Published on September 12th, 2016 | by Alan Cross0
The Big Question: How Much Will People Pay to Stream Music?
With the number of people willing to pay for physical music product–that is, CDs, vinyl and the like–dropping every single week, there’s no question that we’re heading for an era of access over possession. If you can stream all the music you want instantly, you’re going to be much more picky about which physical product you’ll buy, right?
But how much is the convenience of streaming worth? In other words, how much is the music worth? This is a thorny issue, one that can be divided into two halves: what the artist/record label thinks it can charge and what the consumer is willing to pay.
Somewhere around 100 million are now subscribing to some streaming service at the industry standard of $10 a month. (For the purposes of this discussion, let’s set side the millions of people who listen via ad-supported free tiers.) Artists and record labels say that’s too little. There’s doubt that streamers like Spotify can survive on that. But there’s also plenty of indicators that the general public thinks that $10 is too much.
(Take a moment to jet over to this article: “Just How Well Is Streaming Really Doing?” You may be surprised.)
Ten bucks a month for unlimited access to 35 million seems like a great deal. But given that the average American music fan spends $67 a year on music, $10/month works out to almost twice that. That’s why Pandora and Amazon are working on services that would charge just five bucks.
The New York Times reports:
Both companies are set to introduce new versions of their streaming services in coming weeks, charging as little as $5 a month, according to multiple people with direct knowledge of the plans who spoke on the condition of anonymity because the process was ongoing. The plans will put pressure on incumbent players like Spotify and Apple Music and offer the music industry a major test regarding the value of streaming music — including the crucial question of whether discounts will be enough to entice people to pay anything when virtually every song is also available free.
For both companies, the new streaming offerings represent variations on the existing models, with a mix of new features that are intended to entice casual listeners into paying a minimal fee without eroding the ranks of customers who are willing to pay more.
Amazon and Pandora have spent months negotiating new licensing terms with record companies and music publishers to allow their new streaming offerings, and they are close to completing those deals, according to the people briefed on the plans. Representatives of both companies declined to comment.
To some degree, these deals reflect a new willingness among the major record companies to experiment with pricing and shore up a wide field of competitors. Just last year, when Apple was negotiating with record labels over Apple Music, its streaming service, the company wanted to charge customers $8 a month. But the labels balked and held out for $10, giving Apple no price advantage over competitors like Spotify, Rhapsody and Deezer.
If you’re an artist reading this, your shoulders have probably slumped. “My art is being devalued again?” I don’t blame you. The argument over how much music is worth is entering a new phase. The race to the bottom seems to be speeding up.
Read the whole NYT story here.