Study Finds that 70 Percent of Streaming Users Are Completely Inactive…

Back in March, respected industry researcher Mark Mulligan unearthed a fairly shocking statistic about Deezer.  That is, nearly three-fourths of all Deezer registered users were completely inactive zombies.  They had all signed up and ditched out completely, even though it was all completely free.

But this isn’t just a Deezer problem; it’s a problem that affects all streaming music services according to Mulligan‘s calculations.  Yes, the churn on these applications is this damn bad.

streamingchurn

Which means, not only are a small percentage of people paying or even sticking around, a large majority simply aren’t interested.  “The important point is not whether Deezer has more inactive users than Spotify, but that streaming services as a whole have a problem with churn,” Mulligan relayed.

“Again, this is not a Spotify problem, it is a fundamental issue with the freemium music model: many more people decide it’s not for them than continue using the service.”

There’s an even more worrisome issue: both Deezer and Spotify are plowing tons of cash and getting crappy retention.  But does all this cash-burning eventually lead to a financially-sustainable happy place?  “Currently Deezer and Spotify are in growth stage and are more focused on acquisition than retention, but sooner or later they’re going to have to recalibrate their metrics if they want to move towards sustainable financial models,” Mulligan noted. “It can be done, as Rhapsody shows us, but it is not an easy task, and it also doesn’t leave a lot of spare cash in the kitty for aggressive growth.”

“Any established subscription business – such as a cable or satellite TV provider – will tell you that managing churn is the overriding strategic objective.  Any subscription service – especially a nice-to-have like music – is going to be vulnerable to churn.”

41 Responses

    • Visitor

      it would be interesting to look at these numbers and stats against satellite radio and pandora.

      Reply
    • Vail, CO

      No, No… NOT like a gym. In a gym scenario people PAY then don’t go. Here they use the treadmills for free then STILL don’t come back.

      Reply
  1. jw

    Didn’t the Deezer guy say they’re profitable? (Likely a function of staying out of the USA.) I’m not sure it’s fair to say that they’re “plowing through cash,” because that just doesn’t seem to be the case (if we’re going to take Deezer bro at face value). However, that seems to be true for Spotify.

    The problem is discovery. People aren’t willing to pay $8/mo or endure ads while listening to the music that they already own, which is what they default to. Just because all the music anyone could ever want to listen to is there, that doesn’t mean it’s there for everyone. It’s only an incredible deal if you put in the effort to find new stuff, but as hard as they try, Spotify doesn’t make real discovery easy.

    I think the value of streaming services is still hidden to the average music fan.

    Reply
    • TUNE HUNTER

      You right the problem is discovery!

      All of the music monetization should shift to discovery point.

      No prostituting Shazam attached for free to free Spotify.

      Just stop free Shazam, Soundhound, lyric ID guys – make them the new Coconuts then limit RDS display on the radio and all of the freeloaders ( whole society?) will have to go on detox. They will go nuts without the input on how to steal!

      Reply
      • jw

        I wasn’t saying any of that. In fact I disagree with all of it.

        Terrible ideas.

        Reply
    • hippydog

      I would agree..

      Netflix is a great example.. their ‘interface’ isnt perfect, and their catalog is pretty lacking..

      BUT they are getting great retention numbers because people are USING IT!

      IE: There are tons of older movies and TV shows that many people never thought to watch, but are now checking out because Netflix does a pretty good job at ‘recommendations’..

      It comes down to ‘value’.. a user will pay $10 a month if they keep coming back to the service, and feel that they are getting good value from that monthly payment..

      Netflix is competing with cable, and DVD, and cable “on demand” (all paid services).. and one of the ways they are competing is by having proprietary (are first run) shows (“house of Cards”, Disney, etc etc)

      The streaming services (deezer, spotify, etc) are competing with a users already large catalog, and FREE over the air broadcast..

      Reply
      • jw

        Agreed, Netflix does a great job of creating that “rental store” type of browsing experience. They do a great job of culling the giant catalog down into relevant & manageable chunks, which makes discovery possible, which Spotify doesn’t do very well. (Though they have been doing a better job lately at recommending.) Even if Netflix doesn’t have a huge library, being able to discover something is better than being confronted with an unmanageable heap of content. That’s certainly key to their retention rates.

        Reply
  2. Casey

    Any time you have a completely risk-free trial or free service with no strings attached you will get high churn. Anyone can create a Spotify account for free. Subscribing to a cable TV service is a bit more involved and usually filled with charges even if they offer you a risk free trial. Churn of free users is not really an issue. They come and go on a daily basis for any number of reasons. Churn of paid users is what Spotify and Deezer focus on and getting the free users who stick around, to pay.

    I think these companies could help lower paid churn if they would provide people with the ability and incentive to make annual subscriptions or semi-annual. Offer a slight discount perhaps. Or do what Napster use to do, offer some free legal downloads that you can keep. Brings in the subscriptions and not all that many people use them.

