This could be a make-or-break year for music streaming apps

Spotify still struggles to break even with 20 million paying customers, while Apple and Google use music as a loss-leader

 
RnB artist D’Angelo performing at a Spotify event in May 2015.
(Andrew Burton/Getty)

The past year was a big one in streaming music. On the plus side, Apple got into the game with its summer-time launch of Apple Music. On the downside, Rdio announced bankruptcy and the winding down of its business.

Taken together, the two events paint a fairly clear picture for what’s going to happen with streaming music in 2016 and beyond.

Simply put, it doesn’t look like standalone streaming music services have much of a future. None of the other many players in the space are making money, including Spotify—despite its 20 million paying customers. Indeed, the company’s losses are only deepening.

It’s still very much an open question as to whether any music streaming service can make money, given the pinch they’re feeling on both sides of the business.

On one hand, consumers aren’t willing to pay much for such services, with many instead opting for free ad-supported versions.

There isn’t much leeway for the likes of Spotify, Apple Music or Google Play Music to boost prices beyond $10 a month. And yet on the other hand, they still have to pay out royalties to labels and artists to get them on board, which hasn’t proven easy so far.

Pandora, which bought some of Rdio’s assets, looks to understand this problem more than most. The challenges in creating a viable business are likely behind the company’s moves to diversify beyond just music streaming, such as its October purchase of concert ticket seller TicketFly.

Pandora is also expanding into video, which is another baby step toward offering customers and subscribers something more than just music streaming.

Meanwhile, the two big giants in the room – Apple and Google – are offering music merely as a way to keep customers within their mobile ecosystems. It probably will never matter to them whether the services make money or not.

That leaves Spotify in a tough spot. The company will either need to diversify like Pandora or create some sort of big advantage over Apple and Google that convinces music fans it’s worth a subscription.

Either that, or it ends up being acquired by another large multi-platform company that’s also looking to hook users into its other products. Samsung and Facebook come to mind.

MORE ABOUT DIGITAL MEDIA & MUSIC:

Comments are closed.