U.K. REPORT: STREAMING COULD DOUBLE IN VALUE

A new report on music streaming in the U.K. suggests the market could double in value over the next five years to £1.6b, according to consultants OC&C, who say that key to the growth is new premium tiers and a variety of entry points.

The U.K.’s streaming market was worth £829m in 2018 and, left as it is, the report predicts that number to reach £1b-£1.1b in 2023—a compound annual growth rate of 5%-7%. Inflation aside, that's a value growth rate of 33%, which is in line with a slowing pattern of growth over the last few years (65.1% in 2016, 41.9% in 2017 and 37.7% in 2018).

However, by targeting committed music fans with super-premium and add-on services and finding ways to tempt current non-subscribers, the report says the market could grow to a range of £1.25b-£1.6b. That's a compound annual growth rate of 12%-18%, and a value growth rate of up to 93% (which is just under the 104% rise in value streaming has experienced in the U.K. from 2016 to 2018).

The Entertainment Retailers’ Association commissioned the report compiled by OC&C, who have expertise advising on subscription models in sectors like mobile telephony, gyms and hotels.

Central to the study is analysis of the progress of streaming in different demographics—it accounts for 69% of listening time for 16- to 19-year-olds but only 16% of listening time for 45- to 54-year-olds—and what could be done to persuade each group either to trade up from current services or subscribe for the first time.

The report details how businesses in other sectors, ranging from mobile phone operators to gyms and video subscription services such as Netflix, have driven growth by creating a range of services for customer groups with different needs who may also value features differently.

While all-you-can-eat music streaming services have huge success and remain the default option for most, some consumers may be more easily reached with other features, it said.

“The current model dates back to 2008,” said OC&C partner Pedro Sanches. “It has enjoyed enormous success in part because of its simplicity but further innovation will deliver more growth.”

OC&C calculates that more innovation in services could result in a potential £500m boost. These range from creating new premium tiers and new entry points to paid streaming, to offering the ability to access streaming services without taking out a subscription.

“We commissioned this report to get an independent sense-check on the growth prospects for streaming,” ERA CEO Kim Bayley said. “It’s fair to say even we were surprised just how positive the results are. This is a significant piece of work showing how music can embrace the learnings of related leisure markets.

“Rewind 10 years when the music industry was on its knees, few would have believed possible the miracle turnaround streaming services have now achieved. OC&C indicates that further opening the door to innovation is key to music reaching its full potential.”