A Foolish Take: Streaming Music's Staggering Growth

Americans are streaming songs instead of buying them.

Leo Sun
Leo Sun
Jan 15, 2018 at 12:00PM
Technology and Telecom

Americans streamed more music than ever last year, according to Nielsen Music's Year-End Music Report. Streaming audio consumption crushed sales of physical albums, digital albums, and digital tracks -- all of which posted annual volume declines in both current and catalog content.

A chart comparing the annual growth of different audio formats.

Data source: Nielsen. Chart by author.

The music industry was first shaken up by digital downloads from platforms like Apple's (NASDAQ:AAPL) iTunes, which debuted in 2003. That disruption resulted in the bankruptcies of physical album retailers like Tower Records.

This second paradigm shift -- led by streaming platforms like Spotify, Pandora, Apple Music, and Amazon Music -- occurred because improved mobile connectivity and data plans made downloading songs seem cumbersome.

However, the music streaming industry is still a tough one to thrive in, due to high content-licensing and data costs. That's why many top players, including Pandora and Spotify, still aren't profitable.

However, bigger players like Apple and Amazon can afford to run their music streaming platforms at a loss in order to tether more users to their ecosystems. Steve Jobs once said that people "don't want to rent their music," but times seem to be changing.