Less Than 2% of Americans Are Paying for Music Subscriptions…

Does this ever get to 20%?

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There are approximately 318 million people living in the United States right now.  According to stats received this morning from the RIAA, 6.1 million of them are paying more than $0 for an on-demand streaming music service.

That’s about 1.9% of the population.

Which means paying for an on-demand music subscription service is still a completely niche concept in America.

25 Responses

  1. GGG

    Maybe Deezer will actually hire a competent marketing team. Could boost numbers a bunch.

    But this also begs the question, Paul, do you really envision yourself buying a download in ten years?

    • Paul Resnikoff

      Ten years? How about right now?

      (actually, I still do buy iTunes movie and TV show downloads for a few reasons, one being the inaccessibility of streaming services like HBO Go in many places, and the unavailability of certain titles on Netflix).

      • PiratesWinLOL

        That sounds expensive and like a lot of trouble. For that purpose, I would just get a VPN if I where you. It is so cheap these days.

    • visitor

      What streaming service in the USA has more than 30 million paid subscribers with churn? Netflix is around 30m, SiriusXM is around 30m… so that looks like about 10% is really willing to pay, and that’s at $8 or so a month.

      So someone thinks we’ll get to 60m paid subscribers for music (20% of 300m)? Really? Too bad we only need 90m paid to make the model work on a cash basis versus the transactional business…

      here’s the math, again…

  2. smg77

    Once labels and certain misinformed musicians stop holding on to the idea that we’re ever going back to paying $18 for CDs again maybe they will actually start working with the streaming services since those services represent the future of music consumption.

    • Allan

      So true! There is no logic in the “cost per stream” argument. One, it’s not up to the streaming service to pay artists directly. Artists signed to a label should be asking their label about a rev share model on the licensing fees paid by the streaming service to the label. Secondly, as you correctly pointed out…consumers are not going to go back to paying $18 for a CD. That will never happen period – let it go! And lastly, a person who buys a $1.29 track from iTunes or Amazon Music can listen to it over 100 which equals to $0.0129 a listen – which is less than what streaming services are paying out to labels for each listen.

  3. Piketty

    This is embarrassing math. At the least, adjust the total population figure to exclude those who are too young and too old. Two year olds and octogenarians can’t be expected to subscribe to streaming services.

    • Paul Resnikoff

      Actually, they can and do subscribe, directly or indirectly. Octagenarians subscribe to cable like other people and watch TV. Two-year olds listen to Sirius XM and Netflix as part of household plans.

      • Yrlic

        But the problem statement is that only 6.1 millionaire paying for subscriptions … And how can we get that to 20%. So, removing kids under 10 and people over 60 to me is reasonable, but certainly under 2 and over 80, because they don’t pay.

        • Paul Resnikoff

          Eliminating kids under 10 and adults over 60 restricts the demographic by a massive and unreasonable percentage. There are many 65 year olds that are more than capable of subscribing to a media service.

          But even the 2 / 80 exclusion rule presents all sorts of problems, especially considering that people are often living into their 90s and beyond, quite functionally (and watching cable for example). And even kids under two can be counted under more complicated family plans (which require multiple logins and cable boxes, etc., though household counting does change the math and methodology somewhat).

          Beyond all of that, how reliable is this 6.1 million number, anyway? I’ve heard 2 million for Spotify in the US. Who’s got the other 4?

  4. Nissl

    It looks like we’re entering the steep part of the growth curve, and who can say where it will level out. UIs are still being hammered out. Bundling with phone plans, Spotify’s key to Swedish success, is just starting. Bundling in cars is just starting and will take 10+ years to occupy most vehicles on the road. The biggest digital music players right now (Apple, Youtube, Amazon) haven’t launched streaming services yet.

    Netflix (who btw should be thinking about some kind of partnership) is well past 30m US subscribers now, with much more limited content. Why can’t all these music services combined do a bit better with a nearly complete catalog?

    That said, I do think it will be tough to get all the way to 60m unless there is an agreement to get rid of the all-access free tier on Spotify. It’s too good of an alternative. I also think getting to maybe 40m and drawing the rest of the revenue from download/physical sales and serving ads to the other 260m is probably most realistic.

  5. Veteran - US MUSIC INDUSTRY 1970-today

    We’ve been supplying free content over the air since the 1920s. We got businesses to subsidize it with advertising. The public hated that idea, so they went where they could get content for free with no commercials. The average person has no idea how this thing works.

  6. Yrlic

    How many of the 318 million buy music.
    remove the people over 60 and under 10 first, then redo the numbers.

