Music Streaming - Market Sizing

Proposed solution

• Number of people in this world
  • Number of people per continent
• Number of people on the platform
  • Adoption rates by continent
  • Number of people on the platform = adoption rates * number of people per continent
• Hours of listening per week
  • Segment hours of listening by weekday and weekend based on purpose
    • Weekday (other structures are possible)
      • Listening while commuting
      • Listening while at work
      • Listening in spare time
    • Weekend (other structures are possible)
      • Listening in spare time
  • Average hours of listening per week = 5 * weekdays + 2 * weekends
  • Total hours of listening per week = average hours of listening per week * number of people on the platform
• Hours of listening per year
  • Total hours of listening per year = total hours of listening per week * 52

Share that the global population is 7.5 billion and that the interviewee may assume a 20% adoption rate globally.

Proposed solution

Proposed solution

• The analysis is most sensitive to the % adoption of people on the platform; a 1 percent point increase would skew the analysis by ±5%.
• The analysis is also sensitive to hours assumed; the interviewee should point out that the analysis is more sensitive to assumptions in weekdays than weekends.

Share the following data after the interviewee asks about costs and revenues:

• He/she can ignore any costs or investment. Additionally, there are no transaction or intermediary fees.
• The streaming platform pays €4 per 1000 streams (assume that all plays are qualified streams).
• The average length of a song is 2.5 minutes.

Proposed solution

Proposed solution

• The average number is highly skewed due to the long-tail concept.
• To outperform the average (have more plays/streams than average), one needs to be amongst the 80-90 percentile due to the long-tail phenomenon.

Proposed solution

My analysis shows that people listen to the number one platform for 1.716 bn hours per year, which is 1.144 hours per person per year on average. Even though that number is high, to earn the mentioned salary you need people to listen to your music for 25.000 hours per year, which is negligible as a %. It is important to point out that 80-90% of all streams are on the same artists; this is called the long-tail effect. That means that the average is highly skewed and that obtaining 25.000 hours per year is a potential challenge. It requires further research into the average number of plays per track.