The music industry is struggling to generate revenue from streaming music, as it is seeing paid digital download sales dropping, according to the "Will Royalty Crisis Defeat the Music Streaming Industry" report from Strategy Analytics.
Popular streaming music services Pandora and Spotify are paying extremely high acquisition costs as subscribers and listener figures increase, making it difficult for them to get ahead of the cost curve. Pandora generates 82 percent of its revenue based on advertising, while Spotify earns 91 percent of its revenue from user subscriptions.
"Technology is evolving and changing the way consumers discover, listen to, share, and interact with music, but it is also a significant factor in the decline of music industry revenues," said Leika Kawasaki, Digital Media Strategies analyst and report author. "Many artists feel they are under compensated by streaming services, but as currently structured the underlying economics won't support higher royalty payments by these services, particularly for free ad-supported services."
The music industry has to boost ad revenue from music streaming services, and help entice users to become paid subscribers to these music services - and it's going to likely continue to be a bumpy road in 2015.