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Two-Thirds of U.S. Homes Stream Audio Over Broadband, With Amazon in a Surprising Lead

A substantial majority of wired homes uses streaming audio, new research indicates, though the most widespread paid music streaming subscription service happens to be one originally known for selling books.

According to a report by market-research firm Parks Associates, 66 percent of the 97.64 million U.S. households with broadband connections use a streaming audio service. Of all U.S. broadband households, 40 percent stream audio using a free service, the report says, while 26 percent subscribe to paid streaming services.

Among paid subscription streaming services, Amazon Prime Music leads with 9.76 million U.S. subscribers, or 10 percent of broadband households, followed by Pandora One at 6 percent, Spotify Premium at 4 percent, SiriusXM Streaming at 4 percent, iTunes Match at 2 percent and Google Play Music at 2 percent. All other paid services were at 1 percent or less.

The report draws on surveys of 10,000 U.S. broadband households. The surveys took place prior to the June 30 launch of Apple Music. Parks Associates provided survey respondents with a list of paid music streaming subscription services and asked them to select the services to which they subscribe. Parks Associates didn’t ask about specific free streaming services.

Amazon’s predominance among streaming services, at least in terms of sheer subscriber numbers, highlights the music industry’s struggles in persuading listeners to pay for streaming. “The big question moving forward is if streaming music providers can achieve the scale they have been seeking to balance their ad revenue with paid subscription revenues, all while striking fair licensing agreements with artists,” says Glenn Hower, a research analyst with Parks Associates.

In the next five years, free streaming will probably rise substantially, Hower tells Billboard. He forecasts that free services will outpace paid services in North America by almost three to one, meaning that streaming music services will rely on advertising for a hefty chunk of their revenues. Given enough scale, though, Hower projects that North American ad and subscription revenue “would be nearly equal.”

Steve Boom, vp of Digital Music for Amazon, says in a statement: “We’ve already reached several million monthly users of Prime Music, yet we’re barely scratching the surface of the opportunity in Amazon Prime. The power of being able to market to our Amazon Prime members, who are music lovers and also big Amazon fans, is an unbeatable tool we’ll continue to use. And we’re constantly delivering more and more value to our Prime members — from expanding the catalog to add UMG artists to adding new features such as Prime Stations. We’ve had an incredible first year, and this is just the beginning.”

The online retailer doesn’t disclose how many people subscribe to Prime, its shipping-discount membership as well as music and video streaming service. As Billboard has reported, Amazon recently struck a deal with Universal Music Group, the third and last major label to offer its music via the $99-a-year Prime service.

According to the RIAA, the number of paid music streaming subscriptions averaged 8.1 million in the first half of 2015, up from 7.9 million a year earlier. Those figures are substantially lower than the number of total paid music streaming subscriptions implied by Parks Associates’ research. Josh Friedlander, svp of strategic data analysis at the RIAA, says the trade group doesn’t collect data on specific services.

Streaming revenues accounted for a third of U.S. recorded music revenues in the first half of the year, according to the RIAA, growing 23.2 percent, or $193.7 million, to $1.03 billion.

Worldwide, streaming subscription revenues alone rose 39 percent last year to $1.56 billion, according to the IFPI.

Parks Associates predicts revenues from paid music streaming subscriptions and from advertising on free music streaming services will each reach $17 billion globally by 2020.

With the addition of Universal, Amazon Prime Music now offers recordings from the likes of Taylor Swift and Katy Perry, among many others. Still, other evidence suggests the service may have a long way to go before its usage catches up to its subscriber base.

According to Russ Crupnick, managing director at research firm MusicWatch, Spotify Premium was the leading paid subscription music-streaming service among U.S. Internet users over the last three months, with 5 percent indicating they’ve used it, followed by 4 percent for Amazon Prime and 4 percent for Pandora One. The numbers are based on users who’ve listened but don’t necessarily subscribe personally; the account could belong to a friend or relative. Among other subscription streaming services, Apple Music was too new to include and Tidal was too small, Crupnick says.

Parks Associates’ Hower says the survey results accurately represent Amazon Prime Music usage, because the survey asked about music streaming specifically. “My assumption is that the number of users who have access to it is higher, since anyone with a Prime subscription has access,” Hower says. “Elsewhere in our survey, 18 percent of respondents indicate that they subscribe to Amazon Prime Instant Video. The subscription is the same, numbers are different. To me that indicates usage, or at the very least, awareness of the particular media service.”

Charles Alexander, a digital marketer and co-founder of Streaming Promotions, says he is an Amazon Prime subscriber but hasn’t used the music streaming service. “That speaks volumes,” he tells Billboard.

[Billboard]