Music streaming how does it work

Pros: SiriusXM has a wide variety of offerings that will probably be a significant upgrade over your local radio stations. And if you have good cell service on your commute, plus an unlimited data plan, you could stream to your car stereo from your phone.

Cons: You have to call customer service to end your subscription, which was a convoluted, time-consuming process when we tried it. Choosing a package is also surprisingly complicated. When you factor in the satellite radio tiers, new users need to pick from numerous subscription choices with a confusing variety of offerings, optional add-ons, and hidden fees.

The SiriusXM app and web interface can also be more difficult to navigate than those of most competitors.

Price: Users can stream music free with ads via desktop and web apps. A day trial period is available. Spotify is also famous for its effective recommendation algorithm. Spotify has doubled down on podcasts as well. The service is host to a variety of exclusive content, including shows from the likes of Barack Obama and Joe Rogan. Pros: Spotify combines a large library of popular songs with a series of robust playlists.

These playlists are often geared toward specific activities and genres, helping consumers find music for specific situations, such as the gym or long car trips. Podcasts and other original programming are also available. Spotify works with a variety of connected devices, including the Sonos One and Google Home Max smart speakers, as well as video game consoles.

Cons: On a smartphone, users can stream playlists and stations free with ads, but on-demand song selection is limited to a small selection of tracks and you can skip only a certain number of songs per hour. Price: Tidal has many tiers. Discounted plans for families, students, and members of the military are available. The service offers a free one-month trial. And even if you feel high-quality audio files are worth the price of admission, they can use up small cellular data plans pretty quickly.

Price: YouTube Music is free with ads. A free three-month trial is available. Discounts are available for students. People with a Google smart speaker can access free ad-supported playlists and stations without signing up by asking their device to play music. It includes the same music streaming service plus ad-free videos and some original video content.

YouTube Music is also one of the few free options for listening to songs on demand. Pros: What sets YouTube Music apart is the ability to upload up to , of your own audio files to stream from the cloud. YouTube Music Premium gives you access to a library of 70 million songs, personalized playlists, and music videos.

Location-based playlists will even suggest songs—think high-tempo music at the gym—at appropriate times. I want to live in a world where consumers take advantage of technology, not the other way around.

Access to reliable information is the way to make that happen, and that's why I spend my time chasing it down. This means that some of the original audio recording's quality is being sacrificed to make the file smaller and easier to stream. In other words, standard streaming audio isn't equal to the quality you'd hear on an actual CD.

Though this loss in quality is hard to notice for the average listener, most audiophiles demand "lossless" music that preserves the full range of the original track. This is where "HiFi" music streaming comes in. Though there are some differences between them, they all generally refer to streaming audio tracks that are presented in at least CD-quality. Tidal, Amazon Music Unlimited, and Apple Music are some of the most popular services with lossless audio options, making them a better fit for listeners who want the very best quality.

Spotify will also add a CD-quality plan later this year. On the downside, lossless audio streaming requires more bandwidth so you'll need a fast internet connection and big data plan. To take full advantage of the audio quality benefits you'll also need a nice pair of headphones and a dedicated digital-to-analog converter , or a high-end set of speakers. You can learn more about lossless audio formats in our guide to HD audio.

If you're signing up for a music streaming service, chances are you'll need a reliable media player or smartphone to access the app, along with a nice pair of speakers or headphones to actually listen to your favorite tracks on. With that in mind, we've highlighted some of our other buying guides for streaming players, mobile devices, headphones, and speakers that are sure to come in handy for anyone who wants to stream music.

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There are many services to choose from, and some are better suited for specific devices. Loading Something is loading.

Email address. While Spotify and the ecosystem brands are ruling over Europe and the Americas, the majority of the markets outside of the western world have their own streaming landscapes, developed in the absence of global players.

As of late, international streaming brands turned their attention towards those developing markets. Most of those regions already have established streaming brands of their own, which means that the global services including Spotify , are put into the catching up position — and the question remains if they would be able to beat the local competition. One one hand, global players can come in strong, wielding their subscriber bases and unmatched marketing budget.

On the other hand, they might still struggle with the local catalog and culture-specific curation — which is a huge success factor when it comes to domestic markets. Developing markets are likely to become the main battleground within the streaming industry in the coming years — we'll get to it a bit further down the road.

The third approach to overcoming Spotify's advantage is in differentiating the product itself and appealing to a niche audience. The core offer of the most streaming services is unlimited access to the complete music library of the world. However, that all-fits-all approach of global streaming services leaves space for improvement, and here's where the niche streaming services come in.

The idea of niche streaming is that if you choose a specific customer segment — usually fans of a particular genre — and build a dedicated service for them, you would be able to create a better listening experience including discovery, recommendation and so on within that niche.

Classical music is the lowest hanging fruit, but several apps are applying the same niche approach across different genres.

We have BeatportLink for electronic music, GimmeRadio for Metal — and even Tidal can be put into this category due to its connection with the hip-hop world — although its catalog isn't limited to the genre.

Besides, various Hi-Fi streaming services like QoBuz are also virtually niche brands — just focusing on audiophiles instead of the genre fans. Last, but not least, we have the digital service providers that, while used for on-demand music streaming, doesn't exactly fit the definition of a streaming service. The most prominent examples of such brands are the historical players on the market, that were here even before Spotify came around: YouTube, Bandcamp, SoundCloud, Pandora, and alike.

