Streaming services have been a double-edged sword for the music and video market. Credit: Matthew Keys

Streaming subscriptions have proved to be a double-edged sword for the music and video market, driving growth and innovation in the industry while removing much of the need for traditional retail products such as DVDs, CDs as well as download files. The music & video market (including streaming service revenues from the likes of Spotify and Netflix) is forecast to grow by 46% between 2018 and 2023, but excluding streaming, it is set to decline by 21%, pointing to a bleak future for smaller retailers relying on the sector, which is now dominated by global technology giants such as Amazon, Apple, Netflix and Spotify.

The only sub-category aside from streaming services not in decline yet is the digital video market, driven by subscription services such as Amazon Prime encouraging customers to purchase products not included in its service for a fraction of the price of a physical DVD or Blu-ray.

Streaming services are stealing investment from traditional retail channels

Apple’s entrance into streaming with Apple Music has resulted in limited investment in its original platform: iTunes. As a result, this service has experienced sluggish traffic to its site as it actively encourages consumers to sign up to its newer alternative.

While this has caused much speculation that Apple will close its iTunes store for good, the brand vehemently denies this. Yet given its lack of investment, iTunes’ sales will continue to decline at an accelerating rate. This will result in an almost negligible digital music market by 2023, worth less than £100 million, which is half the size of what it was in 2017.

Streaming services are generating the highest quality content

Since 2014, streaming services have been leading authorities in TV and film, creating original content for their platforms. The most successful of these has been Netflix, winning its first Golden Globe Award in 2014 for Best Actress in a television series (Drama). This success has continued into 2017 with Netflix winning an Emmy Award for Outstanding Supporting Actor in Drama for its critically acclaimed series, The Crown.

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With Netflix, Amazon Prime Video and Hulu (an American streaming service) having all received accolades for their original content and both Netflix and Amazon Prime Video developing film content, these networks have the potential to develop high quality film catalogues. Terrestrial TV channels such as the BBC have also teamed up with Amazon Prime Video for TV series, highlighting that many well-established producers are recognising their growing expertise in the market.

Becoming producers in their own right is something that retailers have never attempted historically, yet streaming services have revolutionised the market, giving players more control over content and a unique point of difference.

Streaming services do face challenges

Despite continuing to dominate the music & video market, streaming services do still face a number of challenges. Music subscriptions have historically come under a considerable amount of scrutiny, with Taylor Swift pulling her music from Amazon Music and Spotify over a dispute regarding royalties between 2014 and 2017.

These grievances are not limited to the music industry; Disney announced that it would be removing its content from competing services Netflix and Amazon Prime as it encourages more consumers to subscribe to its own fascia, Disney Life.

In the future, we are likely to see a growing demand for a more streamlined subscription service for all entertainment needs.  Amazon is in the strongest positon to promote both its video and music platforms under one service as an alternative for those that currently pay for separate music and video subscriptions. While this will reduce consumer spending on subscriptions as fewer are needed, volumes are expected to soar.

Both Netflix and Spotify could face troubles if demand for a combined service grows as neither has set in motion a move to offer both forms of entertainment. In comparison, while Apple is very much at the beginning of this process its TV series, Carpool Karaoke and Planet of the Apps are a stepping stone to future TV and film development.

For more information on Amazon’s position in the entertainment market, see GlobalData’s recently published report Amazon Strategic Review – 2018.