October 01, 2012

It was once thought that streaming music on the internet, through services like Pandora, gave consumers a chance to “try before they buy” music in either physical or digital formats. Research from Stage of Life suggests that that trend may be dissipating, however, especially with teens and college students.

According to StageofLife.com, in August, 49% of teens and college-age consumers reported spending zero dollars per month on music. Rather than buying iTunes singles or CDs of even their favorite artists, this age group copies music from friends, downloads free songs from music websites and streams music online.

The 16-to-20-year-old age group streams the most music content, according to EMI Insight. Almost half of that US demographic streamed music in 2011. The second-highest demographic concentration of streamers was the 21-to-24 age group, with 46% penetration.

While streaming is especially popular with younger consumers, downloading music through services like iTunes is still a prominent way to listen to music, according to research by AYTM. AYTM’s survey indicated that 37% of US internet users used free music streaming services like Pandora in October. Moreover, 32% paid to download music through a music service like iTunes. Only about 9% paid for a music streaming service like Spotify on a subscription basis that month.

AYTM’s survey aligns with Microsoft’s launch of Xbox Music, a service that aims to marry both cloud-based music streaming and digital music downloads. Given the Xbox Music model, AYTM asked questions to gauge consumer interest in a service that marries the Pandora and iTunes concepts. The findings point to a split in consumer interest.

When asked whether they would be interested in signing up for a service that integrated the popular capabilities of these music services, 10% of respondents told AYTM “yes, definitely”; 34% said “yes, probably”; 36% said “no, probably not”; and 20% said “no, definitely not.”

Only time will tell whether consumers will opt in to a service that brings together the best of both paid downloads and free streaming. It will be especially interesting to note millennial behavior—a core market for the Xbox product. Meanwhile, marketers must keep an eye on the consumer propensity to listen to music at a low price—and younger consumers’ reluctance to pay to listen at all.

For more information at http://www.emarketer.com

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