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Listen up: Digital audio’s next chapter is only just beginning


13 October, 2021 | Rob Gallagher


Summary

For decades, music has played a critical role in popularizing an array of modern technologies including games consoles, smartphones, and social networks. In the 2020s, the medium’s influence is set to grow even further as part of a wider wave of innovation centered on digital audio. 

Streaming services will win over consumers and advertisers in more new ways  

In the 1990s, dance music helped make the first PlayStation cool for adults. In the 2000s, MP3 downloads convinced many to sign up to broadband and iTunes played a major part in the iPhone’s draw. In the 2010s, streaming services helped establish the first successful smart-home product, the smart speaker, while lip-synching and dancing to pop have been key to the rise of TikTok.

In the 2020s, music will again prove to be one of the most powerful and versatile forms of media, this time in conjunction with podcasts, audiobooks, and other emerging forms of digital audio. 

The market for audio media is already sizable and growing. This year, total audio revenue will have fully rebounded from the disruption caused by COVID-19 and by 2025 it will near $73.0bn, up nearly a third from $55.6bn in 2020.

Global audio media revenue by type 201725

Premium audio, comprising physical and digital music and audiobooks, will contribute $38.7bn in 2025. Revenue from subscription services such as Spotify and Apple Music will drive much of that growth, reaching $26.2bn to account for 68% of premium audio and 36% of total audio services revenue. 

Audio advertising revenue from music streaming, radio, and podcasts is forecast to reach $30.2bn in 2020. In contrast to many other media sectors, traditional radio and established media companies still generate the majority of ad revenue in much of the world. 

But Omdia’s forecasts suggest revenue from traditional radio will never return to pre-COVID-19 levels marking ad-supported audio as a major opportunity for digital natives such as Spotify and YouTube. Omdia’s preliminary analysis suggests that the US market is turning that corner with online radio, music advertising, and podcast services set to account for a combined 47% of audio advertising revenue by 2025, up from 26% in 2019. 

Audio’s crucial advantage in the competition for consumers’ attention

Podcasts will deliver relatively little in terms of their main direct revenue source with advertising reaching just $3.5bn by 2025. We are exploring forecasting podcast subscription revenue, but that number is also likely to be relatively small—and difficult to untangle from revenue from music subscription services.

But that is partly the point. Just as Netflix has claimed Fortnite is its biggest competitor, Spotify competes with online video for consumers’ attention. Audio has a crucial advantage, however, in that people can enjoy it while doing other things such as commuting, working, studying, eating, housework, exercising, gaming, socializing, and even sleeping.

This ability of audio to colonize multiple aspects of peoples’ lives presents huge opportunities. Consider how music streaming services hook consumers first through the volume of content they offer, then curation aimed at specific scenarios (think Spotify’s “Intense Studying” and “Workout Beats” playlists), and finally algorithm-driven personalization. 

Audio is also well placed to drive new forms of experience. There’s the role live-streaming will play in complementing live music events. Music has already proved to be a major draw for the so-called “metaverse,” with the likes of Ariana Grande and Lil Nas X playing concerts in the game worlds of Fortnite and Roblox, respectively.

Yet again, a new decade of opportunity is dawning for music and audio.

Author:

Rob Gallagher, Research VP, Media & Entertainment

Rob leads the team behind Omdia’s global research on media and entertainment, digital consumer platforms, addressable consumer devices, and consumer artificial intelligence. He is also responsible for Omdia’s cross-sector Connecting the Dots thought-leadership program. Read bio

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