The finding, released by Nielsen to Digital Music News on Wednesday night, raises more questions about a streaming industry that simply isn’t attracting enough paying subscribers. According to a just-concluded study involving nearly 3,500 Americans, 78% are ‘Somewhat/Very Unlikely’ to pay anything for a streaming service within the next 6 months, with 13% in a gray, unknown area.
That leaves 9% in the ‘Very/Somewhat Likely’ category, a nebulous number that may simply cover ‘churn,’ or the natural rate of existing subscribers that abandon their accounts (for any reason).
The Nielsen projection complements some extremely soggy figures released by the Recording Industry Association of America (RIAA) this week. According to the stats, there were 8.1 million paying subscribers for services like Spotify at the midpoint of this year, a mere 2.5 percent increase over the same point in 2014. That raises very serious questions on whether paid streaming subscription rates have already plateaued.
Financially, a plateau would represent a disaster for major labels Universal Music Group, Sony Music Entertainment, and Warner Music Group, all of whom have bet heavily on platforms like Spotify. According to the RIAA, which represents the ‘Big Three,’ paid subscriptions accounted for 73 percent of total on-demand streaming revenues last year, with ad-supported, ‘freemium’ accounts woefully underperforming on the revenue side.
The Nielsen data highlighted two main reasons for not paying: (1) streaming services are charging too much, and (2) free services are good enough. That puts the spotlight once again on YouTube, which is surging forward as the fastest-growing component of the streaming music sector, but is completely free. According to earlier data also released by Nielsen, YouTube is now growing 60% faster than all other on-demand streaming services combined, including audio-specific platforms like Spotify.
The data now puts monstrous pressure on Apple Music. The bug-riddled, bloated release may have as many as 15 million trial users, according to a New York Post report published Tuesday. But that same report noted that at least 7.5 million of those users have already de-activated automatic credit card charging within their iTunes settings, which means they’ve already decided not to pay after their three-month accounts expire.
It’s unclear how many of the remaining trial users will ultimately decide to pay.
I expect far more would be very likely to pay for streaming if they could not easily pirate the music.
I Agree. I also think with less piracy we can have more compelling streaming and distribution services, more revenues.
I think a lot of studies like this make you think of the individual. “How can we change their mind?” “How can we make them see value in music?”. But there’s nothing wrong with the individual. They are just making their lives easy as possible. Why should they pay when you can get it for free? why should they pay when no one else is paying? Reduce piracy and many people will switch to freemium. Restrict freemium services and some people will shop around for sources of music.
Duh.
Nothing will change until copyright law is enforced again.
Streaming music is really nothing more than “legal” piracy, just look at who some of the big shota re in the streaming industry.
As far as the Apple thing goes, they shouldn’t have given the option to unsubscribe from pay. It should be “keep the service or don’t keep the service.”
It’s quite simple – You want to use may music, THAT’S GREAT! Pay me.
You don’t want to use my music? Well, OK, that’s your right,. you don’t have to pay me.
You don’t have the right to use use my music without paying.
We need legislation to ensure fair payment for streams if streams are going to replace sales (as they already have.) About a nickle per stream is about right, if not a bit low (As I understand it, that about the royalty on a jukebox play.). Hey, if you think that’s too much, just buy the record and save some money!
I don’t have the right to be paid for something you don’t use.
You don’t have the right to use something you don’t pay for.
Deactivating automatic payment to Apple does *not* mean people have already decided not to subscribe. Many people deactivated it when they started the trial period, so that can make up their mind later.
It’s a good point, I was assuming that de-activation translated into a definite decision not to subscribe. It’s an indicator to me, but, let’s see.
Also remember, there are people that didn’t de-activate that will ‘accidentally’ roll over into paid subscriptions, but cancel them 1-3 months after realizing what’s happened (or more, if they are not checking their accounts). It will be important to understand the behavior of this group, as well. Because, the converse applies as well: everyone that didn’t de-activate isn’t saying they will ultimately subscribe.
As long as the YouTube piracy site is active there’s no chance for paid streaming.
It’s all interpretation. If 9% of Americans really signed up in the next 6 months like the charts show, we would have record breaking growth.
I’d disagree with that assessment. Remember, 9% is ‘somewhat/likely’, not ‘likely/definitely’, which means at most, we’re looking at half, or 4.5 percent actually taking the plunge (and that’s a stretch).
Now, remember, even the most successful and sticky services have churn, just the natural unsubscribing that occurs (financial issue/budgeting, didn’t like it after all, discovers Aurous, whatever). What’s that number for streaming music? Maybe 5%?
See where I’m going with that?
I’m not disputing the findings. At this point they happen to align with the reality of the streaming service business. But these results are no indication of what people will do in the future, especially as services and free platforms evolve. You can’t ask people questions like this and expect an accurate response…they don’t even know themselves. And their natural tendency is to protect what little control they currently fell they have.
I hope this isn’t a surprise to anyone. Nobody has given consumers a reason to pay for streaming at this point.
I wonder how folks would have responded when asked about subscribing to a streaming video service a few years ago.
You could just collapse numbers 1 and 2 into a single statement: “They are too expensive because I can stream music for free.”