Spotify, Apple Music, Tidal, Google, and Rhapsody charge $9.99 a month (or more) for unlimited streaming music. But is that way too expensive?
That’s become a pressing question for the music industry, especially with free, ‘low rent’ music streaming absolutely surging.
Now, there’s more data showing that consumers thing $9.99 is simply too much. According to a US-based survey on the matter conducted by Nielsen Music at the end of 2015, a vast majority of Americans are unlikely to pay for music streaming in 2016. And the number one reason: cost.
Question #1:
In the next six months, how likely are you to pay money for a music streaming music service?
Question #2:
If you are not likely to pay for a music streaming service, what is the reason?
Question #3:
If you were to subscribe to a streaming music service, what would be the most important factors for you?
Source: Nielsen Music, US-based study.
At least one company is paying attention: Spotify. The company has a ‘list price’ of $9.99 a month, but has been offering aggressive discounts to students and trial users. Elsewhere, streaming services like Deezer and Rhapsody have been increasingly bundling their services into mobile data plans, a move that slips the broader costs into a bigger bill. Both strategies have boosted paying subscribers, though price-chopping has raised serious questions about long-term profitability.
Separately, Apple Music has remained firm on a defined, $9.99 price point, with a strict three-month trial window. That has resulted in roughly 8-10 million paying subscribers, according to the latest estimates, though a vast majority of music fans remain on free versions of Spotify, YouTube, and Pandora.
Written while listening to streaming music from Terrorizer and Repulsion (check out both at the ‘Show Your Scars Fest’ at the Regent Theater in Los Angeles this weekend).
The obvious question. Did Spotify do a similar study before launching in the U.S.?
Steve Jobs always believed that people wanted to own music and not rent it. It’s more like people see value in buying music, not paying for subscriptions. The next development to parse is the falling off the cliff of paid downloads, but not LPs and even CDs. Wasn’t there a time when paid downloads were the future and physical product was supposed to die?
Am I the only one sick and tired of the Silicon Valley Pr machine that is trying to foist a future on us that some Venture Capital Firm is trying to get the public to buy into. You can take your driverless cars and shove ’em where the sun don’t shine, while were at it.
I’ll just leave this here:
http://imgur.com/gallery/91sn32Q
You’re definitely not alone. I found your recent comments about the decline in paid downloads to be enlightened and more thought provoking than the article you were responding to.
I would add that humans have a tendency to over-estimate the amount of change that can occur in the short-term while underestimating the amount of change that can occur in the long term (usually as the result of exponential network effects). Past performance is often a poor indicator of future performance.
Streaming has grown rapidly over the past year. But, adoption could rapidly decline for any number of reasons including poor user experiences resulting from consolidation which seems inevitable. I would be more likely to value the benefits of owning my music immediately after my carefully curated collections and playlists have been wiped out b/c the streaming provider I have used for several years has gone bankrupt.
But, adoption could rapidly decline for any number of reasons including poor user experiences resulting from consolidation which seems inevitable.
I’d argue that a large amount of the consolidation has already occurred. Rdio has already collapsed, Muve Music is out, Simfy closed, MOG was folded into Beats, Beats folder into Apple Music, Grooveshark sued into oblivion. That leaves what…
Rhapsody as a smaller fish in trouble? Guvera (have you even heard of it)?
The rest have some runway: Deezer is backed by Blavatnik/Access, Spotify still has Goldman, Northzone, etc.; then services like YouTube Red and Google Play Music All Access have billions to keep them afloat. I’d actually argue that the latter two from Google are the biggest issues, given Google’s notoriously confused and half-baked commitment to its products (or, Alphabet… you know what I’m saying).
Then, I don’t think Apple Music is dying anytime soon.
Does Spotify end up as a spectacular supernova of streaming implosion? Perhaps, yes, though by that time the fate of streaming may have been secured. It’s not that consumers won’t be disrupted by something like that, but downloading may truly be niche at that point.
Paul, your observation is thought provoking.
I viewed Rdio as changing hands ad opposed to a true exit from the marketplace.
Tidal and Soundcloud would be two obvious oversights. So, if we add spotify, google, apple, rdio/pandora, deezer, and possibly rhapsody… that’s still 8 “top of the food chain” competitors operating in the United States.
Within a business model that has NOT been proven to be profitable, I personally believe that the number of competitors will continue to shrink or the business model will change so substantially that it really can’t be considered to be the same business/service.
But, the bloat may be greatest in the secondary “value added”offerings. I’m thinking of Samsung Milk, Microsoft Groove, Amazon Prime, etc.
As you put it in a previous comment, one of the current challenges facing the recording industry is a complete lack of scarcity. In that context, these value added offerings may not attract or retain customers effectively enough to warrant continuation. If the cost of maintaining these services goes up or the associated legal risks increase substantially, that could be enough to trigger a series of shut downs, spin-offs, or sales.
But, those are just my opinions. Time will tell.
People want stuff cheaper than they currently get it for, or free. Shocker…
Steve Jobs always believed that people wanted to own music and not rent it.
This has to be put in the proper context. Jobs also died in what, 2008? It was a long time ago, but, Jobs may have been trying to discourage entrants like Spotify, which were just getting started around that time.
Steve jobs was fascinated by design, he loved calligraphy and that carried through to design. Apple’s first success was desk-top publishing. Packaging as marketing was something he understood and something that is significantly marginalized with a purely digital interface.
