It took a long time to get going, but streaming music is finally mainstream. It’s a business, too, generating more than $1 billion a year.
That sounds like good news for the music labels, which have been waiting for digital music sales to replace the ones that disappeared after CD sales peaked 14 years ago.
The problem for the music business is that most music streamers — around 80 percent of them — are free music streamers, relying on services like YouTube, Pandora and SoundCloud for the tunes, says Midia Research. And those ad-supported businesses generate about 10 percent of the revenue per user that subscription businesses do.
Insult to injury: Many people who do stream music say they’ve cut down on music purchases. Of course they have! If you can listen to any song you want, whenever you want, there’s no need to buy a song. Take a look at the results of this new Midia survey of music streamers:
The big music labels worried for years that streaming would cannibalize CD and download sales, which is one of the main reasons they were reluctant to embrace companies like Spotify. When they finally did cut deals with streamers, label executives said they couldn’t find evidence that streaming was hurting sales. But it looks like those numbers are finally starting to show up.
This is one of the reasons YouTube is going to be rolling out a paid subscription service of its own — the music labels that are letting it stream all that music for free want the ability to convert some of those listeners into buyers.
The problem there is that the pool of people who will pay $10 a month for unlimited music may not be that deep. Midia says only 25 percent of consumers pay more than $10 for music every three months.
A more realistic price, from a consumer’s perspective, might be $3 to $4 a month. But that price won’t be realistic for a while yet: The music labels will only drop it there when they have no other choice.
This article originally appeared on Recode.net.