Cents and Sounds: How Music Streaming Makes Money
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Cents and Sounds: How Music Streaming Makes Money

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Music Streaming Infographic

How Music Streaming Makes Money

The global music market experienced its fourth consecutive year of growth in 2018, generating over $19 billion in revenue. Music streaming now accounts for almost half of that revenue, with 255 million paid users worldwide.

music streaming revenue

Today’s infographic from Global Web Index compares the popularity of streaming services, exploring how streaming behavior differs by age group and region.

While listeners can now gain access to an abundance of streaming options—is the success of the industry good news for everyone?

The Age of Streaming

Streaming platforms are web-based services that allow users to listen to high-definition music without having to download and store large files.

The foundations of music streaming were laid by peer-to-peer file sharing system Napster when it was created in 2001, followed by Apple’s iTunes a couple of years later. Spotify, in an attempt to combat music piracy, was founded in 2006 by Swedish duo Daniel Ek and Martin Lorentzon.

Today, 68% of adults use a music streaming service of some kind. According to Global Web Index, Gen Z leads the way with the highest average streaming times, accessing their favorite tracks across multiple platforms.

How Streaming Platforms Make Money

There are currently 33 active streaming platforms available, with a range of different features and characteristics available. Spotify and Apple Music, the largest of the streaming giants, rely on almost identical models to generate revenue:

  • Paid Subscriptions: Advertising drives free users towards monthly subscription packages, which include a premium offering for $10 a month and a family offering for $15 a month.
  • Advertising: Advertisers pay for exposure, with ads played every 15 minutes for 30 seconds, and can also include sponsored playlists, and homepage takeovers.

Spotify

With 217 million active users, and revenues of almost $6 billion in 2018, Spotify is the global leader in music streaming.

For Spotify, 91% of the company’s revenue comes from its 100 million paid subscriptions—double that of Apple Music—while the other 9% comes from advertising.

Apple Music

Apple’s streaming service commands a larger user-base than Spotify in the Asia Pacific and the Middle East and Africa regions.

While Apple Music has not been a profitable move for the company, the streaming platform bolsters Apple’s ecosystem of services—encouraging a more loyal consumer base.

How Artists Make Money

For both Spotify and Apple Music, 70% of the revenue generated from paid subscriptions and advertising goes towards paying music labels and artists.

Both platforms use the pro-rata model, which pays based on the total share of streams each artist has. For example, if $100 million is generated in revenue, and an artist accounts for 1% of all streams, then they would receive $1 million in royalties.

However, artists advocate for a fairer, more user-centric model that would pay artists based on who each user listens to the most, using their subscription fee. Smaller platforms like Deezer are moving towards a user-centric model and pressuring more established platforms to do the same.

The Future of Streaming

Over the next decade, the music streaming industry will continue to transform, with new innovations presenting significant opportunities and challenges for both streaming platforms and consumers alike.

  • Personalization: Streaming platforms are using technology to fully understand a user’s listening habits and to tailor music recommendations directly to them.
  • Original Content: Spurred on by the growth of streaming services like Netflix and YouTube, Spotify’s purchase of Gimlet Media for over $200 million signals the beginning of streaming platforms investing in original content.
  • Premium Prices: Artists and music labels are demanding more for music, forcing streaming platforms to hike their subscription rates in an attempt to make up for lost revenue.
  • Live Streaming: With live streaming rising in popularity, artists can offer audiences an intimate connection and more authentic version of their music.

Currently, artists can increase their chances of being featured on more playlists and ultimately earn more money by altering their music based on streaming platform algorithms. For example, artists only get paid if their song is listened to for 30 seconds, which results in much shorter songs that open with the chorus to keep the listener’s attention.

While streaming platforms continue to provide more avenues for artists to get in front of the right ears, many industry critics argue that music is no longer about creating something for pure enjoyment, but rather about using a formulaic approach to make more money.

Is the future of music safe in the hands of tech giants?

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The World’s Most Used Apps, by Downstream Traffic

Of the millions of apps available around the world, just a small handful of the most used apps dominate global internet traffic.

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The World’s Most Used Apps by Downstream Traffic Share

The World’s Most Used Apps, by Downstream Traffic

Of the millions of apps available around the world, just a small handful of the most used apps dominate global internet traffic.

Everything connected to the internet takes bandwidth to view. When you look at something on your smartphone—whether it’s a new message on Instagram or the next few seconds of a YouTube video—your device is downloading the data in the background.

And the bigger the files, the more bandwidth is utilized. In this chart, we break down of the most used apps by category, using Sandvine’s global mobile traffic report for 2021 Q1.

Video Drives Global Mobile Internet Traffic

The biggest files use the most data, and video files take the cake.

According to Android Central, streaming video ranges from about 0.7GB per hour of data for a 480p video to 1.5GB per hour for 1080. A 4K stream, the highest resolution currently offered by most providers, uses around 7.2GB per hour.

That’s miles bigger than audio files, where high quality 320kbps music streams use an average of just 0.12GB per hour. Social network messages are usually just a few KB, while the pictures found on them can range from a few hundred KB for a low resolution image to hundreds of MB for high resolution.

Understandably, breaking down mobile downstream traffic by app category shows that video is on top by a long shot:

CategoryDownstream Traffic Share (2021 Q1)
Video Streaming48.9%
Social Networking19.3%
Web13.1%
Messaging6.7%
Gaming4.3%
Marketplace4.1%
File Sharing1.3%
Cloud1.1%
VPN and Security0.9%
Audio0.2%

Video streaming accounts for almost half of mobile downstream traffic worldwide at 49%. Audio streaming, including music and podcasts, accounts for just 0.2%.

