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A music streaming service is a type of online streaming media service that focuses primarily on music, and sometimes other forms of digital audio content such as podcasts. These services are usually subscription-based services allowing users to stream digital copyright restricted songs on-demand from a centralized library provided by the service. Some services may offer free tiers with limitations, such as advertising and limits on use. They typically incorporate a recommender system to help users discover other songs they may enjoy based on their listening history and other factors, as well as the ability to create and share public playlists with other users. It may also include customized radio or social media platforms.

Streaming services saw a significant pace of growth during the 2010s, overtaking digital downloading as the largest source of revenue in the United States music industry in 2015, and accounting for a majority since 2016. As a result of its ascendance, streaming services (along with streams of music-related content on video sharing platforms), were incorporated into the methodologies of major record charts; the "album-equivalent unit" was also developed as an alternative metric for the consumption of albums, to account for digital music and streaming. It has also caused a cultural shift for consumers renting rather than buying music outright.

Consumers moving away from traditional physical media towards streaming platforms attributed convenience, variety, and affordability as advantages. On the contrary, streaming has also been criticized by some artists for making them earn less from their music and artistry compared to physical formats, especially with pay-per-stream systems. Some critique that this system makes it so artists get paid as low as one-tenth of a cent per steam, while streaming services like Spotify tripled in value with no increase in payouts to artists. This is one of the main limitations that comes with music streaming services.

History

Early examples

Digital distribution of music began to achieve prominence in the late 1990s and early 2000s; MP3.com and PeopleSound were early forerunners to later services, offering the ability for musicians (including, especially, independent musicians) to upload and distribute their songs online in the MP3 format. In 1999, MP3.com offered a service known as Beam-It, allowing users to rip and upload music from CDs they owned into a personal library they could stream via their accounts. The service was then the subject of a lawsuit by Universal Music Group, which ultimately ruled that the service constituted the unauthorized distribution of their copyrighted sound recordings. The lawsuit proved detrimental to the company, and it was subsequently acquired by UMG's parent company Vivendi Universal, and later sold to CNET (which shut down its music distribution platform).

In December 2001, Rhapsody was launched by the startup Listen.com, becoming the first service to offer subscription-based streaming access to a library of music online. Initially limited to content from independent labels such as Naxos, it later reached agreements to stream music from the "big five" major labels. In 2003, Roxio acquired the assets associated with the former file sharing platform Napster. It was combined with assets from a second acquisition—PressPlay—to form a new service under the Napster brand, which included an online music store and subscription music streaming.

Pandora Radio launched in 2005; the service initially allowed users to create and listen to internet radio stations based on categories such as genres, which could then be personalized by giving "thumbs up" and "thumbs down" ratings to songs and artists the user liked or disliked. The service's recommendation engine, the Music Genome Project, analyzes and determines songs based on various traits. Pandora initially operated within the royalty framework enforced by SoundExchange for internet radio in the United States, resulting in operational limitations: users could not choose individual songs to play on-demand, and could only skip a limited number of songs per-hour (although users could later receive more skips by watching video advertisements).

Yahoo! acquired Launch Media and its LaunchCast internet radio platform in 2001 amid the dot-com bubble; in 2005, the service evolved into Yahoo Music Unlimited, a subscription service that allowed songs to be streamed in DRM-protected Windows Media Audio (WMA), and purchased for an additional fee.

The social networking service MySpace, and later the video sharing platform YouTube, also became prominent outlets for streaming music, with the latter becoming a particularly popular outlet for music videos and gradually displacing music television.

Launch of Spotify, increasing competition

In 2006, Swedish businessman Daniel Ek and Martin Lorentzon founded Spotify, which first launched in 2008; aiming to create a legal alternative to file sharing platforms such as Napster and Kazaa, the service allowed users to stream songs on-demand using peer-to-peer technology, and would be offered in subscription-based and ad-supported tiers. Ek stated that he wanted to "create a service that was better than piracy and at the same time compensates the music industry."

In 2006, a French music streaming website known as Blogmusiq was shut down after copyright complaints by the local royalty agency SACEM. After reaching agreements with SACEM, the site subsequently relaunched as Deezer, which reached seven million users by the end of 2009.

Also in 2006, MTV owner Viacom partnered with Microsoft on an online music platform known as Urge, which included a music store, music videos and online radio stations, and a subscription music streaming service known as "Urge To Go". Urge was briefly integrated with Windows Media Player as a competitor to Apple's iTunes and iTunes Store, but was discontinued in 2007 amid cannibalization by Microsoft's Zune platform (which was positioned as a competitor to iPod, and used its own separate DRM and music store that was incompatible with Urge). Viacom then entered into a partnership with Rhapsody owner RealNetworks to form the joint venture Rhapsody America, and transition Urge subscribers to Rhapsody. Yahoo Music Unlimited was discontinued in July 2008, and Yahoo also directed users to Rhapsody.

In the 2010s, online streaming gradually had begun to displace radio airplay as a significant factor in the commercial success of music. Spotify officially launched in the United States in 2011, and Billboard began to increasingly include streams into the methodologies of its record charts. In 2012, Psy's K-pop song "Gangnam Style" became a major international hit, driven primarily by the viral popularity of its music video; "Gangnam Style" would become the first YouTube video to reach one billion views. "Harlem Shake"—a song by trap producer Baauer that had become associated with a viral dance meme—was boosted to number-one on the Billboard Hot 100 chart in February 2013 after U.S. YouTube views for music content were added to its methodology.

