Top 8 Music Streaming Trends to Watch for in 2023
In this article, Sergey Bludov, Senior Vice President, Media & Entertainment, reviews which music streaming trends will extend into the year and will be relevant for music or video streaming services, digital or linear radios, labels, libraries, publishers, in-store music providers, or sync agencies in 2023.
The global music streaming market is projected to reach $89.3 billion by 2030. Despite the looming recession, investment analytics are confident in the steady growth of this sector.
Music streaming subscription is the last thing consumers tend to cancel. According to Music In The Air report by Goldman Sachs, “We compare music streaming vs SVOD (subscription video-on-demand) streaming in terms of pricing, penetration, churn, and usage, and overall believe that music streaming should perform better than SVOD in a weaker macro environment or potential recession.”
Despite the industry’s resilience, subscription revenues are dwindling across the board. Music streaming is not immune to the downturn and will have to supplement its traditional subscription-based models with additional revenue streams. Ad-supported streaming ($33.7 billion market by 2030), extensive social media partnerships (30% of record industry revenues in 2021), and integrations with video games, podcasts, and web3 platforms are on the table.
To weather the storm and capture the enormous growth potential of this nascent market, the music streaming industry needs to tool up and get ready their data and integration capabilities.
Let’s review which music streaming trends will extend into the next year and will be relevant for music or video streaming services, digital or linear radios, labels, libraries, publishers, in-store music providers, or sync agencies in 2023.
Audio Programmatic
Music subscription growth took a dip this year. Most US adults, let alone consumers in Tier 2 and Tier 3 countries, are hesitant to pay for these services.
Freemium and ad-supported models are swiftly gaining relevance in the industry. Privacy regulations send shock waves across AdTech but provide additional incentives to streaming services for creating an ad business.
The dominance of companies like Facebook was built on the ability to ingest third-party data and serve as a data warehouse of behavioral signals. As data collection and aggregating norms change, companies with enough first-party data can roll out a proprietary ad network.
Music streaming services that can provide targeting in a native environment will shift ad revenues away from other players. The lingering question is whether this new ad ecosystem will embrace the programmatic approach or enclose itself into separate walled gardens.
For now, a more open approach prevails. Spotify, Pandora, SoundCloud, and iHeartRadio are selling their ads programmatically through independent demand-side platforms, such as the Trade Desk, and through DV360 in the Google ecosystem. But once they have enough scale and cultivated relationships with agencies, hence access to direct demand, they can go into a “walled garden.” Take YouTube; until 2015, it allowed bidding from third-parties until it came of age to create a closed ad platform and manage media selling on its own.
With the tightening of privacy regulations, Apple and Google are swiftly losing ground, while the major first-party data owners are rushing to create their own ad networks. Open or closed, to get the most out of proprietary ad networks, music streaming platforms need to leverage additional inventory management capabilities built on a more privacy-centric approach.
Enriched Metadata
The value of music in user-generated content (UGC) keeps growing. In 2022, YouTube paid 2 billion to the music industry for the use of music in user-generated content. According to MIDiA Research, UGC can generate $6 billion for the music industry in 2023.
UGC’s monetization potential for the music business is enormous. However, this revenue stream has only recently been tapped into. The efficiency of this monetization method is predicated on building effective data exchange between different music industry players.
To increase interoperability, the industry rallied around Digital Data Exchange (DDEX), a consortium of leading media companies, music licensing organizations, digital music service providers, and technical intermediaries. Over the last couple of years, the DDEX protocol solidified its position as a common set of standards for communication in the digital media supply chain. YouTube and Facebook have embraced DDEX integrations and standardized ways to integrate their Content IDs into the wider ecosystem.
The success of DDEX integrations, in turn, depends on the metadata quality within the music company. The need for enriched metadata is growing as more people come on board. The industry lacks coherent standards for collecting and storing metadata. Instead, fragmented data from disparate sources are stitched together. Going forward, metadata enrichment and standardization will be critical for industry technical maturity.
The broader need for accurate recommendation engines also fuels the demand for more advanced metadata management. The metadata enrichment will allow enormous opportunities for innovative matching and profiling capabilities.
Virtual Concerts and Metaverse
With AR and VR technologies coming of age, music streaming is becoming a powerful tool to re-engage audiences and ramp up their revenue potential. While it may still sound exotic, some music streaming services are already integrating these experiences with Snapchat Lens, TikTok, and VR headsets.
For instance, Meta and TIDAL teamed up for new series of virtual concerts, while music streaming platform TIDAL partnered with Oculus to bring immersive music performances to VR. With the maturity of the VR technology is getting, the coveted metaverse is already within reach.
