Streaming media technology solutions continue to attract significant venture capital (VC) investment worldwide, as entertainment companies seek to maximise new revenue streams, according to market analysts StrategyEye.
Last year, $480m was invested in streaming music solutions, spread across 27 deals. This was up from $345m in 2012 across 21 deals and $181m across 24 deals in 2011.
The heaviest investment has been in Spotify ($250m), the streaming solution backed by the record industry itself, and Beats ($60m), backed by Dr Dre. However, there were also numerous million-dollar investments in smaller streaming enterprises.
Speaking to E&T this week, Tom O’Meara, head of editorial at StrategyEye, said, “We know that VC investment in tech has been increasing for the last three years. The industry has accepted that streaming is the ‘future of music’ or at least is going to be the primary consumption method in the coming years. We know that physical is dead and has been dead for a while. You only have to look at the figures to see how much that has collapsed. Streaming revenues have increased every year.”
According to statistics from the RIAA (Recording Industry Association of America), sales of digital downloads dropped for the first time last year – a concern for the recording industry when the dramatic decline in sales of physical product has not as yet been adequately compensated for by the rise in digital revenue.
In the US, the market value of physical sales of music slumped from $11.2bn in 2005 to $2.7bn, with digital rising over the same period from $1.2bn to $4bn. This trend leaves an approximate $6bn deficit – hence the industry focus on streaming media as a new revenue stream. US music industry revenues from streaming rose from $239m in 2006 to $1.3bn in 2012.
This upward trend is expected to continue when the RIAA releases the 2013 figures, with consumers now more receptive to streaming music options, moving on from paid-for digital download services. Crucially, for the industry, the necessary hardware – e.g. 3G and 4G smartphones and tablets – is now commonplace around the world, as is the network infrastructure, such as high-speed broadband. This technological convergence facilitates mass adoption of streaming offerings.
This news came in the same week that Amazon announced that its Prime offering – previously an optional customer account upgrade for next-day delivery of physical goods ordered from the online retailer – will now also allow unlimited online streaming of any TV and film media bought by customers. Amazon already owns the LoveFilm offline DVD and online TV and film streaming service.
Hear the full E&T interview with Tom O’Meara, StrategyEye