Spotify has 20 million paying subscribers, but only a percentage are paying $9.99. And, 55 million are paying $0 a month. “Organic subscription growth… is not growing fast enough,” declared MiDIA analyst Mark Mulligan asserted in a recent research note, while pointing to Spotify’s cut-rate pricing surge as an exception.
So why aren’t those numbers better?
Mulligan feels that a big part of the problem is that the average consumer simply doesn’t care about enormous selections and vast catalogs, and they’re definitely not willing to pay for it. “Most people aren’t interested in all the music in the world and most people aren’t interested in spending $9.99 (or the local market equivalent) a month for music,” Mulligan continued.
“Indeed, just 5% of streaming catalogues is regularly frequented. Most of the rest is irrelevant for most consumers.”
Mulligan strongly suggests dropping the price to widen the appeal of streaming, a move the industry has staunchly resisted. But the returns could be simply enormous for smaller-sized, niche-focused services. “Imagine genre specific playlist apps for $3 or $4 month,” Mulligan proposed. “A dozen curated playlists, a handful of featured albums and a couple of radio stations, all just of your favorite style of music and all streamed into a dedicated app.”
There’s actually research suggesting that existing subscribers are willing to pay more for streaming, but that doesn’t address the hundreds of millions that are paying $0 a month. Would they pay for something simpler? “Niche services are not a nice-to-have, optional extra for the industry,” Mulligan insisted. “They will be crucial to unlocking the scale end of the subscription market and they will be needed sooner rather than later.”
Enter Apple Music, which may only steal good, paying users from rival services but do little to expand the market. “Apple Music looks set to add a significant amount of new users before year-end but many of those will come at the direct expense of the incumbents,” Mulligan noted.
“All the while YouTube is leaving everyone else for dust: the amount of net new video streams (i.e. free YouTube views) in H1 2015 was more than double that of net new audio streams.”
Top image from MiDIA; buffet image by Iwan Gabovitch, licensed under Creative Commons Attribution 2.0 Generic (CC by 2.0). Written while listening to Ravel.
Well… DUH. Thanks Captain Obvious. Who would listen to bad cover songs, remixes, podcasts, audio books, classical music like Bach, intros, folk songs and children songs? What? You dont know these arent existed in music streaming? My what a surprise! What cave are you dwelling in and dont know about these?
Eh, I’ve always hated this argument. I don’t think this number really proves much of anything interesting about listening desires. It just proves the fact that every asshole with an acoustic guitar or who knows how to copy and paste loops in garageband is an “artist” nowadays, and there’s a hundred years worth of recorded music, plus people recording hundreds of years worth of written music. Add on the fact they can distribute their music for cheap and you’ve got a a fuckload of music nobody but those people’s moms will care about.
Also add on the fact that there’s only so much time to listen to music in people’s lives, what are you really expecting? Not sure how that first graph is even quantifying catalogs; by artist, I’d assume? If so, 250K artists, i.e. 1% is still a TON of music, even if you break that down into niches already. Better music rises to the top and people will want to play it more. I mean, hell, I listen to a new artist (to me) close to every day, and have been for like 8-9 years. Even I listened to a new one literally every day, which I haven’t, that’d only be a bit over 3K artists. Even the most adventurous music listeners probably struggle to truly listen to 50-100K artists, let alone 250K. So that’s already a pretty vast number of artists.
It’s because most music pushed to consumers is junk.
95% is not that bad. I know this guy who runs a website and 99% of the articles he writes are completely irrelevant.
“All the while YouTube is leaving everyone else for dust: the amount of net new video streams (i.e. free YouTube views) in H1 2015 was more than double that of net new audio streams.”
Needs to be repeated ad nauseam whenever the millionaire execs talk about limiting free tiers.
It’s a pretty interesting stat. I’m chasing down the source data for it. Nielsen maybe? Not sure, I’m asking Mark Mulligan.
Mark Mulligan has been banging on about the case for lower pricing points for ages, but I’ve never seen him address the basic problem that revenue will only increase if demand for streaming services is price-elastic. In other words, an X% reduction in prices needs to generate a more-than-X% increase in subscriber numbers. Suppose you start with 10 million subscribers paying $100 dollars a year. If you reduce subscriptions to $70 dollars a year (a 30% reduction), you need over 14 million subscribers at the new price (an increase of more than 40%) to generate the same revenue. If you reduce subscriptions by 50%, you need a 100% increase in subscribers, and so on. Now you may think that that is a loaded way of expressing it. After all, it just means that if you cut subscriptions in half you need to double subscriber numbers to get the same revenue, which is (or should be) obvious. But however you express it, you have to recognise the need for a relatively elastic response of demand to a reduction in prices. Unless it can be demonstrated that the demand for streaming is relatively elastic in this way (starting from the present levels) you wouldn’t want to bet the farm on it. Let’s just consider the most obvious piece of evidence: Spotify introduced a trial price of $1 for 3 months, as against a normal price of $30, a 30-fold reduction. Did that increase demand? Certainly. Did it increase it 30-fold? Certainly not. Would a price of $3 or $4 a month (a reduction of more than half) produce a more-than-double increase in demand? It’s not impossible, but I don’t know of any evidence to support it, and the burden of proof is on anyone who wants to propose it. And incidentally, confining the proposal to ‘niche’ sectors does not help. If anything one would expect the ‘niche’ demand to be less elastic than for music generally.
