This year, 58.4 million people in the US will use Spotify, making up 20.8% of internet users, according to eMarketer estimates.
In contrast, Pandora will have 75.9 million users in the US this year. However, we expect Pandora's US user base to decline slightly through the forecast period, while Spotify will see double-digit growth in 2018, as well as next.
While there are several factors driving this success, pricing incentives is the most significant one. Spotify was the first in the market to offer pricing incentives, like ad free and student subscription options in 2014 and family plans, introduced in 2016.
Moreover, the company has been strategic with its partnerships. In 2016, Spotify teamed up with Hulu to offer a streaming entertainment bundle.
"Unlike Pandora, who's partner T-Mobile was mostly focused on retaining users, Spotify's strategy is more effective—they're partnering with companies focused on audience growth, like Hulu," said Martín Utreras, vice president of forecasting at eMarketer.
One challenge Spotify faces however, is that unlike Apple, Google and Amazon's apps, its app doesn't come preinstalled on any hardware. Pandora faces the same disadvantage—but has teamed up with SiriusXM to offer its product in certain cars.
"Spotify’s success in attracting millennials with its curated playlists and personalization has helped to position it as one of the top digital audio streaming platforms today. Yet, the intense competition it faces from players like Apple, Amazon, Google and Pandora for a market leading position cannot be over looked,” said Andrea Szasz, forecasting analyst at eMarketer.
Overall, eMarketer estimates there will be 201.5 million US digital audio listeners this year, making up 76.6% of internet users. That falls in line with other studies, like the H1 2018 survey from GlobalWebIndex, which found that 69.0% of internet users in the US have used a digital audio service like Spotify or Pandora in the past month. (GlobalWebIndex's penetration is lower than eMarketer's because it polled respondents ages 16 to 64, while our forecasts encompass all ages.)
Last week, eMarketer, in collaboration with Starcom Worldwide and GlobalWebIndex, released its eighth annual Global Media Intelligence Report on key digital trends worldwide, like subscription OTT. While the full report is only available to eMarketer PRO subscribers, non-subscribers can download the Executive Summary.
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