    Reply
    • jw

      This is a very good point. If there was an installation fee, these numbers would look a lot different.

      Reply
  3. Yves Villeneuve

    Finally, strongest evidence to date that subscription of unlimited access is way over hyped and unrealistic for the typical music consumer.

    Industry types need a wake up call and this is it.

    I am betting the number of downloaders is increasing faster than the number active subscribers in real terms, not percentage terms since subscribers is already a much smaller market than downloaders. USA only = 45 million downloaders.

    Reply
          • Yves Villeneuve

            Last few days I’ve been strongly hinting we should go our separate ways in these comment threads. I have no interest in responding to him with detailed article- related comments unless I’m defending against false allegations.

            True, I called him a drug pusher/criminal after he recommended I take drugs to improve my creativity. He chose not to defend against the allegations until I told him I was done talking to a drug pusher.

            So hopefully he gets the message, even if not the first time he has received it.

          • GGG

            Nice try. You called me a drug pusher before I told you to take drugs, that’s why I said it…as a snarky joke.

          • Yves Villeneuve

            You keep showing your true colors everytime you express full-fledged BS.

            ALL drug users promote drugs and drug use, you are certainly no exception. The evidence is in the DMN archives.

            Don’t expect any detailed article-related responses from me to you whatever your selling.

          • GGG

            Also, really? You took that obviously half-joking retort after you brought up me being on drugs serious to the point of legitimately thinking I’m a drug dealer? Wow, man. You may be the most sheltered human being I’ve ever interacted with in my life. And that includes the homeschooled kid who lived down the street from me.

          • Yves Villeneuve

            You choose to lie to win a dispute.

          • GGG

            I chose to mistake ‘user’ for ‘pusher.’ You still brought up drugs first and can’t take a joke. That’s on you.

  4. Yves Villeneuve to GGG

    Like I said, ALL drug users promote drugs and drug use. You are no exception.

    Reply
    • GGG

      1. Oh, so you just called me a “user” first like smoking pot is some evil thing, my mistake…haha. Still brought up drugs before I did.

      2. Did you time travel from 1965 as a 60 year old man? It’s the only explanation for your continued use of the terms ‘cannibas’ and ‘pusher’…

      3. No idea how you even came to assume that reverbnation page down there is/was mine. I’ve stated numerous times I’m in NYC. Vegas is a few blocks west of me.

      Reply
  5. David

    I use two streaming services: Rara.com, which is paid subscription only; and Spotify, which is freemium. So far, I have only used the Spotify free version. I certainly wouldn’t pay for two services at once. Some of the things I want to listen to are on Spotify but not Rara, while some are on Rara but not Spotify (of course some things aren’t on either). I therefore do the rational thing, and use Rara unless and until I want to listen to something they haven’t got, in which case I try free Spotify. I couldn’t do it in reverse: I couldn’t use paid Spotify and use free Rara for the things that aren’t on Spotify, because there is no free Rara (except sometimes as a temporary ‘free trial’ option). This is a minor advantage of ‘paid only’ as a business model – the more important advantage being that it screens out freeloaders who will never pay and are also an unattractive demographic for advertisers. How does Spotify pitch to advertisers?: ‘hey, advertise with us: the streaming service for paupers and tightwads!’

    Reply
    • Casey

      A problem with Rara’s strategy however is that they don’t even let you see the service without handing them money unless you get in on one of their very limited free trials. Very few people are willing to hand over money without even knowing what they are paying for. I don’t know how many subscribers they have, but I would venture to guess it is very insignificant.

      Reply
      • David

        99% of the world’s goods and services are sold on the basis of advertising and reputation. You don’t go into a restaurant and expect to sample the menu for free.

        Of course, free samples and free trial periods are a legitimate marketing tool, but they are expensive and should not be expected to be a permanent part of a business model.

        I think Rara.com has occasionally offered a short free trial period, but their standard approach is to offer 3 months trial period at a dollar (or pound, or euro) per month. This approach is arguably more generous, and certainly more expensive to the company, than the Rdio approach of 1 week’s free trial (which I have also tried). The big advantage to the company is that it screens out people, of whom there are many, who have no intention of ever paying for anything on the internet if they can avoid it.

        You are probably right that Rara’s user base is relatively small, but their business model would allow them to break even at a relatively low rate of use (compared to a freemium model). Their business partner is Omnifone, which is one of the very few online music services to make a profit. So they must know something about the business.

        Reply
  6. earbits

    I think this article makes the assumption that these services want to retain these free users. Most evidence points to the contrary. They increase the number of ads and commercials for these users trying to make them convert into paying subscribers, and monetizing them as best they can, but at the end of the day, those who will never become subscribers are simply dead weight. The ad supported model has already proven unsustainable, so once they berate these users with ads and still don’t convert them, why would they want to keep them? If it was profitable to keep these free users around, they’d make it a priority. Since it’s not, their objective is to push them into subscriptions or get them the hell out.

