Freemium Music Streaming Revenues To Exceed $1 Billion By 2017, Per Research Firm

It appears that music subscription services such as the recently launched Apple Music and Spotify will not slow down the growth of ad based music streaming services (sometimes referred to as freemium music streaming services), at least according to data collected by Juniper Research.

The research firm stated that revenues generated from ad supported music streaming will reach $782 million across the world this year, and go over $1 billion in 2016. These freemium services (so called because they are basically free to everyone but still earn cash via advertising) may eventually help in increasing the number of paying subscribers, some of which start out as freemium subscribers before transitioning to paying subscribers.

Juniper Research’s data is no doubt good news to service providers that offer ad supported music streaming. When Apple first unveiled Apple Music, its new music streaming subscription service, in June earlier this year during the Worldwide Developers Conference, many believe that paid music streaming services will become the standard business model, forcing ad supported music streaming services out of the picture. But as suggested by Juniper Research’s data, freemium music services are alive and well.

The basic difference between the two types of music streaming business models is really just the mode of delivery. Ad supported music streaming allows users to stream songs, but after a few tracks, audio ads are inserted in between songs. In the case of paid subscription music streaming, the ads are eliminated and subscribers are given access to extensive catalogues of songs. And while freemium music services limit the number of songs that users can skip, most paid subscription music streaming typically do not limit song skips.

Realizing the advantages of the two business models, music streaming providers actually offer both -- Spotify, for example, offers a paid subscription service and a freemium service. The same with Pandora. 

Freemium or paid, what is increasingly becoming clear is that music streaming is truly on the rise. In March early this year, the Recording Industry Association of America (RIAA) revealed that for the first time, revenues from music streaming have surpassed revenues from sales of CDs. And it is expected to expand even more, especially now that a brand as popular as Apple is entering into this industry.

As for music downloads, it appears that this business model is beginning to decline. According to RIAA, revenues from music downloads in the United States last year had decreased 8.7 percent compared to the year 2013.