While the ad industry is still learning the ropes of metaverse monetization, innovative games like Fortnite are creating an entire cottage industry of metaverse formats. The notorious Travis Scott’s virtual show on Fortnite’s streaming brought together 12.3 million concurrent players on the online event and earned him $20 million. Radio juggernaut iHeartMedia recently launched its own dedicated space in Fortnite to host events and concerts. At the same time, Spotify has a virtual presence on the kids' gaming platform Roblox.
While some music streaming services choose to integrate with existing metaverse ecosystems, others use their scale to roll out their own virtual worlds. Tencent Music, a music-streaming giant with 604 million users, recently unveiled its metaverse strategy launching a music-focused virtual world called TMELAND with a virtual festival on New Year’s Eve.
What should the music industry expect? More exclusive live streaming of concerts, virtual series, DJ sets, and shows are available on a particular streaming service. The opportunities are endless, and music streaming services should be bold in their creative strategies and seek out innovative tech partnerships to back them up.
Web3 and NFT
In 2023, the elusive Web3 finally starts to take shape with the broader application of non-fungible tokens (NFTs). The idea of a decentralized economy with fair revenue share resonated with the music streaming industry, where only 13% goes to artists.
Web3 streaming services boast peer-to-peer infrastructure that will allow independent artists to regain control of their art — and get their fair share of revenues. Web3 streaming startups not only preach a new revenue model but also offer solutions that address ecosystem bottlenecks, for instance, with the metadata.
Audius provides decentralized storage and ledger for sharing metadata, discovery protocol to efficiently query metadata, and governance protocol. Via the platform, artists and fans can participate in decision-making and get rewarded with Audius tokens and artist coins.
The common retort is it would take ages before web3 platforms can dethrone legacy platforms. Yet, many of them are aiming to be something other than a standalone ecosystem and actively integrate with other music industry players. Emanate allows artists who upload music on Emanate to push audio and data to services like Spotify and Soundcloud. All revenue flows back to the Emanate ecosystem, where they are transparently tracked and distributed.
Startups like Sound.xyz employ NFTs to provide a mechanism for cataloging and managing copy-right. NFT marketplaces allow artists to easily create NFTs that consist of songs or entire albums.
The web3 industry is not set in stone, and we will see the rise and fall of several ways of music streaming disruptors. Yet, decentralization is a powerful trend that will most certainly persist throughout the recession. The music industry must keep up with the moving terrain and proactively engage with web3 technologies.
Onset of Non-DSP Streaming
The surging revenues from music in the user-generated content provided an enormous growth potential to the industry, but, on the other side, it propelled the onset of social media-based non-DSP streaming platforms.
Streaming-focused social media platforms, like TikTok, acknowledged their cultural capital as a primary outlet for fandom and pop culture and embraced consumerization of creation. Launching its own streaming service was just a matter of time for TikTok.
A platform with a strong pull among creators will inevitably encroach on DSPs’ turf. For instance, YouTube is posed to overtake Spotify as the music rights industry’s biggest partner by 2025.
In contrast to Spotify, YouTube has a strong creator proposition and a well-oiled machine for creators to make money with music content. To get to the top, YouTube is planning to tap into the monetization of music rights in “Shorts” and streamline “micro-licenses” for creators. While shorts are lagging behind other short-form video apps, YouTube is pivoting to creators with an enhanced revenue-share mechanism.
The non-DSP streaming revenue potential is quickly outpacing that of traditional DSP streaming. In a matter of years, DSPs would have to compete with elaborate music-video ecosystems with resident artists and creators. To counter them, non-DSP streamings need social and fandom tools of the kind Audiomack offers to build communities around artists and provide unique value to their core audience.
Contextual Recommendation and Playlist Curation Augmented by AI and ML
Adjusting to the post-album era, music streaming services offer unbundled music and cater to listeners searching for mood playlists. Geographical boundaries, language, or genres are still going strong, although activity, time, or day of the week, background setting, and mood of the listeners will be more pertinent factors for music discovery and consumption on DSPs.
Streaming and creating mood-specific playlists will compete with other users’ behaviors like listening to soundscapes, generative music, podcast, or white noise on smart speakers. This paradigm shift from content-based to context-based listening behavior is also supported by the popularity of meditation and sound apps like Endel, which deliver personalized soundscapes for productivity, mood-boosting, anxiety management, and fitness DSPs with business plans. FPI’s Engaging with Music 2022 report showed that paid streaming users recognize the music to be very important to their mental health and in terms of soundtracking and motivating their behavior.
