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Streaming music price points too high, claims report
By Chris Cooke | Published on Tuesday 21 January 2014
As the much hyped Beats Music goes live in the US with a standard $9.99 per month price point, a report by professional services outfit Alvarez & Marsal has suggested that the pricing in streaming music is all wrong, and that revising monthly subscriptions downwards could result in more income overall, because it would result in a higher conversion from freemium to premium users.
A&M isn’t the first to make this proposal, of course, with some smaller players in the streaming market already touting lower-priced subscription models. And, MusicAlly notes, A&M’s Faisal Galaria has provided advice to the investors in one of those businesses, the previously reported MusicQubed, which is best known for powering the one pound a week O2 Tracks service.
And while that might mean A&M has an agenda, the report’s findings are interesting nevertheless, being based on a survey of 3,329 consumers in the UK, US and Germany.
According to the research, if streaming services cut their ten pounds of month premium rate (which includes all the mobile functionality) to five pounds, 2.4 million more people would likely sign up in the UK alone, resulting in up to £95 million in additional revenues for the British music industry. In Germany, the report reckons, the uplift would be 4.7 million more subscribers, resulting in up to 265 million euro more income.
Of course, with some, especially in the artist community, already hitting out at the per-play royalties that streaming services pay based on current subscription rates, the thought of pushing standard subscription fees down even further might not be popular, even if the argument goes that overall the industry would be richer.
Though cheaper rates might also be achieved by providing smaller catalogues of content (such as O2 Tracks) or less on-demand functionality (as with Pandora and iTunes Radio), more limited service features which, some argue, more mainstream consumers aren’t so bothered about (whereas depriving them of mobile functionality is a turn off).
Says Galaria: “Our research shows that reducing prices will have a significant effect on subscription rates and, subsequently, be more than offset by an increase in aggregate revenues. While reducing prices may seem like a dramatic step, with the right proposition and price points in place, there is an opportunity to build sustainable interactive music businesses and even create the Netflix of music”.
Ah, the Netflix of music. Though, while there is very possibly a place in the market for more limited catalogue services like O2 Tracks, I’m not sure a Netflix-style set-up – eight absolutely classic albums and 3017 LPs you wouldn’t even find in your pound shop’s bargain bin – is necessarily the way forward.