    -Joey, Earbits

    Reply
  7. hippydog

    I was listening to a “freakonomics” podcast a few days ago that now seems relevant to this article..

    I wonder if many of these services got caught with trying to provide what they ‘think’ people want, and not what they REALLY want..

    Specifically I am talking about them trying to have a large catalog of music, thinking that will make people happy..

    I dont think that works.. or at least not at first..

    They should be concentrating more on the niche markets..

    Netflix, Satellite Radio, Showcase TV, are all great examples on what happens when you start with a centerpiece and then build from there..

    the irony? is anyone who was in a band would ‘get that”.. unless you want to be a ‘wedding singer’ your whole life you dont start off trying to play every type of music.. You concentrate on what your good at FIRST, be the best at it, and branch off later..

    The public might “say” they want a service with a huge unlimited catalog.. BUT in reality they want something they would enjoy paying for..

    EG: netflix brought in tons of users just because many wanted to watch “breaking bad”.. they stayed because their kids used it, and “house of cards” was excellent.. Satellite built their user based on ‘niche’ markets like huge sports choices, and howard stern, showcase became a huge award winner (and major TV cred) by producing quality drama shows after another..

    so personally i believe the biggest problem with spotify, deezer, rdio, etc etc etc, is…

    Whats the difference? Free or not.. Why should someone invest time or money in them?

    Reply
  8. balbers

    (rant)

    I’ve never used any of these music streaming services. Not even the free ones, and I’ll tell you why.

    I’m probably in the minority as I’ve been such an mp3 hoarder over the years- currently 32,380 songs in my ipod. So even if I stopped seeking out new music immediately and permanently, that’s enough music to keep me entertained/occupied the rest of my life. And I’m guaranteed to like every last song.

    1. A healthy chunk of the music in my ipod is unreleased, unauthorized live, remixes, demos, dvd rips, radio or video broadcasts or otherwise unofficial releases that will never find their way onto any of the streaming services.

    Take, for example, one of my favorite artists, Venetian Snares.

    My ipod shows that I have 250 properly released VSnares songs totaling 19 hours. It also shows that I have an equal number (give or take a couple) of unreleased songs at 16 and a half hours. (VSnares is undoubtedly an outlier in my collection, not part of the bell curve. No other artist will have that high of a percentage, but you see my point.)

    2. It seems like a vital component of any of the services is their recommendation/discovery feature. Well, when it comes to people like me, they’re damned if they do, damned if they don’t. Meaning, if they recommend artists to me using a narrow focus, they’ll end up recommending artists/albums/songs that I already have in my collection. Conversely, if they broaden their scope out a little bit, they’ll end up recommending stuff that I don’t like.

    3. No restrictions regarding how many songs I can listen to, how often, how many times, or for how long. Ever. Backup copies on my local, external hard drive. Memory is cheap, and I have more gigs around the house than I know what to do with.

    I suppose I’m coming across as one of those ‘get off my lawn!’ old guys. Of course we’ve all heard from the so-called experts that it’s all about access, not ownership. To that I say bah humbug. For me, there are simply too many advantages to downloading/ownership, and too many disadvantages with streaming.

    160gig ipod classic FTW. Brian. (/rant)

    Reply
    • jw

      At some point you’re going to want to stream all of those songs to all of your devices, & you’ll probably be better off using Apple or Google to do that. It doesn’t sound like you’re in the demographic for a subscription service. But that doesn’t mean others aren’t.

      Spotify actually does a pretty good job at incorporating a local library into the software, & they sync tracks to mobile devices via wi-fi. So I can listen to Devin Davis via Spotify, even if he isn’t in their library. I do this with stuff on a semi-regular basis, but I wouldn’t waste my phone’s storage space if a large portion of my collection wasn’t on Spotify.

      Reply
  9. 12% paid subscription for Deez

    … NO !

    Or you must precise something : paid NOT par the final customers but paid by Orange and given away for free to their customers and not used by them !

    Reply
  10. sj

    This might be a net positive indicator that free music isn’t necessarily what the majority off sic fans are after and there’s still hope that “favorite” music is still valuable to most individuals. This also would seem highly contradictory to the RIAA’s war cry that anyone who supports free music shares the same intrinsic motivations as pirates – forcing the value of music down. If this data is to be trusted, it would suggest that maybe most people stick to what they already like and don’t need endless amounts of “free” music choice in their lives.

    Reply
    • hippydog

      it can be interpreted in multiple ways..

      Myself I would say its very indicative that its the CURATION that helps sets the ‘value’.. Only a small niche market is willing to do their own curation.

      Reply

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