Highly successful consumer products, like coca-cola and red bull, spend tens of millions of dollars designing their packaging, or in the case of porsche and coca-cola make minor changes on great visual designs. It’s called branding and say what you will, but cover photography played a major part in selling of music and building fan bases. Music has become a ‘white label’ product.
There was a recent article in the NYT that made the case that kids growing up in households with bookshelves full of printed books and physical musical collections were far more interested in both idioms. In the case of books the kids who grew up in houses with significant collections of books read 2 to 3 grade levels higher than those who didn’t.
I have a thousand albums in my living room and many of the people who come over to my house go right to the records and start pulling ones out. NO ONE, has ever asked to see my music files on my computer.
Back to Jobs. He listened to vinyl recordings. There’s an iconic shot of him sitting in a furniture-less living room cross legged on a hardwood floor. At the back of the room is a receiver, a turntable and records. To your point, Paul, more than likely Jobs wasn’t a fan of renting music because he didn’t think it would make money. And if that’s the case, looks like he was ahead of the curve, once again.
The only thing worse than lawyers and accountants running the music business is 2 yahoos who grew up on Napster thinking they understood the music business. Make that 3.
Great post.
“I have a thousand albums in my living room and many of the people who come over to my house go right to the records and start pulling ones out. NO ONE, has ever asked to see my music files on my computer.”
Because you’re 67 years old?
All people ever did with MP3s was share them. Napster was literally everyone in the world being able to see each other’s music files.
Now, with Spotify, not only can I see my friends’ music libraries, I can see their playlists and what they’re listening to in this exact moment.
It’s a much, much better world now for music fans and musicians.
Yeah zak it’s a much better world for musicians who don’t want to be paid… for those who do however… it’s a different story. More consumption, less revenue. Still.
Every year has been the turning point for like 10 years, and the numbers are still going DOWN…
http://www.billboard.com/articles/business/6835350/recorded-industry-2015-consumption-grew-revenues-digital-deflation
Which musicians would that be again?
Oh, none.
Interviewed by Kitty Magic magazine back at about 1991 or so – you know, the height of CD-buying mania – John Doe of X was asked about his acting “side job” and he pointed out that while he was in a “legendary” band widely well-regarded, it was the film which work enabled him to buy his house.
Not a knock on the band, X, but I wouldn’t say they were a major mainstream act.
Yeah, because Elektra signs loss-leaders for shits and giggles.
I have a thousand albums in my living room and many of the people who come over to my house go right to the records and start pulling ones out. NO ONE, has ever asked to see my music files on my computer.
There’s always a place for novelty acts and freak shows.
Is that an invitation to your house?
I know y’are, but what am I?
And as your own post demonstrates, it was his focus on the human experience that made Jobs’ designs stand-out. I believe when the ipod first came out, several experiences drove rapid adoption and change:
* the ability to have access to your entire collection, anywhere anytime
* the ability to buy new songs online for $1, even album cuts with the ability to hear a short sample
* having a small computer in your pocket almost 24/7
* constant temptation to use industrial scale piracy based on peer to peer networks like Napster. For musicians, this created fear and anxiety.
* the desire to share using online social networks, driven by myspace
Reluctance to pay $10 for a music subscription may be an indication of a new human experience. I know a lot of folks who feel like they’ve steadily acquired too many monthly subscription fees in general driven by the growth of online cloud services and mobile service plans.
The question isn’t what Spotify or others want to charge. Price is set by the labels.
This was evident when Apple wanted to price their service at $7.99 but were stopped.
Thanks for the late laugh ? And I do agree with you completely.
Wow, that is absurd. The problem with streaming is that the value of it — unlimited access to virtually everything, everywhere, all the time — has not been communicated persuasively to the public. If music fans think convenient access to this vast library isn’t worth $10/month, they could just as easily say it’s not worth $5, or $1. It’s true streaming has a “natural” price point, an amount people are willing to pay for it, but that amount is different for a service they understand the value of and a service they don’t.
Note to Spotify: work on the value proposition. You can probably raise the price.
Yea, this. Spotify’s marketing as been possibly the worst marketing I’ve ever seen (or in this case, not seen) almost since day 1.
The invite only thing was good to build some allure, then it just stopped. Makes no sense.
And you 2 don’t even see the reality. Streaming music is boring, everything becomes background music. Whose interested in paying for background music, which they’re not even really listening 2 anyway. “All Along the Watchtower” selling Channel cologne or perfume or whatever the crap is. Jimi’s writhing in his grave.
This makes no sense. Music is fucking music, dude. I’ve discovered as many artists I enjoy in the last month that it probably took you a year to find when you were 30. I’ll probably go see most of them in concert when they roll through town. How in the world is that a bad thing? Just because you can’t brag about your record collection? I get it, very firsthand in fact, that streaming payouts suck, but gimme a break. This existential argument you have is bullshit.
I listen to music very actively with streaming, AND passively, i.e. throwing on Debussy or Coltrane when I’m doing something else. Streaming is irrelevant in that sense as I did that with CDs for a long time, too. For every one person who uses streaming in a “boring” or totally passive way, guess what? That’s how most people listen to radio too. And terrestrial radio is a nightmare now. But I guess you’re cool with the same 20 tracks spun day in day out? On top of that, there are plenty of people who don’t stream and either don’t buy music at all, or buy like 1-2 CDs a year. Yet somehow they’re “better” music fans than me? Gimme a break.
Also, since when are music placements is ads a streaming issue? Go back to 1999 and talk to Sting.
