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Marketers should boost targeting in troubled streaming music industry: report

Mobile advertisers reaching out to streaming music services consumers should consider how to make ads more targeted in light of the services? struggle to be profitable, according to a Strategy Analytics report.

Marketers would be well advised to ride on mobile?s stronger feedback capability through collaboration with different stake-holders on the value chain of mobile carriers, over the top application service providers and others. 

?As mobile is driving an increasingly large proportion of digital music consumption, we actually predict ads spend on mobile music to increase by at a 10 percent CAGR from this year to 2020,? said Wei Shi, senior analyst for wireless media service with Strategy Analytics, Newton, MA.

?To cope better with the changing dynamics of the industry, however, we advise mobile advertisers to consider how to make ads on mobile more targeted, for example by riding on mobile?s stronger feedback capability through collaboration with different stake-holders on the value chain such as mobile carriers and OTT service providers.? 
 
Profit challenge
The report, Will Royalty Crisis Defeat the Music Streaming Industry, found that despite continuous growth in adoption of music streaming services, players are having difficulty turning music streaming into profit.

Although technology is evolving and changing the way consumers discover, listen to, share, and interact with music, it is also a significant factor in the decline of music industry revenue, according to the report.

Spotify app.

Many artists feel they are under-compensated by streaming services, but are unable to obtain higher royalty payments due to the system?s structure, particularly for free ad-supported services.

As a result, music spending may never agin reach the levels of a decade ago. 

Despite significant growth in revenue and a lower net loss, Spotify average monthly revenue per user (ARPU) has actually declined for both subscription and advertising. 

Monthly subscription ARPU in 2013 was down 2 percent while monthly advertising ARPU was down 37 percent from 2012.

Most companies benefit from economies of scale. Pandora and Spotify's content acquisition costs increase in parallel with subscriber growth, preventing them from getting ahead of the cost curve, according to the report.

Pandora earns the vast majority of its revenue from advertising (82 percent), whereas Spotify earns the majority of its revenue from subscriptions (91 percent).

Strategy Analytics predicts that overall global recorded music revenue declined 1 percent, from $22.8 billion in 2013 to $22.5 billion in 2014, as digital music growth failed to offset losses in packaged music revenue.

Streaming music ? subscription and ad-supported ? accounted for about half of digital music revenue in 2014, up 14 percent year-over-year.  
 
New opportunities
New opportunities are opening in the industry. For example, YouTube Music Key has opened a new visual display channel in addition to conventional ads for music that have been largely confined to the audio format. 

Driving consumption, not profit.

?We may also see in the future mobile music streaming becoming part of a total social experience proposition, for example something we expect to happen following the recent acquisition of MixRadio by Line,? Mr. Wei said.

?This would present the marketers with an opportunity to consolidate their solutions to deliver through a strong social channel,? he said.
 
Final Take
Michael Barris is staff reporter on Mobile Marketer, New York.