For years the music industry has been grappling with how to make money in the digital-first world. And now, after looking at the success of streaming sites like Netflix and YouTube, music execs may have found their answer: original content and the continuation of bundled services.
As competition in the audio sphere heats up, the pay-to-stream model is becoming the key driver of growth in the competitive digital music business. Paid streaming users grew ~50% year-over-year in the US and globally in 2018, according to Morgan Stanley's annual music and radio survey, and the firm expects global number of paid music streaming users to grow at a ~25% CAGR over the next five years.
Original content has driven growth at video streaming services like Netflix and YouTube, and music execs are hoping that the same could be true in the audio space.
During an appearance on Squawk on the Street earlier this year, Spotify CEO Daniel Ek said that content creation is a key area of focus going forward. "We are investing in more original content that will broaden the appeal of the platform," Ek said. "And as we're doing that, we believe obviously subscriber engagement will go up, which increases our long-term opportunity."
"We're definitely investing a lot more in getting more original content on to the service and you should expect that going forward," Ek added. "And as long as we're seeing cost of engagement numbers, the content, we're investing in, you should expect this to make those investments." Ek added.