While Endel offers personalization and contextualization powered by users’ biometric information and AI predictions, most DSPs playlists are created with the personal touch of the editorial team and curators. But the increased velocity, value, and variability of those playlists are achieved due to music search and tagging engines. Some playlists are completely algorithm-based; in a similar vein, independent and editorial playlists can be assembled with the help of algorithms and AI. At Deezer, Editorial teams and Customer Care use an internal recommendation API and the designers’ tool that automatically generates playlist covers.
Spotify uses natural language processing and machine learning techniques to compare lyrics and moods based on the respective user’s “playlisting” behavior. Spotify brings playlist automation to another level with its recommendation engine and AI, which generate the Discover Weekly, the Release Radar, and recommended lists on the Home screen. To strengthen its positions, the company regularly gets involved in Artificial Intelligence investments and acquisitions and contributes to events and researches dedicated to the topic.
NTS Live, a radio station and media platform, embraced a listener- and curator-centric approach to drive engagement on the platform: all NTS playlists are created by NTS residents, who “play exceptional music that is hard to find anywhere else.”
On the other side, playlists have proven to be a powerful tool for artists promotion, catalog promotion and new monetization models, fan engagement, and search indexation. As Spotify’s playlist pitching gains more popularity DIY musicians, artist managers, and labels start using music search and tagging engines, like Cyanites’s AI tool. Cyanite’s technology are called for emulating the professional Spotify editorial procedure of analyzing keyword cloud and the mood of the song. For example, Cyanite tools can identify the emotions behind the song, collect the most accurate term for track description, and, by reverse engineering, identify the most fitting lists for the track. Now AI is getting better than music curators and tastemakers at playlist optimization, automatic playlist generation, beat matching, social media targeting, and sample library search.
Music personalization and contextualization of playlists are the standard practices for major DSPs whether used for control, engagement, and trustiness, listeners’ needs, trustiness, serendipity, or adaptability to listening preferences. We predict that DSPs will extend their playlist contextualization and recommendation beyond the platforms themselves, it will not rely solely on past listening behaviors but more and more — on native ecosystem touchpoints.
Lossless Streaming as Market Standard
Lossless is among the most popular developments in music streaming, which provides DSPs with more opportunities to upsell and cross-sell. TIDAL has broken down its subscription service into three tiers: TIDAL Free, an ad-supported service that plays way-less-than-lossless tracks, TIDAL HiFi with lossless CD quality sound, and TIDAL HiFi Plus with 360 Reality Audio and Dolby Atmos Music. Spurred by competition from Apple and TIDAL, Amazon decided not to charge their subscribers an extra fee for CD quality.
In a near future, lossless will not be an elevated listening experience, as the standard set by Apple Music will perpetuate the advancement of sound accessories and devices.
To win a competitive edge over TIDAL, Amazon Music HD, and Deezer, which have their CD-quality, hi-res, and spacial audio formats, Apple brought another industry-leading sound quality — Spatial Audio. All these audio upgrades and features will become prerequisites for new DSP development and credibility among audiophiles.
Video-Related Music Discovery
According to Lyor Cohen, YouTube’s Global Head of Music, the music business is experiencing 3 major crises associated with music fans’ search intents and video-related discovery.
First, artists nowadays spend a significant chunk of their energy, creativity, and time on creating content for social networks with a negligible impact on consumer fandom. The second problem is on the consumers’ part. Most of them aren’t delving deep into artists’ catalogs, performances, music videos interviews, and stories, and this trend will likely progress into the future unless short-form video stop being merely consumption engines.
Lastly, record companies now have prolongated process of breaking the artists. But the migration of fans from long-standing social networks, high retention, and engagement of short-form video platforms promise new opportunities for breaking developing acts and taking a burden off the artists.
Music streaming platforms can’t single-handedly address the above issues. Rather, integrations similar to YouTube Music and YouTube Shorts can offer customers a perfect informational and navigational journey, and artists — promotional and discovery tools. TikTok seems to have discovered this, as the platform is considering moving beyond simply being a consumption engine. The company plans to launch its music streaming service that would take away YouTube Music’s unique selling point.
The playlist strategy also loses its traction because short-form video platforms changed the timeline of a hit. Now a new track is discovered in TikTok, YouTube Shorts, and Instagram Reels earlier than in the editorial playlist. The curators of playlists are ceding ground to UGC on short-form video platforms.
Music Streaming Trends Going Strong in Early 2023
Music streaming trends in music streaming seem to be at their all-time high, and only savvy competitors who strive to stay ahead of the developments are sure to have a competitive edge. From reliance on audio programmatic and enriched metadata to virtual concerts and Web3 to DSP streaming and contextual playlists, adopting these trends can boost your game and set you up for the future.
Originally published at https://www.dataart.com.
