Spotify Said to Power 114% Jump in Paid Music Subscription Revenue for 2016

Privately held Spotify may face doubts about its path to profitability, but it nonetheless was hailed as the clear leader in a Recording Industry Association of America report that streaming services accounted for the majority of U.S. music revenue for the first time in 2016.

Streaming services accounted for 51% of U.S. music revenue last year, which jumped by 11% year-over-year to $7.7 billion. That's the biggest jump in U.S. music sales since 1998, according to the trade organization.

Spotify is well in the lead with 50 million paying customers globally, followed by Apple (AAPL) Music with 20 million subscribers. In addition, Pandora (P) , iHeartMediaAmazon (AMZN) and Tidal all offer subscription streaming services.

"Spotify is driving the increase more than the other services for one reason or another," eMarketer senior analyst Paul Verna said, noting that other players haven't taken off as much as was expected.

Russ Crupnick, managing partner of research firm MusicWatch, said Spotify is beating its competitors partly because it's been able to create a little bit of the same cultlike feeling among its followers that Apple once created for its customers. Since Spotify's users are so satisfied with their experience, they also tend to be "evangelists" for the service, creating positive word of mouth advertising. Spotify is easy to use and does an especially good job at making music easy to share on social platforms, he said.

"Spotify is really hitting everything that's important to the core music users and early adopters," he said. 

The service's path forward looks especially appetizing when you look at how many people aren't yet paying for a music subscription service, Crupnick pointed out. For people over the age of 13 who use the Internet, 90% still aren't paying for a music subscription service, leaving a long path forward for growth, according to MusicWatch. 

Part of the reason for the large number of people without a music subscription service is because the music industry is competing with a number of other subscription services, such as Netflix (NFLX) and publications such as The New York Times (NYT) .

"People have limited resources, and music is not something that people have been jumping up and down to pay for," Verna said. "But the figures from the RIAA suggest that society may have turned a corner when it comes to willingness to pay for music." 

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