Ahead in the Cloud: Thumbplay Acquisition Raises Streaming Stakes

POSTED BY Global Administrator
The announcement that Clear Channel – the largest radio station group owner in the US – is to acquire Thumbplay’s music streaming service for both fixed line and wireless devices is a strong indication of the potential of this business model. As I discussed in my recent report on mobile music, a number of streaming services – including Spotify and Grooveshark – are now available on the mobile, and will contribute to revenues from full track mobile music reaching $5.5 billion by 2015.

While streaming has yet to really take-off on the mobile, the market is now ripe. In addition to network speed and coverage, one of the key hurdles to the adoption of this type of service on the mobile was the screen size of handsets. Whilst playing a song from a known library stored on the device could be accomplished with a relatively simple user interface, browsing a streamed service requires added functionality. Given that the screens of most high end smartphones is on average 4 inches, as adoption of these devices increases, so users will be more inclined to stream.

A key strategic consideration for the operators of streamed services is the business models: another recent development of interest is the news that Last.fm is to drop its free, ad-funded service, instead only offering a monthly subscription option. This brings the service in line with other mobile streaming services, such as Spotify and Grooveshark – which only offer the paid subscription option. Whilst this may be the most common model on the mobile, this is not to say that the ad-funded model is not viable: as adoption of streaming services on the mobile nears that of fixed line devices, we may see more services similar to Grooveshark’s browser-based, ad-funded model.

Of course, streamed music must be a frightening prospect for copyright holders: in an industry which has been hit hard by a decade of online piracy, subscription services like streaming threaten to devalue it further. Consider that to purchase a record company’s entire catalogue of x million songs on a track-by-track basis might cost x million dollars (assuming $1 a track), whilst access to stream this entire catalogue can cost $10 a month. Nonetheless, regardless of the business model, the ubiquity of the mobile device and the improvement in network and handset technology make it an exciting time for music on this platform.