Spotify is the fastest-growing music service in the United States, according to a new survey by Morgan Stanley. From 2019 to 2021, the streaming platform’s share of the average American’s listening hours increased from 7% to 10%. That’s well behind AM/FM radio and YouTube, but strong with the younger consumers who will make up the bulk of listeners over the next decade.
“Overall, the results reinforce our OW [overweight] thesis on SPOT [Spotify] shares and bullish video of the audio market,” the analysts wrote in the survey report. The company has a $350 price target for Spotify shares, which closed at $228.16 on Monday (Dec. 20), implying a 53.4% upside.
There are multiple narratives about audio listening: Broadcast radio companies boast they have the largest reach of any audio platform despite newer, digital platforms’ attempts to unseat it. Spotify executives talk about the financial rewards in taking listening share from AM/FM radio. SiriusXM argues consumers still see value in satellite radio, even when investors and the media give more attention to fast-growing streaming services. YouTube says it’s the largest music streaming platform in the world. Well, they’re all true. The results of Morgan Stanley’s survey show clear trends but underscore that there is no one way to enjoy audio.
YouTube has the highest usage rate among digital platforms at 60% of all respondents and rises to 77% in the 18-29 age group. In the latter category, YouTube is well ahead of AM/FM radio, which comes in second place at 65%. YouTube’s 12% share of listening hours is also the highest among all streaming platforms. But SiriusXM and Spotify have the largest listening shares among subscription services—11% and 10%, respectively—making them more valuable platforms to rightsholders, performing artists and songwriters than YouTube, which is predominantly an ad-supported platform.
The survey also goes a long way toward dispelling common beliefs about how people listen to music. Yes, young people—even those who subscribe to streaming services—listen to broadcast radio. Yes, older consumers subscribe to streaming services.
But the way people listen to music is obviously correlated with a consumer’s age. Having grown up with the ability to choose music on-demand, consumers aged 18-29 spend more time listening to Spotify (21%) and YouTube (17%) than to radio (14%) and SiriusXM (6%). Consumers 65 and over grew up listening to radio and were middle-aged by the time iTunes made digital downloading mainstream. Accordingly, they spend more than half of their listening time (57%) on AM/FM radio and another 15% on SiriusXM. The 30-44 age group splits the generational differences: a quarter of their listening time is spent on AM/FM radio, while the three leading on-demand services—Spotify, Apple Music and YouTube—collectively account for 32% of listening time.
The future of music streaming is arguably not music—it’s spoken word content, such as podcasts and audiobooks, that turn music platforms into one-stop shops for audio. Investors take special note of podcasts in particular because music services are scooping up podcast content creators, distribution platforms and exclusive licenses with popular shows. Spotify has been especially aggressive in podcasting by acquiring content creators (Gimlet, The Ringer, Parcast) and technology (Megaphone) and signing exclusive licensing deals with popular podcasts such as The Joe Rogan Experience.
Spotify’s efforts appear to be paying off. It’s now the most popular platform for podcast listening at 31% of respondents, an increase from 24% and 30% in 2019 and 2020, respectively. Apple Podcasts was flat at 24%. Third-place iHeartRadio remained at 15% and fourth-place Pandora fell from 17% to 12%. In terms of weekly listening time, Spotify’s 3.9 hours ranks second to Apple’s 4.2 hours. The Joe Rogan Experience is tied with two NPR shows—Up First and News Now—for the largest audience, with 17% of respondents having listened to the show. The New York Times has two of the top ten podcasts: The Daily, heard by 12% of respondents, and This American Life, heard by 10% (through a 2020 partnership, The New York Times does marketing and ad sales for This American Life).
That’s not evidence that Spotify’s podcast strategy has boosted subscriptions and ad-supported listening. But the survey results suggest podcasts are helping people spend more time on Spotify and adding value to the service. They appear to make Spotify users happier with the service, too. Spotify moved up in user satisfaction from 80% to 84%, tying SiriusXM for first-place. (The companies also rank second and first, respectively, in on-platform listening share.) AM/FM radio fell from 79% to 76%, below LiveXLive (previously Slacker), YouTube Premium, Apple Music, Pandora, Amazon Unlimited and Tidal. And if podcasts help reduce churn—the rate at which a subscription service loses customers—they will boost the average customer’s lifetime value.
After podcasts, the next front in audio could be short-form video apps such as TikTok, which is used by 21% of all respondents. TikTok is well known to be a valuable promotional tool that helps artists land recording contracts on the strength of viral hits. But with an average listening share of 2%—not necessarily all coming from videos with music—TikTok is like early YouTube and Spotify before advertising caught up with the number of streams. Rightsholders can take comfort in TikTok’s popularity with young consumers: the platform is used by 52% of respondents in the 18-29 age group—fourth-highest behind AM/FM radio, YouTube and Spotify—and accounted for 6% of their listening time.
For Apple Music and Amazon Unlimited, which rank well behind Spotify and YouTube in both usage and listening time, there is still potential to reach new consumers. About three-quarters of respondents—72% for Apple Music, 73% for Amazon Unlimited—have never sampled the services. (Those figures are 53% for SiriusXM and 57% for Spotify.) With about half of all respondents interested in a music subscription service, there is a large, untapped pool of potential customers. The numbers also warn up-and-coming services about missed opportunities: 9% and 10% of respondents said they used to subscribe to Amazon Unlimited and Apple Music, respectively, but no longer do—about half the percentage of respondents who currently subscribe to either service.