POWER MOVE: Has paid out more than $500 million to rights holders and ended any doubt music subscription services are here to stay.
THE RUNDOWN: 2012 was the year that people stopped doubting the validity of music subscription services, Spotify co-founder/CEO Daniel Ek declares. “When we started a few years ago, no one thought streaming was real, and companies were mostly investing in download services,” Ek says from his New York office. “But streaming will be the de facto way that people consume music, which is why there’s renewed interest in the space from Google, Apple and other companies.”
Subscription services exploded around the world in 2012, and they show no sign of disappearing. Launched in 2008, Spotify doubled its global subscriber base from 2.5 million in November 2011 to 5 million last December, with 1 million subscribers in the United States alone. Deezer, its main international competitor, ended the year with 3 million subscribers worldwide, while the U.S.-only Muve Music more than doubled its phone-centric subscribers to reach 1.1 million last year.
Scandinavia may provide a sign of things to come. Services like Spotify helped drive recorded-music revenue up 14% in Sweden and 8% in Norway during 2012. These small countries may be ahead of the curve when it comes to adoption of streaming services due to quicker download speeds: Ek’s hometown of Stockholm has offered a 100 MB download speed since 1999, while AT&T’s new LTE service in Baltimore, for example, averages nearly 20 MB. Eventually, larger countries will catch up after their sluggish telecommunication companies make needed infrastructure investments. But with the U.S. population some 33 times larger than that of Sweden, the music industry is already thinking of the possible payoffs — to date, Spotify has shelled out $500 million to rights holders, and the best is yet to come.