Each music listener is worth more than ever, however. In the past two years, 29.6 million additional U.S. subscribers added $1.24 billion in industry revenue, according to new RIAA figures. Other forms of streaming revenue, such as ad-supported streams, grew another $386 million. SiriusXM gained a 1% share of listening time, but added 1.1 million subscribers worth about $250 million in annual revenue. These digital gains pushed total industry revenue up 22.4% in two years -- all from arguably the same number of music listeners. “You’re getting a consumer who’s willing to pay for a great service even when listening hours aren’t necessarily going up,” says David Bakula, who researches global media trends for Nielsen Entertainment.
Streaming could also be taking overall listening time from broadcast AM/FM radio and digital downloads. Time spent listening to over-the-air radio, still a popular and influential format, dropped 25%. Edison Research has found that over half of the radio audience listens only in the car. So when the percentage of people who listen to AM/FM radio in the car dropped from 61% to 56%, as Nielsen’s surveys found, listening time decreased accordingly. Yet 92% of people still say they listen to radio weekly, according to Nielsen Music, a metric that’s both consistent year over year and higher than those who watch TV (86%).
In one sense, listening time matters less over long periods. Much of the industry’s revenues come from subscription services that offer unlimited listening -- as much or as little desired -- for a fixed price. Here, listening time and royalties have an inverse relationship. The number of streams determines how pools of royalties are paid out: the per-stream royalty rises as streams decrease and falls as listening increases.
But listening time can still have a direct impact. Video streams at YouTube, the most popular place for music, and some internet radio streams earn a per-play royalty. What’s more, listeners create value by switching from AM/FM radio to any streaming service. U.S. radio stations do not pay performance royalties to record labels and performing artists, so revenue is generated when listening migrates from radio to usage-based streaming services. In 2016, Pandora estimated that every one percent share of listening that moves from broadcast radio to Pandora generated an incremental $60 million annually.
Ironically, both streaming and radio companies have run into financial challenges. Spotify, the world’s largest music subscription service, improved midyear revenue 31.8% in 2019, to $3.18 billion, while its operating loss was $50 million (an improvement from 2018’s $131 million). Radio companies big and small have struggled. This year iHeartMedia, the country’s leading radio company, couldn’t make its interest payments used Chapter 11 bankruptcy to reduce its debt load, from $16.1 billion to $5.6 billion. Cumulus Media filed for Chapter 11 bankruptcy in late 2017 and was able to reduce its debt from $2.3 billion to $1.3 billion. Salem Media Group’s net income turned negative in 2018; it’s stock fell 79 percent in the last 12 months.
But whether the format is streaming or radio, the music business would benefit from more engagement with music fans. More listening -- even passively -- is better than less listening. Consumers warm to new songs through repeated listens, too. Nobody is saying people aren’t spending time with music. The data suggest that people are taking advantage of the options given to them. Mulligan points to the central question: “How much time could they be spending?”