I added the Hendrix piece, because it shows the direction the music business is going and it’s ugly. Are you fighting for lower wages for any other industries or is it just musicians and songwriters that deserve to be screwed?
Yea, it’s so ugly that I’ve gotten $1-5k placements for bands in films. So ugly that a friend(s) of mine have gotten $5-10K spots on TV shows. So ugly a band a friend of mine manages got $10K for an ad. So ugly, man, you’re totally right. We should just not let bands make any money from anything other than direct sales of recorded music sales so everyone can fit in your narrow worldview that existed 30 years ago.
I don’t know how many times I can say on this website that streaming payouts are far from optimal. I shit on Spotify’s marketing every time it comes up, I have supported windowing when it’s good for acts, I support them adding a premium only option, I am pretty vocal about Spotify’s avg payouts often not meeting their claimed avgs which is bullshit, etc.
But you don’t realize how beneficial a tool it can be because you don’t do anything in the industry anymore. The part of you that pushes for more money for acts, I’m behind 100%. Even if you look at me in the most cynical light you can, it still benefits me directly for artists to make more money, so this idea that I support low pay is retarded. The part of you that is no better than an armchair quarterback is an issue, though, because THAT’s where this issue stops being so black and white.
Yeah, if you’re really really lucky you can score commercials.
Moron.
Hey then we need to link up. I’m a music producer looking to put my music in ore ads, and films.
Hey then we need to link up. I’m a music producer looking to put my music in more ads, and films.
There isn’t space enough to list all the members of bands, just starting from the punk era, who have had to go public with the fact that they were flat broke and deadly sick. I kicked in a few bucks in an online campaign for the bassist of one band (I won’t say who, but she has since died, and they started before the invention of the CD), and after the fact, the thought of her dealing with her illness and still signing memorabilia and shipping it out to me in gratitude (I certainly wasn’t expecting anything physical in return, and nothing was promised up front – it took me by surprise) makes me want to scream.
So really, GFY if you think newfangled computer thingys are what’s screwing musicians.
I’ve known a few people who would match that description. I think one of the dynamics that is often overlooked in this area is the degree to which our celebrity driven culture contributes to this type of financial hardship.
Celebrity has become a marketing technique. Successful musicians are almost forced into adopting a celebrity life style. Most buy-in willingly, at least in the beginning. Financially, it’s unsustainable and wasteful and leads to real harm.
I think one of the dynamics that is overlooked is how the music business is pretty much the same as porn and prostitution: built on the dreams and ambition of the young, stupid, and pretty, who get abandoned by their pimps who then complain a little too much and a little too long about how they ain’t makin’ no money.
If there’s any difference, it’s that nobody expects a working girl’s pussy to provide income for the pimp for 90 years.
Streaming music is boring, everything becomes background music.
A streaming account is what you make of it. The world you want to live in – in which pulling an old dusty record off a shelf is a religious ritual – is not happening. Get over it. I respect it, I get it, but it was never what kept the lights on at the old record companies.
Compared to other services, music streaming is actually pretty expensive. Take Netflix or Hulu. Both can be had for $8 per month. Consumers have typically been willing to put far more money into TV than music (just look at cable TV) yet videos streaming services cost less than Spotify or Rhapsody. Even Amazon Prime costs less than Spotify and you get video, music, and free 2 day shipping.
Apple may have had it right when they reportedly wanted to start at $5 per month to gain mass adoption and then work up from there. Spotify may be worth $10 per month, but for now consumers at large are not seeing the value.
One difference you’re overlooking is the scope of catalog.
Even if Spotify is missing a few songs, for all practical purposes it’s fair to say that Spotify has everything – $9.99 for all music.
Netflix and Hulu, on the other hand, have incredibly limited catalogs (for streaming at least; excluding Netflix’s dvd subscription).
We’re not comparing “the price of access to all music” to “the price of access to all movies/tv” – we’re comparing “the price of access to all music” to “the price of access to a small subset of movies/tv.”
Or, put another way, if you subscribe to Spotify it is unlikely that you need to pay money to access music on top of that. But if you subscribe to Netflix, it is very likely that you need to pay money to access movies/film on top of that in order to get what you want.
A better comparison would be the price of Spotify vs. the combined price of of a normal bundle of video services (e.g., Netflix, Hulu, plus others if you want additional content – like GOT)…. viewed that way, Spotify is cheaper than movie/tv subscription services.
Exactly right. $10 for unlimited access to the most massive music library in human history is a steal.
Those who think it is too expensive should be given an option of lower price points, or which they get less.
For example, either a limited number of plays/month, or access to only certain subsets of the music library.
It’s amazing they haven’t tried that. Why does the model have to be all-or-nothing? Offer 25 hours/month for $5, 10 hours for $2, something along those lines. Then they’ll see the value of unlimited.
Not only does clockwatching take just about all the joy of streaming music, I’d say that about 60% of what I playlist,. favorite, and stream is content I’ve already bought, and I’m using the streaming as a portable library in the cloud.
Now, I could abstain from listening to stuff I already own, in order to get a “better value” for a reduced monthly bill, but, you know, why? I’m largely not paying for music. That step is done. I’m paying for ease and a cloud based library and not having to go find some CD from 1989 when I have an impulse to hear a blast from the past.
I love music. Please go ruin another industry with your bright MBA ideas.
No, failure to communicate the value of streaming – unlimited access to virtually everything, everywhere, all the time – is not the problem.
