Report: Subscription music services pressuring traditional radio

Just as CDs eliminated the use of cassette tapes, the advent of streaming and subscription music services are threatening the livelihood of traditional music listening methods like radio and digital music. This was highlighted in a recent study by The NPD Group, which polled Americans and found that half of the 96 million American internet users listened to online radio or an on-demand music service within the past three months.

Specifically, more than a third of respondents listened to Pandora or other internet radio service, while roughly the same amount used an on-demand service like YouTube, Rhapsody or Rdio, The NPD Group reported.

“Although AM/FM radio remains America’s favorite music-listening choice, the basket of internet radio and streaming services that are available today have, on the whole, replaced CDs for second place,” said Russ Crupnick of The NPD Group. “We expect this pattern to continue, as consumers become more comfortable with ownership defined as a playlist, rather than as a physical CD or digital file.”

The proliferation of subscription music services
Pandora, specifically, is having a significant impact on how consumers listen to music. The study found that the number of Pandora users who also listened to AM/FM radio dropped 10 percentage points since 2009, while users who also listened to music on a portable player fell 21 points. While there are several reasons for this, it is largely because individuals don’t mind being charged small recurring payments to find new music.

“AM/FM radio has traditionally played a significant role in helping consumers learn about new music from well known artists, as well as finding new ones; however, Pandora and other music services are an increasingly important part of the music-discovery process,” Crupnick said.

The emergence of innovative subscriptions for music services has made it more challenging for traditional providers to generate recurring revenue from loyal customers, as many consumers are changing how they listen to music.  If these providers want to remain competitive with companies like Pandora and Spotify, decision-makers need to think outside the box and consider a subscription commerce model.