Dive Brief:

• The RIAA 2016 mid-year report on music shipment and revenue found that subscription-based streaming music options are booming while analog and individual download sales continue to decline. 
• Overall revenues at retail were up 8.1% year-over-year at $3.4 billion, the best industry increase since the late 1990s and one driven by subscription growth, which offset other losses. Wholesale revenue was up 5.7% at $2.4 billion.
• Subscriptions accounted for 30% of industry revenue in the first half of 2016, growing 101% to average 18.3 million over the reported period.

Dive Insight:

The findings show the emergence of paid subscriptions as a primary revenue driver for the music industry in the United States. Both revenues and the number of paid subscriptions more than doubled in the first half compared with the previous year, driven by new services such as Apple Music and Tidal as well as growth from services like Spotify Premium. At the same time, physical sales and individual song and CD downloads are slumping.

While many subscription services go ad free-at the premium level, the trend isn't all doom-and-gloom for marketers. Many of the biggest music streaming and internet radio services like Pandora and Spotify partially rely on free, ad-supported models to attract new users — or keep old ones not interested in monthly fees — and advertisers should utilize the variety of targeting options they offer if they want to reach a growing contingency of listeners.

Spotify is a clear leader on this front, rolling out programmatic advertising in July and sponsored playlists in May, and the platform is now actively accruing user data such as listening habits and favorite music to better optimize traffic. Pandora has also been offering marketers interesting opportunities, the most ambitious being a new metric called “audibility,” done in conjunction with Moat, which is the audio equivalent of the well-known "viewability" measurements for display and video advertising.

Pandora's introduction of video ads that, when watched in full, free up more listener song control is a strategy marketers should pay close attention to, as it ensures consumers are engaged with ads while also demonstrating the value exchange they provide for free content platforms — a necessary lesson in the ad-blocker age.