What If There Aren’t Any More Streaming Music Subscribers?

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In about one month’s time, we’ll know how many people are willing to pay for Apple Music.  That number is absolutely critical to the future of streaming music, a sector that is proving ineffective at getting enough people to pay.  According to the latest data released by Recording Industry Association of America (RIAA), paying subscribers increased just 2.5 percent in the past year, to 8.1 million by the mid-point of 2015.

The stat bears repeating: paying subscribers only increased 2.5 percent in the past year in the United States, the largest music economy in the world.

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The question is critical, because without more paying subscribes, there really isn’t a sustainable streaming music business.  a quick look at the data shows that paying subscribers contribute disproportionately large amounts of revenue: in fact, 73 percent of all streaming music revenue comes from paying subscribers (for year 2014).  The remaining 27 percent comes from advertising, or ‘freemium,’ which means that most users are contributing very little revenue to companies like Spotify.

And without more of these paying people, there isn’t a sustainable streaming music industry.

Can Apple save this situation?  Maybe, but for most users, there are just way to many free options, starting with YouTube, SoundCloud, and iTunes podcasting.  According to a report this morning in the New York Post (for what it’s worth), Apple Music now has 15 million people trialling their service, with 7.5 million of those not disabling the automatic rollover setting into paid accounts.

So if every single one of those 7.5 million people ended up becoming long-term subscribers (beyond one month of realizing they’re getting charged), then the US-based streaming music industry just doubled its paid subscriber total.  The more realistic number, however, is probably much lower than that.

21 Responses

  1. Anonymous

    How was subscription streaming revenue up 20% if new subscribers were only up 2.5%?

    Reply
    • Paul Resnikoff
      Paul Resnikoff

      A few possible explanations for that. One could be simple error: I’ve found multiple issues in the RIAA’s numbers, though assuming everything is accurate, the H1 number is just an average for the year. So, in year 2015 (current year) there’s a higher stock of actual paying subscribers, instead of people jumping on later in the year.

      Additionally, there seems to be a higher per-subscriber yearly contribution (approx. $50 in 2014 to $59 or so in year 2015).

      Reply
      • The math hasn't changed, only expectations...

        ahem…

        http://thetrichordist.com/2013/02/08/music-streaming-math-will-it-all-add-up/

        What makes people think that all of the media and content that was created to be monetized on transactional revenues can and will ONLY be monetized via advertising and subscriptions? think about that – it’s an insane proposition.

        It’s like saying the all previous media models must conform to broadcast or cable. Period. Again, that’s an insane proposition. Why do people think the economic models of complete industries can be magically transformed? Because Google, that’s why. Because the IAB, that’s why. It’s nuts.

        Reply
    • Read the Article

      Read the article. It’s right in there (and should be known to anyone who is intersted in this business, anywat)>

      “the data shows that paying subscribers contribute disproportionately large amounts of revenue: in fact, 73 percent of all streaming music revenue comes from paying subscribers (for year 2014). The remaining 27 percent comes from advertising.”

      So, when the part of your customer base that provides 73% of your revenue increases by 2.5%, it results in a far greater percentage of overall revenue increase than 2.5%.

      Reply
      • DavidB

        Huh? If paid subscribers accounted for 100% of revenue, then an X% increase in subscriber numbers, without any increase in revenue per subscriber, would obviously produce an X% increase in total revenue. Likewise, if paid subscribers account for a fixed proportion of all users, then other things being equal an increase in subscriber numbers would produce a proportionate increase in revenue. Only if the proportion of paid subscribers increased, e.g. by unpaid users converting to paid ones, would an X% increase in paid subscribers produce a more-than-X% increase in revenue, since it would increase the average revenue per user.

        Reply
      • Huh?

        If if paid subscribers account for a fixed proportion of all users, then other things being equal an increase in subscriber numbers would produce a proportionate increase in revenue.

        Why would you assume any of these numbers are fixed, or equal?

        This is supposed to be total streaming revenue, as reported to RIAA. That is: across multiple services, each with different price points and different – and constantly shifting – proportions of paid vs. ad-supported users.

        Reply
        • DavidB

          I was trying to address the point made by the previous commenter, who seemed to think that a small increase (2.5%) in the number of paid subscribers, together with the fact that they account for a large share of total revenue, explains the reported increase (23%) in total revenue. It doesn’t. If anything, I was being too generous. Even if the proportion of paid users in the total (and not just the number) did increase, the increase in revenue would not increase by a greater percentage. I have worked out some examples to show this, but this is already getting tedious, so I would just challenge anyone who disagrees to produce a numerical example of their own.

          Reply
  2. Anonymous

    Keep banging your head against the wall. Nothing will change until copyright law is enforced again.

