These 4 stocks are set to win the streaming music game

Streaming music is either the most exciting thing in music, or in desperate need of reform, depending on who you ask.

But it's hard to argue with the trends. Streaming music is here to stay in some form or another. All that's left to determine is who is going to come out on top when the dust settles?

Universal Music Group, Sony, Amazon and LOEN are a good bet, according to Giasone Salati of Macquarie Research. Each of the companies holds a competitive advantage against their peers.

"We argue that the music industry is on the verge of a structural multi-decade growth period, which will likely benefit all industry players, at this early stage," Salati said.

"Still, our stock selection is relatively narrow."

Recorded music revenues are set to double in the next ten years, according to Salati. Streaming music is a big enabler of that growth, as the format captures a higher revenue than older media.

With other formats like CDs, hard prices don't allow companies to optimize the revenue they receive per customer. With reoccurring subscription payments found in most streaming services, revenue has the ability to be flexible. Salati explains it like this (emphasis added):

For about a century, since the advent of commercial radio, recorded music has been monetized via physical sales and advertising revenues... Physical purchases by music fans accounted for the lion's share of revenues, supported only by a relatively small number of buyers.

One problem with the CD pricing model for CDs is its excessive rigidity that forces all consumers to pay the same price for the same album, regardless of how much they are ready to pay. A uniform price level means that genuine fans pay less than they would and for some people the price is too high. The result is a loss of revenue at both extremes.

But streaming has the potential to merge all the existing complimentary models and create a more continuous price offering that will ultimately maximize revenues. Better segmentation of music listeners means that everybody ends up paying the price they want for the level of access they desire.

When you consider the ability to maximize revenue from each customer, it makes sense that streaming will take off.

But who will win the streaming music takeover? Read on to find out...