Increasing usage of smartphones and Internet has resulted in growth of music streaming services. Additionally, rising proliferation of smart speakers and wearables that enable synchronization with music streaming apps adds to demand for such apps.
Per a Statista report, the music streaming market is expected to generate revenues of $12.4 billion in 2020. The figure is expected to rise to $15.5 billion at a CAGR of 5.7% between 2020 and 2024. Further, user penetration in 2020 is expected to be 14.6% and increase up to 6.5% by 2024.
The massive growth prospects bode well for leading music streaming providers like Spotify (SPOT - Free Report) , Amazon (AMZN - Free Report) , Apple (AAPL - Free Report) and Alphabet’s (GOOGL - Free Report) Google.
Music Streamers to Gain from Coronavirus-Led Lockdown
Fears over the spread of coronavirus led to a record weekly slump in the U.S. market last week. However, the market rebounded on Mar 2, following positive comments from the global central banks and a recovery in tech stocks.
Prolific music streaming service providers including Apple, Amazon, Google and Spotify and Siri increased 9.3%, 3.7%, 3.5% and 1.6%, respectively.
Music streamers are expected to benefit from increased usage due to growing speculations of lockdowns in various parts of the world.
Growing Global Penetration: A Key Catalyst
Music streaming service providers are gaining traction worldwide. The United Kingdom has the largest share of music listeners using free and premium streaming services at 83%. The penetration rate in Japan, Canada and Germany is 81%, 79%, and 71%, respectively, according to Nielsen Music’s annual report.
Additionally, the total music streams in the United States spiked 29.3% to 1.15 trillion in 2019 as YouTube and Spotify continued to dominate the industry.
Moreover, in the United States, total revenues from streaming grew 20% to $8.8 billion in 2019, accounting for nearly 80% of all recorded music revenues that increased 13% year over year to $11.1 billion, per RIAA’s 2019 report for U.S. recorded music.
YouTube Dominates Music Streaming Space
Google’s on-demand music streaming service, YouTube Music, is currently available in 77 countries. At the end of fourth-quarter 2019, YouTube achieved $15 billion in ad revenues in 2019, growing 36% year over year, with more than 20 million Music and Premium paid subscribers and over 2 million YouTube TV paid subscribers.
Further, in terms of free music, this Zacks Rank #3 (Hold) company has a free version of its music streaming service in place but is still limited only to Google Home speakers.
Spotify’s Growing Premium Subscribers Poses a Threat
Spotify is benefiting from premium subscriber growth. Its solid focus on the personalization of playlists enhances the music experience for users.
Moreover, robust playlists are helping the company rapidly convert free listeners to paid subscribers. At the end of 2019, the Zacks Rank #3 company reported 271 million monthly active users, with 124 million premium subscribers globally, up 29% year over year.
Notably, Spotify is set to purchase sports and lifestyle company The Ringer, for $200 million upfront with another $50 million later, per a Bloomberg report. The Ringer will bring to Spotify its industry-leading sports and entertainment team, podcast catalog and website, expanding Spotify’s offerings and reach.
Amazon’s Aggressive Stance to Aid Market Position
Amazon’s ad-supported free version of Amazon Music, available on iPhone, Android and Fire TV, is a key differentiator. The offering is expected to help the company reach an audience unwilling to pay a subscription fee to listen to songs.
Moreover, in January 2020, this Zacks Rank #3 company announced that its music streaming service reached more than 55 million customers globally with subscriptions to Amazon Music Unlimited growing by more than 50% last year alone.
Furthermore, solid momentum across Amazon Prime is benefiting the company in music streaming market. Per CNBC, Prime members have access to over 2 million ad-free songs.
Apple has been gaining steam in the market with expanding Apple Music subscriber base. Apple currently has more than 60 million paid subscribers.
Further, its availability on Google Play is a major positive. Apple Music’s availability on Amazon Echo devices is expected to expand the iPhone maker’s footprint further in the music streaming space. Additionally, the iPhone maker is gaining from its tie-up with Verizon.
However, Amazon’s free music service poses a significant threat to this Zacks Rank #2 (Buy) company’s market share. It has no free version of Apple Music. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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