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Pandora and Spotify Lead in Streaming Music Via Internet Radio but Face New Challenge from Apple Music/SiriusXM Tops 27 Million Subscribers, Business and Industry Trends Analysis

More and more people are shifting to streaming music services, accessed via online subscriptions or ad-supported plans. This is hurting recorded music sales, as consumers who subscribe to Pandora and similar services see little need to buy their own copies of their favorite songs.  However, music publishers offset this revenue loss by licensing music to Pandora, Spotify and similar subscription services.  In fact, streaming music over the internet means that more people are accessing more music than ever before.
For all of 2021, RIAA (Recording Industry Association of America) reported that music subscription services, such as those from Apple, Inc., and Spotify Technology SA, saw revenues rise 23% over 2020 to reach $12.4 billion.  Streaming music accounted for 83% of all recorded music revenues in the U.S.  Total U.S. retail music revenue (including CDs and vinyl) grew 24% in 2021 to $15.0 billion (up from $12.1 billion for 2020). 
Streaming Music:  A number of services offer ad-supported free streaming music services including Spotify, Pandora, Amazon Music, Google Play music, and the recently launched Apple Music.  Most also offer premium subscription access for a few dollars per month that is ad free. 
Pandora’s web-based platform allows its 50.55 U.S. million active users (as of early 2022) to build unique virtual radio stations based on their personal music preferences.  Pandora allows up to 250 personalized stations to be created per account.  The firm’s technology is based in part on the Music Genome Project, which analyzes and catalogues thousands of songs from multiple genres to create a comprehensive database that breaks down songs by 450 individual musical attributes.  In February 2019, Pandora was acquired by SiriusXM Holdings, Inc., the satellite radio service provider, for $3.5 billion, creating one of the largest audio entertainment companies in the world.
Pandora offers free accounts, which are ad-supported but restrict the ability to skip songs, as well as premium subscriptions through Pandora One, which give listeners the ability to skip an unlimited amount of songs, has no limit on monthly listening hours, delivers higher quality audio and removes advertisements.  The firm branched out into mobile listening by releasing software for internet-enabled smartphones and tablets.  It has also established partnerships with consumer electronics manufacturers, including Panasonic, Pioneer, Samsung and Sony, to integrate its software into new devices, as well as automakers like Honda, Ford, Lexus and Mercedes to include its software pre-installed on certain new model vehicles.
Competitor Spotify, Ltd. also offers a wide range of listening options.  Spotify is a web-based subscription music service offering streaming music to registered users with roughly 456 global listeners to the free service, plus more than 195 million paying subscribers by early 2023 (North America accounted for 28% of Spotify listeners).  The firm’s library of 80 million songs is accessed via its proprietary Spotify streaming music player program, which users can download and install on a variety of platforms, offering them access to Spotify’s entire music library and the ability to listen to chosen tracks at any time and in any order.  Spotify is investing heavily in podcast content with great success.
Spotify users can create personalized playlists and have the option to share these playlists with other Spotify users who can then edit the playlists and make their own updates, enabling a collaborative approach to online, peer-to-peer music sharing.  The company offers two main access tiers.  Spotify Free, allows free access to the online music library and is supported through advertisements, while the fee-based subscription service, Spotify Premium, offer a variety of upgraded features and does not include advertising.  Subscribers to Spotify Premium can access Spotify on a variety of mobile platforms, including the iPhone, the iPod Touch, Android-based phones and Windows Mobile-based phones.  Spotify also connects users to a range of music sellers, providing links to online music stores where customers can purchase albums and individual songs for download.  Additionally, it introduced Spotify Platform, which allows third-party developers to create music-based apps.
Apple Music has been attempting to catch up with pioneers Spotify and Pandora.  Paid subscribers are charged a modest fee per month for ad-free service.  In addition to on-demand streaming service, Apple Music offers a 24-hour global internet radio station and a portal in which artists connect with listeners.  The service had 88 million users as of 2021, with about 33.7 million subscribers in the U.S. (latest data available).  Researchers at JP Morgan expect Apple Music will have 110 million paying subscribers by 2025.  The fat that Amazon Music can be controlled conveniently and easily by voice via the Alexa personal assistant has been an immense boost.
A major competitor is Tencent Music Entertainment Group in China.  The firm’s apps include QQ Music, Kugou and Kuwo, and have more than 841 million active users and 71.2 million paying subscribers.  Parent Tencent Holdings Limited acquired China Music Corporation in 2016 to strengthen its music offerings, and subsequently changed China Music’s name to Tencent Music Entertainment Group.  In mid-2018, Sony/ATV Music Publishing acquired an equity stake in Tencent Music, and in December 2018, Tencent raised almost $1.1 billion in an IPO in the U.S.
Satellite Radio:  While Spotify and Pandora have gained tremendous audiences in internet radio, they have not benefited financially as much as the world leader in delivering radio via satellite:  SiriusXM.
Sirius XM Holdings, Inc., operating as Sirius XM Radio, is a U.S.-based satellite radio provider.  (It also owns an interest in a related company Canada, where broadcasts are made in French and English.)  It offers hundreds of channels to its more than 34.2 million SiriusXM subscribers (as of September 2022), consisting of dozens of channels of commercial-free music; as well as popular channels of sports, news and talk that may include advertising in some cases, traffic and weather; and Latino channels.
The company’s primary source of revenue is subscription fees, with most of its customers subscribing to Sirius on an annual basis.  Sirius radios for the car, truck, home, RV, boat, office and store are distributed through automakers and retail locations nationwide as well as online through  Sirius also has agreements with every major automaker to offer its radios as factory or dealer-installed options in their vehicles.  In addition, satellite radio services are offered to customers of certain rental car companies.
Sirius Internet Radio is an internet-only version of the firm’s service that delivers a simulcast of select music and non-music channels.  Additional services provided by the firm include Travel Link, a collection of data services that provides users with information on weather, fuel prices, movie listing and sports scores and scheduling; and both real-time weather and traffic services.  The fact that voice-activated personal assistants, such as Amazon Echo and Google Home, can take verbal commands to find play music (by artist, genre or specific title), will add to the subscription music trend.

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