I represented Capitol EMI at retail in NYC and I also covered some suburban stores. In the city, our entire catalog–pop, jazz and classical–turned over continually, but outside the city it was just the hits and top catalog titles. I’d expect the on-demand streaming market to reflect this pattern.
Im more concerned that theres still record stores on NYC. Is there a real problem why the industry cant shift from physical to digital? You know most physical copies of video games today are nothing more but glorified installation discs, even on home consoles.
Elementary, my dear Watson: physical is a much better value proposition for the record industry. The reason we’ve not seen a complete move to digital formats is that digital pricing is insane. Take note of the fact that download sales have begun their downward slide without ever coming close to replacing revenues lost on physical and streaming is not likely to do any better – especially if people listen to Mulligan.
That didnt answer the question. In fact, it gives more question than answers. Everyone knows from David Grohl to Courtney Love to David Guetta to Moby that hardly any musician profit from album sales. Artifact of 30 seconds to Mars a must watch is one example of record label manipulation even in digital era. I ask why still continue a old and outdated business model? Thats the reason why Im concerned.
Digital copies and streams actually favor the record labels more. Since the consumer never even own his copy completely, and its easy and cheaper to produced. Any PR talk cant change that fact. I want a real and honest answer, not another heard it read it quotes and comments.
People still buy physical copies (CD or vinyl) for various reasons. For one thing, they like a sense of ownership and permanence. Online services come and go, and a file on your hard disk is unlikely to last more than a few years unless you are very careful about backing it up and keeping the format up to date.
People (mostly) also like something physical that they can hold in their hand or put on a shelf. I don’t know where you live, but where I live most people still buy a printed newspaper every day, even though they could get the same content cheaper (or free) online. It just isn’t the same.
People also like to collect things. If you have been buying (say) every Coldplay album (there’s no accounting for taste) you are not going to suddenly stop just because you could listen to their latest album on a streaming service instead.
Whatever the reasons, there still is a substantial demand for physical formats. I haven’t checked the lastest stats, but I would guess that digital downloads are now declining faster than CD sales.
Steve Jobs advocated cannibalizing yourself, because the marketplace and competitors are already going to do it for you. Otherwise, as a business, you are essentially at war with yourself. In the case of the recording industry, you’re witnessing the exact opposite philosophy: labels have hung on to more-profitable physical as long as possible, and aggressively battled against album unbundling as well.
I think we can see the results. Sadly for the recording industry, they are officially a poster child for the fruits of tech-phobic resistance, and ineffectively controlling mass, wide-scale theft of their output. Even worse, investors and start-ups, often in Silicon Valley, view the executives at labels as inferior thinkers, with protective objectives and a system that rewards those that shrink the pie. Look at someone like Doug Morris for ample evidence of this.
“Steve Jobs advocated cannibalizing yourself…” This, ding!, etc.
I heard frequent stories of music executive pigheadedness from my mother while I was growing up. I’m shocked/not shocked to see that mindset hang on for a generation, even amidst the onslaught of technology to their business model. Sometimes it remids me of the 19th c. Russian shtetls.
You need to add a Like button for discussion posts, PR.
Im not here to counterpoint or make conspiracy theory statements. Im here to discuss what you replied, since you collect CDs is there a financial reason to do it? Because owning something for sake of owning especially media doesnt makes sense. Im a avid collector too not music CDs mind you, but cassette tapes. I only bought few CDs because even at that time CDs are too expensive. And most of it including the booklet along with it are all thrown away somewhere. Not because I didnt enjoyed or I didnt valued them but because theres no need for it.
I own most boyband albums even the ones that only few knew like code red and 911, and boyz to men rip off like Damage I own most of it. I even own some rock albums like Oasis and all 90s Green Day albums. Sad and disappointed for me to waste all my allowance, I thrown it all away. Cassette players are becoming obsolete and walkmans are discontinued.
This is from 00’s I even surprised that CDs still existed even today. Is it because some music collectors just dont want to let it go?