Or TikTok , originally created for sharing short videos, not only has it become a music discovery tool, but also an influencer of global hits. Semi-streaming services have the most precious resource of all — active users, who employ the platform as the source of music — which means that they can leverage that audience and try to convert it into paying subscribers.

Streaming is now the primary source of recording revenue around the globe. However, what does the future hold for the likes of Spotify? The lion's share of the streaming growth we see today is due to the new consumers, making a switch from the previous generations of music distribution — whether its physical sales or digital downloads.

Once that shift is completed, the growth is bound to dial down — in fact, we are already at the point where some of the more developed markets are reaching the max streaming adoption rate. The Scandinavian markets are the first mature streaming economies that completed the user-transition mentioned above — and in that sense, they can provide a sneak peek into the future of the global recording market.

Take a look at the home of Spotify, Sweden. However, that's an inevitable future of the streaming industry — the question is just how and when the various local markets will reach that mature state. The streaming industry is fragmented: while some markets, like Scandinavian countries and, to a lesser extent, the U. The maturation trend, however, seems to take the upper hand.

At the current state of the business, most streaming services struggle to find a sustainable financial model. Spotify reported a profit only once in over ten years of its history, in Q4 of — and the company projects to get back in the red in There's every reason to believe that not just Spotify, but all major western services are yet to reach profitability — it's just that Spotify doesn't have a massive company behind it to absorb the losses like Apple Music or Amazon Music do.

However, profitability is not imperative for streaming services — much more important is the valuation of the business. Which means that the question isn't how will streaming services turn a profit — it's how will they keep the momentum, given the slowing down market. So first, to understand how the streaming services make money, we need to take a look at the cost structure across the segment. The first line of cost for any streaming service is the payouts to the rights holders.

In general, the payout is divided into:. Paid to the songwriters for the right to reproduce the recording every time the user chooses to play a song. That means that non-interactive plays on DSP, like ad-supported radio-stream of Pandora, doesn't generate that type of royalties. Paid to the songwriters for the right to publicly perform their music.

Since the streaming distribution model implies that the consumer doesn't own any of the songs, every stream is rendered as streaming service publicly performing a song to the user — even if it is enjoyed in the privacy of one's headphones. Payouts to master recording owners make up the primary share of the overall per-stream payout. It is paid to the owners of the recording copyright — whether it's a label, distributor or artists themselves if they went with a direct Spotify deal, for example.

For more detail on how the recording business works, check out our article on the Mechanics of the Recording Industry. On the artist side, the per-stream payout will depend on the vast number of factors, from the stream type ad-supported vs. Not all streams are born equal. We've explored the subject in great depth in our article on the streaming pay-out rates , so check it out if you want to know more about how the streaming payouts work and why we should forget about the per-stream metrics.

On the streaming side, however, calculating the overall artist payout is much simpler — the DSPs would usually pay a set percentage of its revenue to the rights holders. The exact figures that are a subject of those negotiations are rarely publicly disclosed. Given the power tensions between the recording industry and streaming services, major labels are interested in keeping the playing field levelled and competitive — so it's reasonable to believe that approximately equal rates are applied across the board.

The rest of the streaming costs are hardly worth mentioning in that context. The market is still in its early stage, so the key to a company's success is not in optimizing the internal costs structure. To come back to the concept of the value of the business as the primary financial goal for streaming services: in its core, the market valuation is a communal estimate of all combined future profits whether they are 10, 15 or 20 years from now given the fact that the streaming market is a growing industry with huge potential.

So, the streaming services can play a very long game, securing the share of the market that they will turn into profits 10 or even 20 years from now. Profitability and customer acquisition costs are hardly relevant at this point — what matters is the share of the global market with the reasonable assumption that streaming will become the global standard.

If we would simplify things a bit, every streaming service has two main ways to grow the market share. First is the horizontal expansion of the market — entering new territories to unlock new growth opportunities and broaden the addressable market. Second, is strengthening the positions on developed streaming markets: either by winning over the users of competing services or expanding the product to attract the non-streaming audiences. As we've mentioned before, more developed streaming markets are reaching the max adoption rate.

That is to say that, even though the penetration of streaming in the U. There's not much to be gained in terms of "new blood" in the U. MIDiA Research predicts that the long term growth of the global streaming market will be driven by emerging markets: Brazil, Mexico, China, and India — as well as major markets that are a bit late to the streaming party, namely Germany and Japan.

Each local music market is a universe of its own and a topic for a separate discussion, but let's skim through the more interesting ones:. China is the fastest-growing music industry in the world right now. It went from 12th to 7th place in the IFPI global recording market rankings, and the vast rise of streaming powers a big chunk of that growth. There are now over million people logging into the streaming services every month in China. However, due to the local legislation and the country's closed off digital space, those audiences are not accessible to the global streaming players.

Instead, they are users of the local streaming services Q. However, the premium subscriptions are not even the focus of the local players, as TME , the most significant player on the market, takes an alternative path to the valleys of its customers. We did a great piece on the Chinese streaming services — so check out our Market Focus: China if you want to know more about the country's unique digital music market.

The second biggest music market in the world, Japan is still a predominantly physical market, with the entire industry built around the CD-format. However, the physical market is slowly deteriorating — and streaming remains the only real answer to falling CD sales. Even in Japan, nobody knows. India represents a massive opportunity for the global streaming market in terms of new blood. With such promise, no wonder that both Spotify and YouTube Music have launched their services in India in less than a month apart.