    Reply
    • Anonymous

      Which brings us to the real problem. The current copyright law as it is written is unenforceable. Copyright law has to be rewritten. Doable, except that we have lost any sense of reality when it comes to what copyright is and what it is supposed to do. On one side we have copyright maximalists and on the other side we have the exact opposite. Both sides are like a dog with rabies.

      Reply
    • STFU About Copyright Enforcement, Moron

      No one was in charge of enforcing copyright law besides copyright owners. And the only people who fail to enforce it are the very same copyright owners.

      The copyright law we have is entirely enforceable. People who actually care to protect their rights under our current laws, every day. Statutory damages claims by trolls is an entire industry.

      Just as all the houses in nice neighborhoods have state-of-the-art alarm systems, gates and fences, while the ghetto tenements don’t even have doors or windows. If your copyrights are worth anything, you will spend the time and money to protect them. If you can’t or won’t, then you’re just saying that your copyrights aren’t worth very much, to you.

      Reply
      • DavidB

        “The copyright law we have is entirely enforceable”

        OK, explain how you can enforce copyright law when someone uses a false name and a masked IP address to upload ‘user-generated content’ (e.g. an MP3 file they have ripped from a CD) to a ‘sharing’ site which claims immunity under the DMCA so long as it complies with the take-down procedures. As a case in point, consider Grooveshark. It took years of litigation to get rid of Grooveshark, and even then it was only possible because Grooveshark’s operators had been unusually foolish in incriminating themselves.

        “No one was in charge of enforcing copyright law besides copyright owners”

        Not true. Copyright infringement carried on for financial gain is a criminal offense in most jurisdictions. It can be, and sometimes is, prosecuted by law enforcement agencies like the FBI or PIPCU (the Police Intellectual Property Crime Unit) in the UK.

        Reply
      • Make Sense

        DavidB – “[If he copyright law we have is entirely enforceable] explain how you can enforce copyright law when someone uses a false name and a masked IP address to upload ‘user-generated content’ (e.g. an MP3 file they have ripped from a CD) to a ‘sharing’ site which claims immunity under the DMCA so long as it complies with the take-down procedures.”

        Simple. If the party complied with DMCA take-down procedures in the copyright law, then the copyright law has been enforced.

        DavidB – “Copyright infringement carried on for financial gain is a criminal offense in most jurisdictions. It can be, and sometimes is, prosecuted by law enforcement agencies like the FBI or PIPCU (the Police Intellectual Property Crime Unit) in the UK.”

        I think the point was that even these agencies will typically only enforce if copyright owners bring it to their attention. There never was, and really isn’t now (IPEC notwithstanding) a “Copyright Police.” It’s essentially up to individual copyright owners to protect their copyrights.

        Reply
  3. Rickshaw

    Who needs to stream when they’ve already taken all the music they want to listen to?

    Reply
  4. Duke

    what I find pathetic is to even think that people don’t think they should pay a paltry $10 a month for all the music they can consume. The reality is going to be that these very smart tech people who have no idea what it’s like to make an album or single and how much it should really cost are going to be in line to receive new music at a much lower talent and quality scale because who can make a great album with great musicians and artists if it can’t be paid for?. yes you’ll have the singer/songwriter at the bare bones of production,The lap top guys who just cut and paste music together and the guy who for some reason can eek out a living at his studio but the creative days of the past are over. Music will be maid by hobbyists and true dedicated artists who have to also have a day job to make any kind of music. you see with Free there comes a price. Want a free meal at a great restaurant? Good luck getting that. So when you listen to All the great music of the past and maybe the future and it’s $10 a month for access to billions of dollars worth of music-Really ask yourself Is this right? The again we live in un-rational times so any answer won’t surprise me

    Reply
  5. Josh Friedlander

    Regarding subscriptions, the RIAA does not collect data on specific services, but there was a good explanation here: http://www.musicbusinessworldwide.com/streaming-music-subscriptions-are-starting-to-flatline-in-the-us/ where analyst Mark Mulligan points out service level explanations for what could be happening with the number of paid subscriptions. Also, it’s worth noting how we reach that number: it is a weighted average for the entire 6-month period.
    Josh Friedlander
    RIAA SVP Strategic Data Analysis

    Reply
  6. Josh Friedlander

    Regarding subscriptions, the RIAA does not collect data on specific services, but there was a good explanation here: bit.ly/1JmwPKr where analyst Mark Mulligan points out service level explanations for what could be happening with the number of paid subscriptions. Also, it’s worth noting how we reach that number: it is a weighted average for the entire 6-month period.
    Josh Friedlander
    RIAA SVP Strategic Data Analysis

    Reply
    • Vail, CO

      “Music Business Worldwide” should be called the “RIAA Gazette”. So obvious to the entire industry.

      Reply
  7. Blahblahblah

    Why is everyone still scratching their heads over this one? Spotify has been offering it for free for years now already. Why would anybody want to pay? Sounds simple right, but it really is that simple.

    Reply

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