Consider this situation in a different context. Imagine that all the taxis in NYC get together and decide to exclusively offer a subscription model: $200 per month for unlimited taxi rides anywhere in NYC.
For everyone in a position to use that subscription (people who are regularly in NYC), that’s an incredible value.
For a person in town for a day who wants one ride that should cost $30.00, it’s outrageously bad value … and no amount of telling them that it’s an amazing deal is going to make this person think that having to sign up to a $200 monthly subscription is a better value than paying $30 for a single ride.
Because while this deal is good for people who will take advantage of it, it’s not a great deal for people who won’t. Period.
The value of a particular deal is determined by the particular person, not objectively in a vacuum.
Moving back to Spotify, you can accurately say that Spotify is the steal of the century, and I can accurately say that it’s a total rip off – and we can both be right, for ourselves.
If you listen to music extensively, if you place value on on-demand access to everything, or if you value access to a massive catalog, then Spotify is a great deal.
If you only listen to music once in a while, if you don’t place value on on-demand access, or if you limit your music to a relatively small catalog, then Spotify probably isn’t a good deal.
The problem (even allowing for the possibility that Spotify could have had better marketing) is that the number of people who fall into that first category is much, much smaller than the number of people who fall into the second category.
Consider the survey question above, where 46% said that the streaming services are too expensive, and 38% said that they wouldn’t use them enough. Those answers are extremely telling: if you won’t use something enough to justify paying for it, then the current price is necessarily too expensive – because you won’t get sufficient value to cover that price.
Someone saying “I won’t use it enough” is actually saying “I won’t use it enough to get sufficient value for me to feel good paying that price.” They aren’t saying “I won’t pay” — they’re just saying “I won’t pay at that price because it isn’t a good deal for me.”
Spotify created a product to appeal to heavy consumers of music, and they’ve done well at that. For those consumers, it is priced properly (arguably even too low) and they receive excellent value. But now you’re complaining that a product designed and priced for heavy music consumers isn’t appealing to light or casual music consumers … of course it isn’t, it wasn’t meant to be appealing to them.
The problem is that one package and one pricing model (unlimited everything for $9.99) doesn’t fit everyone. No amount of marketing will change that. The product must change – or more accurately, expand to include other package/pricing offers.
Because, again, that second group – light or casual music consumers – is significantly bigger than the group of heavy music consumers. Less than 10% of the US pays for streaming right now because the only paid streaming product offered is designed and priced for heavy music consumers. The music industry is leaving a fortune on the table, every year, by not giving casual consumers a way to pay that suits their preferences. Better marketing, with no attempt to actually meet the needs of casual consumers, is not a solution.
I respectfully disagree. This isn’t $200, it’s $10. And it isn’t designed for people who would listen to music one or two days a month. It’s designed for those who integrate music into their lives on a regular basis. We’re talking about $10 — less than the cost of a pizza, less than the cost of a single CD! Whining about that is ridiculous. Saying Spotify is overpriced is just a convenient way of saying that paying anything for it is not desirable.
As I mentioned below in my reply to Versus, Spotify could offer 25 hours/month for $5, 10 hours for $2, something like that. Then people would understand the value of unlimited for $10/month.
Have you seen Spotify’s “marketing”? It’s virtually non-existent. If you don’t communicate the value of your product, you risk that its value will not be perceived or acknowledged. And that is exactly where Spotify is standing right now.
Great points, Sarah.
My mother, who is a recording artist, falls into the category of people who don’t see a need for a subscription music service. She has well established techniques for discovering new music. Time Warner Music Choice is one example. When she really likes a song, she buys it.
When discovery is removed from the equation, the value of a “huge catalog” seems much lower.
Right on.
Exactly why there should be tiers for streaming service.
At least 3, I would think, to allow for low, mediate, and heavy music listening habits.
For example:
Low: $3/month = 20 hours of streaming/month
Medium; $6/month = 40 hours of streaming/month
High: $10/month = unlimited (of some very high number)/month
I honestly believe a huge chunk of people who say they are not interested would be hooked if they just used it. I feel like the simple step of having to download something scares some people off. And once used, $10 won’t seem that bad, though the freemium tier needs to be killed or made less desirable comparatively.
I also think the 38% thinking they’d wouldn’t use it enough speaks to how many people really don’t care about music THAT much. In other words, sure they may love songs, but they are fine hearing the same group of 20 hits every day for 2 months on the radio, then moving on to the next group of 20 hits.
You bring up a good point. On sites like DMN or their equivalent that discuss streaming and industry related topics in some detail, most of the people reading and commenting and musicians or music fans. That’s not to say that the average person isn’t a music fan, but rather, like you stated, that they’re more passive in their approach to music.
In my opinion, the reality – which many still refuse to accept – is that the genie is out of the bottle. Once pandora’s box was opened by Napster and the major labels refused to make a deal time and time again, they lost the opportunity to regain control over distribution and music consumption. That’s not to say that issues of piracy and music being free would not have become issues, but the music industry would have been in a much better place to handle them if instead of attacking these new distribution methods, they bought them out and made a deal.