  7. Faza (TCM)

    I think Yrlic comes closest to the heart of the matter. Using NPD Group’s numbers – quoted on Spotify Explained – as a proxy, we can peg the portion of U.S. citizens willing to spend anything on music at around a quarter of the population. The real number of potential subscribers – meaning people who want to spend money on personal music consumption – is probably less, because NPDG would also have included folks who bought music for other people.

    In all, maybe a tenth of the population is sufficiently into music to actually spend considerable amounts on it, which is why it actually matters how much each individual person is spending and how close we’re coming to their “reservation expenditure” (a sister concept to reservation price, meaning the maximum amount a person is willing to spend on music over a given time period). The streaming model – as it now stands – is taking the paradigm of one-size-doesn’t-fit-anyone and running crazy with it, meaning high-value customers (the Fifty Quid Bloke) are getting their fill for a fraction of what they would have been willing to pay, whilst the low-value customers are complaining that streaming is too expensive.

    Let’s be realistic: the only way to get the majority of the population on streaming services is to make streaming an opt-out part of an internet connection bundle at a price so low that even cash-strapped customers are unlikely to notice. It would certainly increase Spotify’s valuation before the inevitable IPO (or give the share price a boost), but its effect on the industry at large is likely to be negligible or downright harmful.

  8. Emmett McAuliffe

    We tend to forget how big of a seachange this is going from a culture where 95% of the human race paid for recorded music to one where only 2% now pay for it. Somebody screwed up, somewhere. “

    • Jeff Robinson

      No one screwed up, this is what Silicon Valley Venture Capitalists want. Content is the fuel they need to make their high-tech wares go. Imagine if the car companies tried this with the oil companies? Ford should offer equity in Ford Motor Company to BP. Think THAT would work?

  9. Rik L. Rubin

    I’ve said this a thousand times. You’ve heard this a thousand times.

    If artists have “Songs” people will pay attention and pay. If they don’t have songs, and 95% of artists don’t, we aren’t interested.

    Lifestyle artists used to make loads of $$ in the pre-internet days. Those salad days are way over.

    Streaming wil catch on eventually but training the BROAD general public to switch to streaming is going to be a long costly task. Ask the teenager in South Dakota or Iowa how they listen to music. Maybe these streaming companies should’ve relied on human testing prior to launch. Living on the “Coasts” most people get it. The flyover states are going to be the hard ones to convert. If they even care at all. The Music has become so watered down and devalued over the past decade. Kids don’t care. They really don’t.

    Ironically…..It’s time to Face the Music

  10. Jabsco

    We can just admit that the streaming services out there aren’t offering what people want in a music experience.

  11. John Simson

    The subscription numbers are actually a bit more rosy than the picture you paint Paul. Sirius/XM has over 25 Million subscribers. If you add that to the 6.1 Million for “online” sites, we are at over 31 Million about 10% of the population.

    Pandora had awful conversion rates from free to paid until recently when their ad-load increased significantly. It is still not the 10-12 minutes of terrestrial radio ads, but it is starting to have an impact on their conversion numbers and some folks are paying to rid themselves of ads. A few more ads mean they play fewer songs per hour for those freemium folks, so lowers the royalty rate; those who pay get more songs and Pandora is very profitable as a subscription business.

  12. Jeff Robinson

    Paul, do you have any information showing how likely it is that people who use these streaming services for free translate to paid subscriptions later? I know that’s what these companies hope for, but I wonder if there is any hard data to back it up.

    I also wonder how the latest Cell Phone alignments AT&T/Beats, Sprint/Spotify, Verizon/Apple iRadio are going to help. Are these Cell Phone alignments a case of the price of the subscription being bundled in to the cost of the phone and phone service? That’s what car makers did. If this becomes like SiriusXM was with car makers and new car buyers, I wonder if there is data there that could show similar numbers for the translation to subscriptions?

  13. Willis

    Maybe Ted Cohen, Bob Lefsetz or Ian Rogers can swoop in and save the industry? Oh wait, they are some of the biggest problems with what is now considered the music industry. Not innovators or visionaries, but opportunists.

  14. 40 Year Radio Vet

    “We can just admit that the streaming services out there aren’t offering what people want in a music experience.”

    So, how is streaming music via the Internet any different than “streaming” the music over AM or FM signals?

    “We tend to forget how big of a seachange this is going from a culture where 95% of the human race paid for recorded music to one where only 2% now pay for it. Somebody screwed up, somewhere.“

    95% of the human race NEVER has paid for recorded music. We expected advertisers to cover the cost to the consumer.

  15. Spizza

    It’s displaying Year On Year growth so that’s not a bad thing and 80% growth in 2013. If it can sustain that growth over the next 2 years and if on demand services pick up more share, then things aren’t looking too bad. The argument about artist payments and their fare share from streaming services is another argument altogether….I think the horse has bolted on that one.