After Spotify's launch, new competing services began to emerge in the North American market, including Beats Music—which was backed by headphone maker Beats Electronics, Microsoft Groove Music Pass (formerly Xbox Music), Amazon Music Unlimited, and Google Play Music All-Access (a branch of a service also offering downloads and a music locker). Beats Electronics was later acquired by Apple Inc., which discontinued Beats Music in 2015 and replaced it with a new Apple Music service. Tidal, a streaming service oriented towards high-fidelity audio, also emerged in 2015, with backing from rapper Jay-Z, and a focus on exclusive content.

In October 2015, after initially offering "Music Key"—a subscription bundling Play Music All Access with ad-free viewing of music content on YouTube, Google launched YouTube Red— which extended ad-free access to all videos on the platform, and added premium original video content in an effort to compete with services such as Netflix. Concurrently, YouTube introduced YouTube Music, an app dedicated to music content on the platform. In 2016, Rhapsody was renamed Napster; Rhapsody had acquired Napster in 2011.

In 2017, Pandora launched a "Premium" tier, which features an on-demand service more in line with its competitors, while still leveraging its existing recommendation engine and manual curation. In October 2017, Microsoft announced the discontinuation of Groove Music Pass, and directed its users to Spotify.

In 2018, YouTube Red rebranded as YouTube Premium, and YouTube concurrently introduced a redesigned YouTube Music platform, along with a separate YouTube Music subscription at a lower price point. The YouTube Music platform can be used without a subscription, but carries video advertising, and does not support background playback on mobile devices. The YouTube Music service eventually replaced Google Play Music entirely in 2020, and Google no longer operates a digital music store.

In 2019, Beatport, an online music store primarily targeting DJs and electronic music, announced music streaming services known as Beatport Cloud and Beatport Link. The latter is designed to integrate directly with DJ software such as Serato, Rekordbox, Traktor, and its first-party web application Beatport DJ (which launched in 2021); the service targets professional DJs shifting to streaming-based models for their music libraries, as well as amateur DJs.

Impact and figures

By 2013, on-demand music streaming had begun to displace online music stores as the main revenue stream of digital music. In 2023, the International Federation of the Phonographic Industry (IFPI) reported that growth in revenue in the music industry had increased by 11.2% compared to the previous year. In 2021—its largest increase in the past 20 years—with paid music streaming services accounting for $12.3 billion in revenue ($2.2 billion YoY), and ad-supported streaming $4.6 billion ($1.1 billion YoY). Revenue from music streaming services had more than doubled since 2017, and the estimated number of users of paid services was 667 million in 2023. In 2019, streaming services accounted for the majority of music revenue globally for the first time.

Music streaming services have faced criticism over the amount of royalties they distribute, including accusations that they do not fairly compensate musicians and songwriters. In 2013, Spotify stated that it paid artists an average of $0.007 per stream. Music Week editor Tim Ingham commented that while the figure may "initially seem alarming," he noted: "Unlike buying a CD or download, streaming is not a one-off payment. Hundreds of millions of streams of tracks are happening every day, which quickly multiplies the potential revenues on offer – and is a constant long-term source of income for artists." Amidst those rising number of streams, Spotify has also confirmed that they will require tracks "to get a minimum of 1,000 listens every year to receive royalties" starting early 2024. Additionally, some have expressed concern about the focus of streaming metrics as the primary source of monetary compensation for musicians and songwriters as streaming fraud gains traction.

When music services already face critiques for taking large cuts from artists, some say their business models help record labels profit even more. Streaming services take the revenue from songs on their platform and send it back to record labels and management companies that own the rights to the songs. These companies then take another cut before sending it to the artists. However, in the past, there were ‘royalty models’ that would allow for artists to get a share of physical albums sold, but with the creation of streaming services, those models have now become obsolete. This is the case for smaller artists, who take up a large portion of the music industry. Without an extensive fan base, these artists aren't able to make a sufficient amount of money.

To increase the diversity and value of their services, music streaming services have sometimes produced or acquired other forms of music-related content besides songs, including music documentaries and concert presentations. Spotify had begun to increasingly make investments into podcasts, buoyed by acquisitions such as sports publication The Ringer and exclusive rights to The Joe Rogan Experience.

In the 2010s, record charts began to increasingly include listener data from streaming platforms into their methodologies. In March 2012, Billboard launched a new "On-Demand Songs" chart, which was added to the formula of its flagship Hot 100 chart. In January 2013, On-Demand Songs was broadened into "Streaming Songs", and YouTube views in the United States on videos containing music were added to the Hot 100 formula the following month. In 2014, the UK Singles Chart similarly changed its methodology to include streaming. To account for streaming and the decline of album purchases, album charts began to adopt a metric known as "album-equivalent units" (AEUs), which are based on purchases of the album, and how many times individual songs from the album have been purchased or streamed. In 2016, the GfK Entertainment charts in Germany also added streaming to its methodology; however, the metric is based on revenues generated from a song's availability on paid platforms only, thus excluding free ad-supported services.

See also

• Comparison of music streaming services
• Digital distribution
• Video on demand

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• Music streaming services
• Recorded music