You keep hearing people like Jimmy Iovine or the RIAA spewing rhetoric about the industry, streaming, piracy, etc. in hopes that they can return to the glory days of the CD bubble. But, the industry has burned too many bridges – mainly among music consumers – to regain the position they once had. And frankly, the position, albeit one that many other industries still enjoy today, was one of exploitation as we saw toward the end of the 90s when it came to CD prices. The casual music fan who wants to hear the latest top 40 hit on the radio so they can talk about it with their friends, classmates, or coworkers no longer has to buy the whole album to get that song they can listen to whenever. When music is free and terrestrial (and even satellite) radio has become so monotonous to the point where you hear the same songs on every station, then why on earth would the average person pay for Spotify or its equivalent? Downloads and CDs? Once in a blue moon maybe.
I don’t think things are much different than they ever were. The people who care about music are the people who care about music. Super fans will support the bands they love. The average person on the street who listens to whatever is on the radio isn’t going to buy a CD, purchase a download, or subscribe to a streaming service because they don’t have to anymore. We can go round and round about the specifics, which is well and good, but the bigger picture doesn’t change. You could charge $1/month for Spotify and I’m sure a group of people would still say it was too expensive or too inconvenient.
The days of being able to only sell records as a means of income for the music industry is over through no fault than their own for the most part. The major labels and the rest of the music industry has not learned from their mistakes as is evident by the state of modern popular music and the agreements between Spotify and other services as it relates to contracts with artists. But, that’s a conversation for another day.
I think you are missing that most people who would be interested in subscribing to a music service have already tried them. Spotify has seen massive adoption on their free service. You could take away their free service and gain several million subscribers. But the vast majority will not subscribe.
Well, my point isn’t about people who know/think they might be interested, it’s the people who have no idea what streaming is, and/or just assume they won’t like/use it.
That’s an interesting point – do you think there are many people who don’t know what streaming is at this point? I think that number, in the US at least, is vanishingly small.
Yes, I do. My parents (early 60s) are very smart people, and I know they know that something called Spotify exists, but I’m not sure they know what it really is, and I’m 99% sure they’ve never used it or seen anyone use it.
Obviously that’s anecdotal, but there is an enormous amount of extremely casual at best listeners out there. The types that listen to radio in the car, maybe at work, maybe buy a CD or two a year, maybe go to one concert a year, etc. Even if someone does all of those things, I think there’s still a good chance they don’t care enough about music to even entertain needing a service where you can listen to millions upon millions of songs. They just don’t care. They’ve got their Adele CD and whatever hits are on the radio and they’re happy.
And there’s nothing wrong with that, per se, but between older generations and these types of music consumers, there’s still a lot of people alive that simply just don’t care. Over the next decade, as younger kids now grow up and want to consume music beyond what their parents play, that will probably change.
Amazon Prime is $8 a month, half that for students, and includes music movies, games etc.
Good luck music industry.
Does anyone know if that model is actually profitable for Amazon?
Or is it some kind of loss-leader or low-price intro phase like drug dealers give to get people addicted before the real price comes into effect?
It depends primarily on how they use their free shipping. That is by far Amazon’s biggest expense for Amazon Prime.
The price of eggs, milk and gas is also out of control.
Take answers 1 and 2 to the first survey question together and that tells they story.
As far as those parroting stale memes about genies and myopic labels, have at it. Or educate yourself: http://www.trickness.com/blog/five-reasons-why-the-major-labels-didnt-blow-it-with-napster
Wall street ventures ultimately can’t make customers behave they would like, despite the decrees that unicorn shit is the future.
Blockchain, decentralized, as in distributor is obsolete. That is the next genie.
Artists are the future.
Get rid of the unlimited free tier, and all of a sudden, magically, $9.99 won’t be “too expensive”.
Oh give me a break. Phish fans pay $9.99 per month for the Phish app and catalog alone. $9.99 for all the music in the world is “too much?” LOL.
Die hard fans will always pay more. Spotify needs millions of casual listeners who pay something–and its clear $9.99 is too much.
Reality. Bitch all you want, pero no cambia los hechos.
What a BS. Of course it’s too expensive as long they can get everything for free at the YT piracy site. Shut down YouTube and $9.99 will look very cheap for all the music in the world.
Apple reportedly tried to lower the monthly fee for its Music service, but push back from the rights holders prevented them from being able to.
I think the next revolution in subscription music needs to be on the usability front. All the methods of access and playback need to be relentlessly optimized and personalized for the way people use them in different situations. And there’s an opportunity to employ innovative methods to train people into trying these new methods of access and developing strong habits of use.
Have you actually trialed or subscribed more than 1 paid service?
I have had six streaming services under my belt over the years, and have patronized an even higher number of download stores. Their policies, restrictions and UIs are all over the place, which – assuming that the available catalog is identical across services – is a good thing. Free market, etc. Certain brains will never wrap around certain UI concepts. Those same brains will take to others like fish to water. If people want to struggle daily with YouTube as a “free” music service, god bless them. That’s strictly a “But I can find this nowhere else, so I have to deal.” experience for me.
Vive le difference.
These are valuable numbers, however some data is missing unfortunately:
“In the next six months, how likely are you to pay money for a music AT ALL?”
“How much would you be ready to pay for a music streaming service?”
“How old are you?”
The perceived value of music is very different from one generation to another (what does “vast majority of Americans” mean here?) and it is always interesting to find out who the right audience is (or would be) for these services.
Also the gender information is missing, as well as the annual income, etc.
If I remember correctly, one of Deezer’s execs once said the “fair perceived price” for a music streaming service was around 5$ (but I can’t retrieve the blog article with the interview on the topic, sorry).
Jeremie Varengo
JTV Digital
As always, these are reactionary responses that take the conversation all over the map.
