Q. What additional features could be added to justify a higher price point?
Q. Should we be lowering the monthly price point to encourage adoption by the
Q. Outside of monthly subscriptions, could top-ups on a PAYG basis be a good interim step between ad funded and paid?
Q. How can the current per stream rates support artists, so they can continue creating new music?
Just a few of the questions floating around the music industry news wires currently. In answer, there have been many opinion pieces promoting various arguments for and against, always normally with some sort of bias or creating as many questions as they attempt to answer.
The main point is, streaming is growing as a consumption model and looks set to be the dominant revenue source for those involved in the recorded music business in the next few years. Check this great article from Music Business Worldwide which gives a few different predictions on how streaming will develop:
For a while I have been considering a modification to the main aspect of the commercial structure that sits behind this brave new World (really it is as new as paid-for-downloads, both iTunes and the paid version of Napster launched in 2003).
The search for price utopia continues, and my take on this is to borrow from other industries (like Gym's and Telco's) that have been been charging monthly fees for a lot longer than the music industry.
I would like to see a variable subscription considered, rather than a fixed monthly charge to the music fan. Or, more simply put, a 'pay for what you use'.
The following looks at some of the main issues, as well as the viewpoints of the current subscription model from the main stakeholders, most importantly including the music fan.
One Size Doesn't Fit All
Some of the commentary has been focused on pricing. Nearly all services as I write this are at 9.99 (insert your own currency) per month. So regardless of how often you listen to music, you'll pay the same. There is some support for lower price points, as it is felt that for the critical mass needed to sustain the current model we need them all paying, as advertising can't alone be 'the other option', especially as many suggest that ad-funded music promotes a devaluation of music, albeit a great introduction to the format. At some point I am sure the argument becomes circular. Certainly there is truth in the idea that the music aficionado destroyed recorded music sales as they now have a price ceiling which they now don't need to break, see Mark Muligan's excellent piece on this:
Mark of course isn't actually blaming the music fan, let's face it with the amount of investment in advertising, subsidisation and R&D in creating great services really the music fan was just finally given a great alternative (addition?) to the CD, Vinyl and download - and they have voted with their feet.
More Than The Question Of Price
Price alone can't answer all the questions people have but maybe human curation rather than algorithms brings back that indie record store shopkeeper recommendation quality we have lost in the online age? Beats Music was certainly using that as their USP. Apple certainly thought so seeing as it bought the fledgling service back in May 2014.
A recent focus for differentiation and price adjustment has been on audio quality. In the streaming World, the most recent addition is Tidal (Norway's Aspiro company who have been in business with their WiMP service since 2010). These guys not only created a beautiful user experience via a browser as well as in a native application, but they also doubled the monthly cost to the user. It is early days, but some of the opinion pieces I have read suggest that users don't view the cost as totally prohibitive and are signing up. The French service Qobuz has been pioneering this for a while now, and like Tidal really paid attention to the extended experience to a music fan that wants more than just a play button. They follow the same pricing model, either 9.99 per month for standard definition or 19.99 per month for the higher definition audio experience.
Like with all innovation, there are some questions surrounding the actual value of higher definition audio, Neil Young's Pono service coming under particular fire on this subject.
As we continue to search for service and price utopia, we have to look back as well as forwards. When it comes to digital services be it download, subscription, streaming or radio there are different tools in the armoury.
- Classic: Exclusive content to a service/retailer
- Original: Online vs Offline access = price/value change
- New: Curation & High Definition
- One size doesn't fit all, there are those that want a lot of music daily, and those that perhaps only want it weekly, monthly or more sporadically, therefore;
- Price differentiation needs to be achieved, but reducing the price from a low ceiling can't be the only option (or certainly not a universally welcome one)
- Just having curation as a focus or high definition as an experience differentiator isn't necessarily all that can be done to make one service more attractive to another
- Exclusive content will always be a negotiated element between services and the labels that provide the repertoire to them so they can hold onto or attract more users
- Being locked into just one service each month isn't necessarily what every music fan wants
Let's look closer at the various stake holders in this relationship.
The main questions to me seem often interlinked. This is a recap from each of the three stake holders in the equation:
- Rights Owners - price too low, ceiling of spending for music aficionados, monopolistic dominance, transparency for fees
- Services - risk in too much usage, losing user to competitors,
- Music Fan - renting music is new, interoperability, perceived value proposition, choice of consumption
Within this structure various packages could be designed, to lower the ceiling in exchange for commitment, in a similar way to how millions of people commit to their mobile phone carrier.
Here are how I see the advantages, and how they address the main questions from each of the stake holders:
- Prices Too Low & Low Ceiling - this format allows to establish a higher per play rate than the unknown or low minimum currently employed, as well as enabling a higher ceiling for heavy users
- Monopolistic Dominance - lowering the barrier to entry to the user with each service through removing the fixed monthly subscription, would mean that each service would have to constantly try and engage their users through an improved service offering as users could sign up to any number of services. From a marketing point of view for the rights holder, the value of exclusive repertoire or promotional content rises as every service would be asking for it in order to compete for engagement
- Transparency - a hotly debated topic. Currently there is no way of putting a price on a stream, and for some that is too difficult to contemplate. Whilst the idea of a ceiling would still exist, for much of the usage a per play rate would exist. Maybe there are many within each 'package', but at least you could confidently add this to a contract in a far more precise way than the 'if, then, maybe' concept we are currently faced with. Whilst I acknowledge minimum per play rates do exist, they are low, and therefore offer limited protection to the rights holder. Fixing the per play rate as with Psonar demystifies the cost, because everyone from the consumer onwards knows and understands what each play costs
- Financial Risk - Control per play usage through established per play rates, allow higher ceiling for heavy users to limit exposure through higher usage
- Customer Retention - create a variety of packages that fit almost any wallet size, and match against users expected usage. With users who are unsure about committing to a service, they never actually need to leave, they would just stop using it. Therefore the barrier for re-entry to a service has been removed nearly completely
- New Format - for those unsure about renting music for a period of time if a financial commitment isn't met each and every month, they now need not worry. Their money can be used on a month to month rolling term till it is used up. It would essentially feel like an auto-top up should they continue to use the service, a bit like Skype minutes. The ceiling 'bonus' for high consumption starts at the point of top up, and runs for a month from that stage. This creates a transparent relationship between the user and the service, although I appreciate it makes the monthly calculation for the service more complicated potentially, but not impossible
- Interoperability - as the user doesn't have to make a monthly commitment, they will perhaps adopt multiple services. Whilst this isn't true interoperability, it certainly would start to demonstrate whether or not users wish to stay within one service, or whether choice is more important. It would potentially bring greater diversity into the consumer offering, as niche services could establish themselves. If nothing else it would certainly make the concept of exclusive repertoire important to all services, not just those desperate to try and gain marketshare. Even the dominant services would have to try harder to win over rights holders
- Value Proposition & Choice - An all you can eat music service that works for almost any user (there will always be many who can't or will never pay for music so ad based models will sit alongside this). Value to the user is matched to their consumption habits. In fact we turn the subscription into a reward based concept rather than its current state which is a barrier to entry; passionate music fans will still have a ceiling as they are not worried about the commitment, those in the middle whose usage fluctuates get the benefits of a ceiling at the top end but no wasted money in the months where they are less engaged, and for the incidental users they can get an ad free music listening experience without having to commit past their usage requirements. This finally introduces choice into the equation.
Is this true Utopia, no not really, but getting to a perfect place for all stakeholders, means you need to consider all the angles. Personally I'm not convinced that has truly been done so far.