In 1997, music was sold and enjoyed on physical media, mostly CDs. My turn-of-the-century vintage Toyota, which I still drive today, came standard with a built-in cassette player. But 20 years ago this month, in September 1997, Capitol Records/EMI made the very first buck from the sale of a digitally downloadable song — a single from the new Duran Duran album. It was the first small pebble of an avalanche that Capitol Records itself only survived through acquisition by Universal Music Group. But that song, “Electric Barbarella,” heralded “a massive shift in how the music industry operates.” That’s according to an excellent recap of the history of the event in Billboard Magazine.

REVENUE TRENDS

But despite this history, the music industry did not leap to embrace music sales on the Internet. Instead, the big labels covered their eyes and ears and litigated away the services — like Napster — that sprung up to serve the demand. Here’s a look at how album sales fared in the post-Napster era:

(Source: Nielsen via Statista)

The cash cow had dried up, but musicians themselves looked for alternative revenue streams. Many found an answer is their touring roots:

(Source: Pollstar via Statista)

Since 1997, concert revenue has risen almost seven-fold. That helped touring bands, but did little for the recording industry. Instead, events pushed the industry forward. By 2001, most peer-to-peer music sharing networks had been squashed, and a new device, the Apple iPod, and then the Apple Music Store and iTunes, emerged to satisfy the demand for legal digital downloads. With new smartphones, the ringtone fad generated some revenue for a while. As new services starting up, like eMusic and Pandora, then Spotify and Amazon and others, digital music began generating some significant revenue:

(Source: RIAA via Statista)

And of particular note, look how subscription services emerge out of nowhere in 2011 and demonstrate rapid growth. An exact snapshot of the industry is hard to pinpoint given different data sources, but look at this forecast from PwC to show one prediction showing a bright future for streaming music revenue:

(Source: PwC via Statista)

This forecast suggests that streaming revenue will eclipse other digital download revenue by 2018.

On the other hand, look at this Nielsen research, which looks at the market strength of the subscription music segment among many others:

(Source: Nielsen via Statista)

According to Nielsen, adding subscription streaming to subscription satellite radio, the subscription music total is 16% of all revenue, compared with a 36% market share for live events and 11% for physical media.

The net aggregate sales total for music from all sources, according to this forecast, is looking pretty rosy:

(Source: PwC via Statista)

According to this prediction, music industry revenue is headed for steady — and higher — growth than it has enjoyed yet this century.

Perhaps that is not so surprising, considering that since antiquity, humans have loved music, and since the arrival of the modern Internet, accessing that music has become easier and easier.

HOPEFUL DEMOGRAPHICS

Unlike their grandparents, who bought songs on vinyl and tape, and unlike their parents, who loved the free downloads of the dot-com boom times, young people today are embracing the idea of buying and streaming their music, and paying for it.

(Source: NPD Group via Statista)

Young people are more willing to pay for music by subscription:

(Source: Vantiv via Statista)

And they listen to streaming services as much as they listen to songs they download:

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(Source: Piper Jaffray via Statista)

When you look at these revenue numbers and demographic trends, it is easy to see the opportunity in selling music by subscription to the growing audience that demands it.

SUBSCRIPTION SERVICES

Let’s look at the largest players in the streaming music industry, and consider which are best positioned to take advantage of current conditions. Here’s a look at everything competing to serve music to Millennials:

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(Source: Nielsen via Statista)

That’s where Millennial dollars are going, but it’s not an accurate reflection of their time. For that, you have to add in free options:

2)]

(Source: Morning Consult via Statista)

That’s for all adults, not just Millennials, and the older folks do love their radio time. It is notable that the number one and two choices are free; that’s a challenge for anyone wanting to sell premium services. And this data has to be read with care; look at this research on which streaming services are used most frequently:

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(Source: Edison, Nielsen, and Triton via Statista)

This graph is specifically looking at young people. In the overall population, Pandora still has the lead over Spotify (17% vs 9%); in the poll of young people, Pandora loses to Spotify (30% to 38%). That’s if we’re even comparing apples to apples, and maybe, for different pollsters, we’re not.

But let’s consider these as the key market players, and take a closer look.

SPOTIFY (150 million listeners) — The current fair-haired child of the streaming set, Spotify has expanded from its European roots and seen very rapid growth in recent years. The company has a remarkable 50 million paying customers worldwide. Apple is seen as the company’s chief rival, but at Forbes, Spotify gets the nod:

• At around 65 million, Spotify has more monthly paying customers than any of its competitors by far. One of the reasons is that it was one of the first in the streaming music space, and another is that it has a fairly simple user interface. But the biggest reason by far is the fact that Spotify continues to make affordable deals with its main customer base, with the latest partnering with Hulu as a perfect example.

PANDORA (81 million listeners) — The granddaddy of streaming services — and a public company since 2011 — held out for a long time with a “radio station” model that did not allow users to listen to specific tracks when they wanted to do so. However, that changed this year with a new premium service. The U.S.-only service has particular strength and loyalty in country music fans. On the other hand, many pundits look at Pandora as a leader no more, and, at best, a possible acquisition target. Still, Barron’s picks Pandora over Spotify:

• Though we believe Pandora now trails Spotify in terms of these more advanced offerings, Pandora’s scale and local selling infrastructure gives Pandora a substantial advantage in addressing the relatively untapped — though slower moving in terms of digital adoption — local market.

APPLE MUSIC (27 million listeners) — A bit of a late-comer to the streaming wars, Apple is still seen as a major contender to come out on top. With the built-in leverage of the Apple music infrastructure, from iTunes to iPhones, Apple’s deep pockets give it an edge, according to The Mercury News, citing recent price cuts:

• Digital media analysts said the unusual move by Apple – undercutting its own pricing models –  is an effort to pounce on its financially struggling competitors and lure paying customers to its service. Unlike Stockholm-based Spotify and Oakland’s Pandora, whose revenues are heavily reliant on premium subscriptions, Apple has the money and the flexibility to absorb losses while squeezing out the competition, analysts said.

THE REST — Amazon Music and less popular providers like iHeartRadio are also pushing subscription services. Amazon is tying its offering to its Alexa and Echo speaker products. And do not give up yet on the rest of the players, according to a recent Billboard analysis …

• iHeartRadio has never disclosed subscriber numbers, but the size of its online and traditional radio businesses gives it an advantage as well. TIDAL — which recently hired former Kobalt Music Group president Richard Sanders, its fourth CEO in four years — remains focused on exclusives: It offered JAY-Z’s 4:44 a week before other services, and it’s still the only place to legally stream Beyoncé’s Lemonade. And SoundCloud? In August, a last-minute injection of capital saved it from extinction. The only sure winner here is the overall music industry, which expects another year of significant growth as streaming becomes mainstream.

I “boldified” that last sentence because it hits home for me. Yes, there will be competition and consolidation, but the music industry as a whole can draw some reassurance from the success of the streaming subscription business model.

Insiders Take

Looking long-term, the business model of providing streaming music to consumers on demand seems like a clear path to future growth for the music industry. However, in the short term, the competitive landscape is quite fierce, and the prospects for any given provider are not nearly