1. Streaming is here to stay, but in its’ current form it re-directs too much money from musicians and songwriters.
2. Limiting what’s available on streaming services will help artists and will not destroy the streaming industry.
3. Apple music just reported 10m paying subs in 7 months. Spotify has done serious damage by focusing on their free business and offering everything for free. There’s no way around it. Spotify is in the IPO business, not the music business.
2. Physical product is going to be around for a while. Vinyl will continue to grow, but CDs will continue to decline and may disappear at some point in the future. No sense killing it off any faster than need be..
“Apple has passed 10m subscribers for its music streaming service, taking six months to hit a milestone which took its arch-rival Spotify six years to hit, according to people familiar with the matter.”
http://www.cnbc.com/
“Apple has passed 10m subscribers for its music streaming service, taking six months to hit a milestone which took its arch-rival Spotify six years to hit, according to people familiar with the matter.”
http://www.cnbc.com/
As someone who works in the business professionally and exclusively on the label side, I am REALLY getting sick and tired of how stupid everyone is being with refusing to experiment with this one size fits all streaming model. I rely on income from downloads/streams to pay the bills, and frankly I think it’s hurting me a lot… But being an indie label I can’t change things. I think the major labels are perhaps just as at fault as the streaming companies.
It’s hard to say what will “work” in the real world, but a combination of:
1. This is number one for a reason… Making free less desirable. Limiting selection, more ads, limited amount of listening a month, etc. Try things. Do whatever it takes to create enough incentive to want to pay something. As it stands now $1.00 a month is worth more than a free listener.
2. Windowing for new releases to paid tier only…
3. And/or even top tier catalog stuff. Want ALL the Zeppelin/Beatles/Nirvana tunes? Gotta pay. Otherwise you get Stairway to Heaven, the Immigrant Song, and a couple others from the band so there’s “something” in the free tier to entice you. Every time you want to hear “Black Dog” or “Gallows Pole” and can’t you’ll think about paying.
4. Different price points. A certain number of songs a month, or a certain number of hours… Whatever. You price it so that you get more for your money the more you pay. This is the most basic economic concept in the world, yet is non existent in streaming. It’s mind boggling. You can also go “up market” from $9.99 for extra bonus stuff like higher quality audio or other bonus/exclusive features. Exclusive interviews. A VIDEO tier where it’s all official music videos in HD. Offer discounts on live tickets or whatever through partnerships. You could come up with a ton of value added things. This is probably 2nd most important after getting rid of the current way of dealing with free tier.
And that would probably about do it. More clever ideas probably exist, but those are the only things that would really be needed to dramatically change the dynamics in the streaming market. Anything else would just be gravy so to speak. The real thing would be finding the “right” numbers for pricing, or windowing for how long, etc to maximize income… But the right numbers can never be found until there are some numbers other than ZERO and $9.99. I just wish the majors/streaming companies would stop being so fucking stupid and TRY something since I make 100% of my living from the business and am basically just getting carried along for the ride. It’s very frustrating sometimes as I can see the potential for streaming to match, or even surpass, the music business income of the last several years. Whether or not it will hit 2000/2001 income levels (in inflation adjusted terms that’d be something like 20 billion USD annually in the US alone now) is highly doubtable, but I think it could go up from where it’s at now at least.
One need simply see the 42% who said “I can stream music for free” as the reason they won’t pay! If free were crappier, might half of those people consider it? What is free were crappier, AND there was a limited tier at $4.99? Might it not be 75% then? Who knows. Even if it were 20% of just those people that would be millions of people globally converted.
You can compete with free. You can’t compete with convenient.
The dreamscape you describe is a convoluted nightmare of rules and gotchas and is tiresome.
That highly-limited/ever-revolving selection idea especially, #3: it is specifically why, even though I’m an Amazon Prime member, I don’t use Prime Music. It’s “free” to me, but half the time I fire up the app to listen to something I find that it’s usually not worth the time “tuning in”. Unbundle the music from Prime, I say. The tithing to the labels is just a giant money suck which could be dedicated to giving me more free shipping. I wouldn’t use Amazon Prime Music if it were free.
I am sure many people would agree with Name2. But, its also a very large marketplace and any assertion about how many people actually feel this way relies on assumptions.
Amazon is actually uniquely positioned to test some of these alternatives pricing models.
As it stands today, Amazon prime is essentially a value -added “free” bonus for prime members. No one actually buys prime for the music streaming. Amazon doesn’t depend on streaming to support their too or bottom line. It’s also HEAVILY windowed. It often takes more than a year for new releases to appear. All of this reduces rusk for both Amazon and the labels that choose to work with them.
Why not offer exclusive discounts for buying new releases by partnering with specific artists or labels? ?
Why not offer a pay as you go option for anyone that is NOT a prime member? How easily could this be incorporated into amazon’s gift cards so users can put $5 in their account and not have to worry about spending more than they intended???
Even if these pricing plans fail, IMHO there is a lot of insight to be gained from the experience.
Even if these pricing plans fail, IMHO there is a lot of insight to be gained from the experience.
Yeah, because Amazon exists to be a canary in the coal mine for a dying business.
Lose the “Prime” music. Free next-day shipping. Make it happen, Jeffie B.