First I have only ever bought 1 single download ever, that was “Ding Dong the Witch is Dead” the week that Margaret Thatcher died, I may buy a album download once in a while the album is one I like but I only have a passing interest in the artist, or if it is a compilation. Physical CDs on the other hand I buy all the time (20 in the last 6 weeks). I simply prefer the physical product and especially detailed liner notes etc, for digital downloads I always feel there is something missing. Yes I know that some CDs also come with very little supporting information and people should address that so that the physical product is always worth having over a download. But hey!
you know theres a thing called disc rot right? Most discs have it because of the materials that made the discs. And its a fact especially with music CDs. I dare you to play again those hundreds of CDS you owned, especially the over 10 year old ones. 1 out of 5 of those collections wont work. You didnt own the songs you bought, the materials thats made the CDs assure of it. So why even buy physical discs?
The vast majority of commercially replicated compact discs I’ve owned, come across, even ones from the 80’s are fine. Still playable, with no sign of “disc rot”. Damage from surface scratches is far more of an issue.
On the other hand, I’ve seen some (but not all) CD-R’s with the substrate peeling right off of the plastic after several years of use and/or storage.
I certainly know I’m not like most music consumers and Mulligan probably has something.
In fact, here’s how the big labels could regain dominance of the consumer music market — the only reason I’m gonna say it is because I’m sure they already thought of it — is to ‘find’ a stream service willing to create the sort of walled garden approach outlined above — with ONLY big label content on it.
Certainly, when I tried Beats Music prior to the Apple buyout, I felt more like I was being marketed to and pushed to major label content rather than given a system for finding and playing the music *I* wanted to hear. And, in fact, one of my buddies, who is one of those ultimate music consumers who spends 5 figures on music many years, unsubscribed from Apple Music before his free 3 months were even up because he said it just felt like he was always being channeled to what they wanted him to hear.
I don’t think that streaming services can ever give you access to truly ‘new’ music. What they give you is recommendations based on what you are already listening to. So if I listen to a particular genre the service may present an artist in that genre that isn’t already in my playlist – big deal – it is just similar to what I’m already listening to. If the service is running as a type of ‘radio’ then its going to be playing the more popular tracks from the genre, it is hardly ever going to divert off into the wild.
OTOH unless you are Billy Nomates recommendations from friends are almost always going to be new.
And restricted access and content is? theres one point in this music industry is in bad state that even pirates have no interest to it in 2011. It continues till 2014. Heres the three hit of those years:
2011—-> Friday Rebecca Black
2012—-> Gangnam Style PSY
2013—-> Harlem Shake (whoever the artist is)
Thats what restriction had done. No one cares if Adele won a grammy or her album is multi-platinum. Its about internet and viral sensations. Sales have no bearings in this digital age anymore, the age of album sales is long gone.
A lot of this information already exists. Spotify, for example, files financials regularly with the UK-based Companies House, as well as with Luxembourg Registre de Commerce et de Sociétés. That, coupled with recently-leaked contract with Sony Music Entertainment, offer a fairly good glimpse into Spotify’s financials.
Hint: they aren’t very good, and don’t point to long-term sustainability:
https://www.digitalmusicnews.com/2015/05/08/dont-worry-spotify-only-lost-185-2-million-last-year/
Written while listening to Fuego and Major Lazer.
this reply makes the reader thinks this site is pro streaming and pro spotify. And the articles that this website posts seems they want another Netflix. Its simple really, either streaming services losing money but record labels made more money or… Streaming services made money but record labels lose even more money. Theres no grey matter here. Just black and white.
“Steve Jobs advocated cannibalizing yourself…” This, ding!, etc.
I heard frequent stories of music executive pigheadedness from my mother while I was growing up. I’m shocked/not shocked to see that mindset hang on for a generation, even amidst the onslaught of technology to their business model. Sometimes it reminds me of the 19th c. Russian shtetls.
You need to add a Like button for discussion posts, PR.
How many people do we need in the creatives industry? Really, think about it. Ever since the industrial revolution many sectors have fallen to automatization, and now take a look to computation and so on. That is not being a loddite whatsoever, were people will work?. Transportation?…nah, Services? mmm. It seems that ultimatelly every one would have to make a living out of their creative talents and effort.
I will bring up to the conversation what C. Hitchens tell to the studetns that want to become writters.
” I say to my students that if you can write you can talk, you can talk if you can write. and their cheer up a bit at first
Student – Do you mean if I can talk I can writte?
Hitchens – Yes.
Then I say How many people likes to hear the other one talk? and they get depressed all over again.”
Where is the citation?! I don’t see a study anywhere and would like to read the actual study please.
Thanks