Comparatively, social network and web browsing combined make up one third of downstream internet traffic. Games, marketplace apps, and file sharing, despite their large file sizes, only require one-time downloads that don’t put as big of a strain on traffic as video does.

A Handful of Companies Own the Most Used Apps

Though internet traffic data is broken down by category, it’s worth noting that many apps consume multiple types of bandwidth.

For example, messaging and social network apps, like WhatsApp, Instagram, and Snapchat, allow consumers to stream video, social network, and message.

Even marketplace apps like iTunes and Google Play consume bandwidth for video and audio streaming, and together account for 6.3% of total mobile downstream traffic.

But no single app had a bigger footprint than YouTube, which accounts for 20.4% of total global downstream bandwidth.

CategoryTop Apps (Category Traffic)Category Traffic Share
Video StreamingYouTube47.9%
Video StreamingTikTok16.1%
Video StreamingFacebook Video14.6%
Video StreamingInstagram12.1%
Video StreamingNetflix4.3%
Video StreamingOther5.0%
Social NetworkingFacebook50.5%
Social NetworkingInstagram41.9%
Social NetworkingTwitter2.4%
Social NetworkingOdnoklassniki1.9%
Social NetworkingQQ0.7%
Social NetworkingOther2.9%
MessagingWhatsApp31.4%
MessagingSnapchat16.5%
MessagingFacebook VoIP14.3%
MessagingLINE12.1%
MessagingSkype4.1%
MessagingOther21.6%
WebGoogle41.2%
WebOther58.8%

The world’s tech giants had the leading app in the four biggest data streaming categories. Alphabet’s YouTube and Google made up almost half of all video streaming and web browsing traffic, while Facebook’s own app, combined with Instagram and WhatsApp, accounted for 93% of global social networking traffic and 45% of messaging traffic.

Traffic usage by app highlights the data monopoly of tech giants and internet providers. Since just a few companies account for a majority of global smartphone internet traffic, they have a lot more bartering power (and responsibility) when it comes to our general internet consumption.

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Visualizing the Critical Metals in a Smartphone

Smartphones can contain ~80% of the stable elements on the periodic table. This graphic details the critical metals you carry in your pocket.

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Visualizing the Critical Metals in a Smartphone

In an increasingly connected world, smartphones have become an inseparable part of our lives.

Over 60% of the world’s population owns a mobile phone and smartphone adoption continues to rise in developing countries around the world.

While each brand has its own mix of components, whether it’s a Samsung or an iPhone, most smartphones can carry roughly 80% of the stable elements on the periodic table.

But some of the vital metals to build these devices are considered at risk due to geological scarcity, geopolitical issues, and other factors.

Smartphone PartCritical Metal
Touch Screen indium
Displaylanthanum; gadolinium; praseodymium; europium; terbium; dysprosium
Electronicsnickel, gallium, tantalum
Casingnickel, magnesium
Battery lithium, nickel, cobalt
Microphone, speakers, vibration unit nickel, praseodymium, neodymium, gadolinium, terbium, dysprosium

What’s in Your Pocket?

This infographic based on data from the University of Birmingham details all the critical metals that you carry in your pocket with your smartphone.

1. Touch Screen

Screens are made up of multiple layers of glass and plastic, coated with a conductor material called indium which is highly conductive and transparent.

Indium responds when contacted by another electrical conductor, like our fingers.

When we touch the screen, an electric circuit is completed where the finger makes contact with the screen, changing the electrical charge at this location. The device registers this electrical charge as a “touch event”, then prompting a response.

2. Display

Smartphones screens display images on a liquid crystal display (LCD). Just like in most TVs and computer monitors, a phone LCD uses an electrical current to adjust the color of each pixel.

Several rare earth elements are used to produce the colors on screen.

3. Electronics

Smartphones employ multiple antenna systems, such as Bluetooth, GPS, and WiFi.

The distance between these antenna systems is usually small making it extremely difficult to achieve flawless performance. Capacitors made of the rare, hard, blue-gray metal tantalum are used for filtering and frequency tuning.

Nickel is also used in capacitors and in mobile phone electrical connections. Another silvery metal, gallium, is used in semiconductors.

4. Microphone, Speakers, Vibration Unit

Nickel is used in the microphone diaphragm (that vibrates in response to sound waves).

Alloys containing rare earths neodymium, praseodymium and gadolinium are used in the magnets contained in the speaker and microphone. Neodymium, terbium and dysprosium are also used in the vibration unit.

5. Casing

There are many materials used to make phone cases, such as plastic, aluminum, carbon fiber, and even gold. Commonly, the cases have nickel to reduce electromagnetic interference (EMI) and magnesium alloys for EMI shielding.

6. Battery

Unless you bought your smartphone a decade ago, your device most likely carries a lithium-ion battery, which is charged and discharged by lithium ions moving between the negative (anode) and positive (cathode) electrodes.

What’s Next?

Smartphones will naturally evolve as consumers look for ever-more useful features. Foldable phones, 5G technology with higher download speeds, and extra cameras are just a few of the changes expected.

As technology continues to improve, so will the demand for the metals necessary for the next generation of smartphones.

This post was originally featured on Elements

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