Name 2… I just don’t get it. What is so crazy or confusing about ANY of those proposals? They’re all straight forward value proposals to try to incentivize people to pay. You want free? Sweet. You get MOST stuff, but maybe not SOME new releases, and maybe not SOME super hits from yesteryear. And you get ads. Party on! If you want no ads and the hits it’ll cost you a few bucks a month for a limited use plan. You aren’t happy with a 25 hour a month plan for $5 because you want to blast stuff 8 hours a day? Pay $9.99 for unlimited then. You want high res and bonus stuff? Pay $14.99 a month then. Simple. Straight forward.
Nobody would have their arms twisted. It would be a very clear and obvious distinction between different levels of service… Kind of like EVERYTHING ELSE IN THE WORLD. You want a cheap motel? Stay at motel 6. You want an ok hotel? Stay at the Marriott. You want a nice hotel? Stay at the Ritz. That’s how everything works. No name brand boots, Lugz, Redwing. Ford, Mercedes, Bentley. You see? Options at different quality and price points. That’s how the world works.
What the current model does is essentially say you can have the Bentley all the time for free if you want to put up with ads that pay 1/10 the cost of actually buying the Bentley. You can pay if you don’t want the ads. There is nowhere near enough incentive to spring for the “magical” one size fits all $9.99 a month for most people. So offering something that WOULD be worth it for a casual listener, like 25 ad free hours a month for $5 would make them happy (no ads), and would bring in more than 5 fold what a free listener brings in based off of ad income.
That ONE change would probably bring in millions more people that will NEVER pay $9.99, even without any of the other changes. Not everybody is a music freak, so 10 bucks a month, when they know they will only listen to it a few hours here or there is not worth it to them. They may hate the ads, but 10 bucks is still too much to validate in their mind. $5, maybe that’s worth it to them.
The concept of “paying for things” is a pretty old, tried and true concept. I’m not opposed to there being free tiers from Spotify. Frankly if they could get the advertising revenue high enough I would be ok with them not making ANY changes… However it’s pretty clear they are not able to do that. So therefore they need to have lower cost options than $9.99, and PROBABLY make free less appealing too. Maybe not. Maybe a $5 option alone would get enough people through the door that everybody would be happy with that income. I’m not psychic, I don’t know. But I do know that if NOTHING is ever tried we will NEVER know.
This is about an overall amount of income being brought into the music industry to support professionals in it. Not weekend warriors, but serious people who work hard at what they do. I don’t think every dildo with a band and a dream needs to be able to make a living… But when you’re working your ass off, and can’t even make as much money as a Burger King manager that’s an issue… Especially given that barely a decade ago you would have been making double what the Burger King manager was making, which frankly seems pretty reasonable given the complexity and skill required to perform many of the tasks in the music business. This would all of course help out the weekend warriors too, which can often turn into the best and brightest. If they can’t support themselves while at that in between stage, they’ll never make it to their full potential because they’ll have to give up so they can put food in their stomachs and not die from starvation.
Call me crazy but a professional audio engineer/producer/arranger/songwriter/manager/label owner AND LET US NOT FORGET THE ARTISTS THEMSELVES, who has spent decades learning highly complicated and challenging skills PROBABLY deserves to make as much as a Burger King manager. Some skills should probably earn a heck of a lot more than a Burger King manager. Not EVERY engineer or artist mind you, but the ones who really work hard and try. The ones that are AMAZING at what they do.
The way money has been sucked out of this business it is nearly impossible for professionals, even ones that are the best at what they do, to make a reasonable living. There’s simply too little money in it. If you can’t support professionals doing what they do, then you get shit output from amateurs (some of which will be great, but most of it will not be), and a smaller middle class from the entire industry.
My own little company, if we were as “big” in terms of number of releases back in 2000 or 2001 as we are today would probably have been making 400-500K a year. We would have had several more employees doing useful and productive things to enrich the world with more music being available. As it stands it is scarcely supporting 2 owners and a dozen or two hours a week for 2 part timers we employ. Not to mention that the royalty payments we make to artists and songwriters are equally reduced. I know a lot of “famous” musicians that make about as much money as a barista. All while being interviewed in major publications, and having a bajillion followers on Facebook etc. These people made a good middle class living 15 years ago. Now they’re basically in poverty, even though more people probably listen to and enjoy their music than ever, and they’re busting ass harder than ever. This of course reduces their ability to be able to afford to record new music for people to enjoy, since they have to pay rent instead of having the money to self produce an album.
Real income in this business, after accounting for inflation (which is ALWAYS ignored when making percentage based comparisons of now vs 10 or 15 years ago) is something around 1/4 (depending on the numbers you choose to use) of what it was 15 years ago. Not 80% or something. 25%. The business would have been over 20 billion a year in the US just accounting for inflation.
That is a friggin’ bloodbath. It also just doesn’t seem fair. Especially for an industry that is arguably being more widely “consumed” than ever before in history. Not to mention that when one looks at the “peak” of the industry in the early 2000s, IMO it was still very small dollars and cents when considering the joy and impact music has on the world. Single products from single companies often bring in more money than virtually THE WHOLE music business. Is the Samsung Galaxy 6 REALLY more important in the scheme of things than every piece of recorded music ever written??? Hanes probably sold more $$$ in socks than all music income as it was in 2000 even.
So if one accepts that the business is in the shitter, and ultimately not really sustainable as it is, then one must find solutions. Streaming is the future. That is hands down a fact. There will still be some purchases for a long time no doubt, but streaming will be the dominant factor. If that is the case one MUST find a way to make streaming work, while also making the music industry work.
