Music Industry Downfall, Part II: The Rise of Social Streaming – Update
Written by Alex Patriquin (contact - e-mail) -- May 12th, 2008 | Share - Save - E-mailIf any industry has felt the brunt of the internet as a disruptive technology, it’s the music industry, which has been dealt a heavy blow by the onset of digital music distribution. On the April 28, the RIAA again confirmed this state of affairs when reporting that CD sales, the mainstay of the business for the last 15 years, were down a whopping 20.5% in 2007. Then on May 2, a Federal Court ordered AOL, Real Networks and Yahoo! to pay $100M to music artists as back payment for streaming their music online, proving that it’s not just the Big Four labels who have been affected by this disruptive shift.
Apple, a technology company, has become the most powerful player, with sales of 2 billion songs last year. The iPod/iTunes combo, the default of cool in our culture, has freaked out the Big Four and sent traditional music retailers like Wal-Mart and web 1.0 giants like Amazon scrambling into digital music distribution. So far their nascent incursions have not had a big impact, despite offering DRM-free music and savings of a few pennies.
While Apple and other legal download options have somewhat offset declining CD sales, the industry carries far too much overhead from 60 years of jacked up prices to make the digital transition smoothly. Music buyers used to pay up to $18 for an album and rarely was every song a keeper, now they pay 99 cents a drink.
Moreover, many consumers don’t pay for music at any price. The chart below, based on Compete’s data on more than 1,000 music sites, shows how the most popular options for listening to music online are free.
Despite lawsuits against illegal download sites, the fastest growing category in online music last year was P2P downloads, which shot up 140%. Nearly ten years after Napster raged through college networks, online music piracy continues to grow.
Meanwhile, the largest category in online music in March, 2008 was streaming, which racked up 28M unique visitors. The portals have driven the category’s dominance for many years by plugging into their massive traffic bases. MySpace joined the top ranks in 2005.
Then in 2007, a new breed of Web 2.0 sites with sleek, bright graphics and deep search and social feature integration, began to spread virally through social networks and heavily-linked music blogs. The sites combine streaming music with community-based sharing (vs. the anonymous exchange at P2P download sites) and in doing so can skirt thorny legal download issues.
These social streaming communities have risen rapidly in popularity. iMeem recently overtook Yahoo! Music as the most popular streaming site on the web.
*The Hypem1500 presents aggregate traffic to the more than 1500 music blogs tracked by the Hype Machine, a popular blog aggregator. The Hype Machine itself is ranked separately from its network at #16.
Collectively, the social streaming communities are flattening out the curve of online music. Compared to a year ago, the distribution of unique visitors at the Top 25 Streaming sites has a more gradual drop-off and longer tail.
As the music industry seeks to reassemble in the wake of digital distribution, it should recognize social streaming communities as the fastest growing opportunity in its evolution.
**UPDATE** Since the original post, we received great feedback from MySpace who provided the urls of music streaming beyond music.myspace.com, and we wanted to share those numbers. After we ran Compete data on the expanded set of urls, we found that its aggregate volume for music-streaming unique visitors is 19.2 million.
The data from the post included only the subdomain traffic of some sites, and does not represent all of their on-site streaming activity. This relates to some of the larger brands like MySpace, AOL, and Yahoo! who have more urls beyond the subdomains listed where consumers can stream music.
We encourage discussion on our blog and additional perspectives on the evolving online music space.
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Get the 
May 12th, 2008 at 1:23 pm
The music industry deserves all the losses they are incurring. We should only pay for the music we want and we now finally have a system in which we can do so.
May 13th, 2008 at 1:57 am
You know, I don’t see youtube anywhere in that list. I realize we’re talking about music, not video, but still, why don’t you just search for a song you want to listen to in youtube, and see if you can find it? Do you have any data about the number of people who simply listen/watch music videos on youtube?
May 13th, 2008 at 11:40 pm
Ling: have you looked at imeem.com? it is esentially youtube for music, upload mp3’s and share them like you upload videos to youtube, I uderstand there are users who fake their mp3’s it videos to upload them to youtube, but I imagine that’s partly because imeem still isn’t the household name that youtube is. Imeem also does video, but I think that’s a small part of its traffic. I hear that many of the original engineers that built imeem came from the original napster.
So all the sites which were part of the first internet boom have lost traffic, almost all the web 2.0 sites, with the exception of projectplaylist and myspace, are either new entries or have grown in traffic.
May 14th, 2008 at 9:12 am
For the record, Yahoo, RealNetworks and AOL may have to eventually pay ASCAP up to $100 million, but that’s only ASCAP’s estimate – the court never gave a final figure for the period going back to 2002, and the Digital Media Association called the estimate a shot in the dark.
May 14th, 2008 at 3:31 pm
The Low Down on Streaming Music
Complete.com put together a list of the top 20 Streaming Music Sites with a year comparison to their 2007. The article: The Rise of Social Streaming gives a decent overview of the music consumer numbers cross most digital access points. But what I f…
May 14th, 2008 at 9:17 pm
Great stuff, Alex. I’ve been using compete.com to periodically track the top music sites. There’s a few that you may want to pick up for completeness. Check out http://davidporter.wordpress.com/2008/04/06/top-25-music-sites-march-2008/.
May 16th, 2008 at 9:06 am
The music industry will never go back to what it was. The overpriced albums made the average listener rebel. It’s just a shame when the hard working musicians lose out.
May 18th, 2008 at 6:34 pm
hey everyone i want to post my email which is littleguy47@gmail.com and see how many people get on it and please do not change the password i just want to see how many people i can get to get on it just dont change the password and when you get on send an email to littleguy47@gmail.com and say you got on and the password is cougar22
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May 20th, 2008 at 12:19 pm
Illuminating entry, thanks!
For those who want to think about the songs again and not just everything around them, check out http://jamsbio.com and share your memories of music!
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June 11th, 2008 at 1:30 pm
You missed Shoutcast, which at this moment has 586,786 listeners, easily putting it in the top 10.
June 12th, 2008 at 7:11 pm
I’m through buying and listening to commercial music. It all sounds like it came from the same source. My ears like to hear authentic independents like Len Francis Monahan or one of those guys. Bob Dylan still sounds authentic but not always. Genuinely creative songs like Monahan’s “Voice of the Guitar” brings joy to me.
http://www.amazon.com/Voice-Of-The-Guitar/dp/B00160Y5MC/ref=sr_f2_9?ie=UTF8&s=dmusic&qid=1213312007&sr=102-9
July 24th, 2008 at 12:37 pm
Maestro.fm is not in the top 20 yet, but worth a look as a playlist-based social music site which has the added capability of remotely accessing your entire music collection. We do things a little more structured than imeem and a complete focus on music like last.fm.
http://maestro.fm
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