 78: In-car usage of terrestrial, satellite, and internet radio, and personally owned music, by race/Hispanic origin, October 2013
                                                                                                            • Figure 79: At work usage of terrestrial, satellite, and internet radio, and personally owned music, by race/Hispanic origin, October 2013
                                                                                                          • Response to ads
                                                                                                            • Figure 80: Clicking on ads seen on internet radio stations, by household income, October 2013
                                                                                                            • Figure 81: Response to ads heard on internet radio, by time spent listening to music in past week, October 2013
                                                                                                          • Smartphone ownership
                                                                                                            • Figure 82: Smartphone ownership, by OS, by age, November 2012-June 2013
                                                                                                            • Figure 83: Smartphone ownership, by OS, by race/Hispanic origin, November 2012-June 2013
                                                                                                            • Figure 84: Smartphone ownership, by OS, by household income, November 2012-June 2013
                                                                                                          • Attitudes to personalized radio
                                                                                                            • Figure 85: Attitudes to personalized radio, by household income, October 2013
                                                                                                            • Figure 86: Attitudes to personalized radio, by race/Hispanic origin, October 2013
                                                                                                          • Social media
                                                                                                            • Figure 87: Social media usage in relation to internet radio, by household income, October 2013
                                                                                                            • Figure 88: Social media usage in relation to internet radio, by race/Hispanic origin, October 2013
                                                                                                          • Competitive context
                                                                                                            • Figure 89: Attitudes to streaming content, by race/Hispanic origin, November 2012-June 2013
                                                                                                          • Music purchasing
                                                                                                            • Figure 90: Purchasing music heard on internet radio, by household income, October 2013
                                                                                                            • Figure 91: Purchasing music heard on internet radio, by race/Hispanic origin, October 2013
                                                                                                            • Figure 92: Incidence of purchasing CDs and music downloads, by race/Hispanic origin, November 2012-June 2013
                                                                                                            • Figure 93: Number of CDs purchased in past 12 months, by age, November 2012-June 2013
                                                                                                            • Figure 94: Number of CDs purchased in past 12 months, by household income, November 2012-June 2013
                                                                                                            • Figure 95: Number of CDs purchased in past 12 months, by race/Hispanic origin, November 2012-June 2013
                                                                                                            • Figure 96: Number of downloads purchased in past 12 months, by race/Hispanic origin, November 2012-June 2013
                                                                                                          • Limitations on skipping
                                                                                                            • Figure 97: Terminating listening sessions because of skipping limitations, by time spent listening to music in past week, October 2013
                                                                                                        • Appendix – Trade Associations

                                                                                                          Companies Covered

                                                                                                          • AOL
                                                                                                          • Apple, Inc
                                                                                                          • AT&T Inc.
                                                                                                          • Google, Inc.
                                                                                                          • Microsoft Corporation
                                                                                                          • MySpace.com
                                                                                                          • Pandora Media, Inc.
                                                                                                          • Sony Corporation of America
                                                                                                          • Spotify AB
                                                                                                          • YouTube, Inc.

                                                                                                          Streaming Media: Music - US - January 2014

                                                                                                          £3,277.28 (Excl.Tax)