If the most famous musicians (shy of Taylor Swifts and the like) are making less money than a hard working plumber, that’s just not sustainable or reasonable. But that is literally about how bad it is now. Bands like the Sex Pistols or Velvet Underground (in terms of how popular relative to other bands) in todays world would literally not even be able to put food on the table or pay the rent. Which is exactly what is happening today with many mid tier bands. If people that are that important and influential can’t make as much as working as a grunt at McDonalds that’s a problem. If ONLY Taylor Swifts can even make a living from their music, that’s just ridiculous. The broader impact on society would be horrible.
So, given the reality of the situation, I think a few minor tweaks in pricing tiers etc for streaming is pretty damn reasonable. It won’t be confusing for people. Anybody can make a choice between “Do I want ads or not?” or “Will I listen to this service more than 25 hours a month or less?” and make their own choice. In the end having variations on pricing will only make things better for people because they will actually have the choice to get what they want, for the price they want, instead of having only 2 choices thrust upon them.
As far as Amazon… Who cares? Their service is not a “full service” streaming company. It is a half assed value added bonus for customers of their other products, and that is all. They’re not even trying to be a real service. If they were they would have cut proper, whole catalog deals like everybody else has. Spotify/Apple Music/Google Play/Rhapsody/Etc are the real companies, and the real “models” of future music consumption.
tl;dr
I just got back from India…one one leg of my trip I was at the Grand Hyatt in Goa. At dinner one night were two affluent Londoner bankers with their families. At one point it was just the two bankers talking and the topic turned to music. Both professing their love of music. And then the topic turned to streaming.
Banker #1: I just got this Apple Music and it’s brilliant. All the music I could imagine for a tenner. If it wasn’t for Apple telling me about it I’d never known I could do it.
Banker #2: Yeah, I use Spotify free and Soundcloud.
My wife and I listened on for a bit more, but what I found very interesting from the exchange was that here were two well off people who could easily spend £10 a month on music and where the argument of means is moot. One valued paying for music, but the other felt as long as there was a free option, that was good enough. And it made me think about how the value proposition of offering a free model leading to a paid account was a fallacy. If there are people who can pay but are offered an option not to…unless you have a significantly valuable reason to get them to pay…they won’t.
If Apple can get to 10M paid accounts less time than it takes Spotify to go from 10-20M…that’s a big problem for Spotify as it will get harder and harder to defend the free model.
Back to my bankers…one thing I have to remind myself is that I work in the business…and have been paying for streaming since 2006. It never really occurred to me that your average person hadn’t even heard of streaming by now and that even though every iPhone or Apple user might have it pre-installed, that doesn’t mean they can’t be converted at a later point. It means that some people just aren’t hip to it yet.
The early adopter chose the free model (because it was there) and the johnny come lately was willing to pay.
Once you realize that paying $10 per month as a budget gives you access to unlimited amounts of variety without having to sit through the dogs on a particular disc, all of the sudden you feel like $10 is such an amazing bargain that you can’t believe people would go back to buying individual songs, or individual albums.
But charging $10 is hard to compete when there are fully licensed free options – (youtube / spotify).
Welp, maybe streaming REALLY won’t work. I know, I know, I know; I have been saying this a lot, maybe TOO much. Yet I truly think it comes back to this, and ONLY this, though. This is the real, TRUE test of the music industry for the viability of streaming. If streaming doesn’t even have a vague chance of charging enough per month to make enough revenue, than I think it really is time to seriously reconsider whether or not streaming is a viable option for the future of the music industry. If $20 per month is too much, than that is reasonable. BUT, if $10 is too much, than that is a bad sign. Honestly how is the music industry supposed to make money if it charges too little per subscription? This is not to say that streaming subscriptions are a viable source of net royalties even if they do charge more, streaming will never be a good source of income to artists, and will always be a better source of gross revenues than net royalties (even though they will never replace music sales in either gross revenue or net royalties no matter what happens.) But, what happens if streaming can’t even make enough to satisfy a decent base of gross revenue? Then what? Well I know what: streaming will be nothing more than a shell of itself, a form of music too pathetic to even sustain its own meaningless existence.
Honestly I think streaming is a bubble bursting in slow motion. I actually do think that the burst is actually happening right now, right before everybody’s eyes; but nobody will take a second glance at it, not with all the various news articles proclaiming that it is the “future” and that “CDs are dead” and that “vinyl is too small to make a comeback.” But if I were you, I would ignore every single one of those articles and take a good look at the way that the music industry REALLY is at this point of the decade, with:
1) Music sales falling massively
2) A general populace apathetic to the complex woes of the music industry
3) Streaming services on the rise, with a correspondent failing of appropriate revenue distribution
4) In other words streaming services’ failure to pay artists properly due to a fundamentally broken system
5) Most importantly that streaming services are not even profitable, and that they will likely never be successful even in the future.
6) Like, for instance, Spotify isn’t even profitable; go figure
Seriously, screw streaming. I think it is a cancer to the music industry. But I look on the bright side, because I know that streaming at its current pace, will fail in the near future, and all this talk about streaming will be long behind us.
And one more thing about the family plan of Apple Music: the Apple Music Family Plan is a lot more insidious than one would normally think. Think about it this way: yes it is $15 instead of $10, but that is a total of $2.50 PER PERSON. That is REALLY low, that is like 3/4 less than the individual plan per person. That is like $60 compared to $15 per person. That is a maximum of a $45 LOSS in terms of revenue.