Streaming and subscriptions have really begun to make their mark

At the end of last month the music industry once again descended on Cannes for the annual institution that is MIDEM. Opinions from the trade floor and the many conferences and panel sessions left visitors in no doubt that there has been a major shift in opinion from across the music industry that streaming and subscription services have really started to take off.

Whereas a year or so ago services such as Spotify and Deezer were still viewed with some suspicion, they are now finding themselves being championed from within the industry as a real force for change and good. Indeed before the event, much publicity was given to the recent statement by UMG President of global digital business, Rob Wells, in which he said “the idea that Spotify cannibalizes sales is bogus.”

Wells was referring to extensive research the record company had conducted that dispelled the conventional assumptions or opinions that streaming services will, over the long term, have a detrimental effect on the music industry. This of course only publically represents the opinion of one record company. However, as the largest of the big four it’s safe to assume that it stands as a pretty clear barometer of a wider shift in opinion within the industry.

In fact, earlier this week, the outgoing Chairman of WMG Edgar Bronfman Jr. described Spotify as “incrementally positive.” He was speaking at the D: Dive Into Media Conference in California and his opinion contrasts with his views last year that Spotify provided “no net benefit” to WMG. Next week’s issue of Music & Copyright has plenty of full-year 2011 trade figures that prove the point that streaming and subscription services have quickly shaken the niche tag.

Wells was in attendance at MIDEM this year, sitting in on a panel discussion with representatives from Google, Amazon and the indie label association, Merlin. During the session, he was keen to highlight that despite historic difficulties it is now easier than ever for a streaming service to have a discussion with UMG about licensing its content. However he did point out that the newer or less well known a service is, the longer it takes for the cogs of decision-making to turn within what he described as the “Universal cave.”

Over the next year, raising the profile of streaming services as a way to consume music will be key. Globally, such services are still pretty nascent in the minds of consumers –streaming accounts for around 5% of all digital usage – and more service launches and increased competition between them will undoubtedly help drive awareness.

Wells certainly seemed optimistic that more services will be coming to market, as he stated, “I don’t think we have yet seen the critical mass of services that we really should enjoy… some markets may be reaching a sort of solid saturation point, but I still think from a macro top down level there’s plenty of room.”

Despite Wells’ optimism, in practice some feel it is becoming increasingly harder for new entrants as the dominance of already-successful services such as Spotify grows. One anonymous service provider expressed his opinion that in markets where Spotify has already set up business it is near impossible for a new start-up service to get off the ground. This is primarily because Spotify has already set the price expectation from the labels for their content and any new entrant with shallower pockets will struggle to match the Swedish service.

Whether or not the likes of Spotify are really stunting the growth of new players is still not entirely clear. However, what is plain to see is that the record companies are waking up to the realisation that streaming services may actually be the surest way for them to finally start generating revenues again.

Assistance for this blog was provided by the Informa Telecoms & Media analyst Michael Dean

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