Music Streaming Services Experienced Growth During the Lockdowns

New York, NY, 2021-Mar-23 — /EPR Network/ — The pandemic has hit the music industry hard with the cancellation of live music events across the US. In contrast, retail income for music recordings has risen by 9.2% in 2020 to a total of $12.15 billion. This figure has increased by over $1 billion on the income from all formats in the previous year and is celebrated by major record companies such as Universal, Warner, and Sony.

Whilst these initial figures look promising there are concerns within the industry over the future. With the decline in CD sales, streaming accounted for 83% of the record industry revenues in 2020 and it plays the most important part for the industry in generating income. Sales from all forms of streaming in the US totaled $10 billion in 2020.

Whilst this figure looks great, it is a worry that it was mainly generated from paid subscription services such as Premium Spotify. The income from premium subscriptions has risen from $6.115billion to $7.009billion. That’s a whopping increase of $894m in 2020. This represents 58% of all record industry revenue in 2020.

Whether this is good or bad news for the industry largely depends on what segment you are considering. Big labels and famous songwriters have the leverage needed to negotiate deals directly with streaming services, while smaller artists often struggle to get noticed in the streaming market. And while companies like Tunedly have made publishing songs online easier, it still requires a learning curve for many independent artists.

Another concern is that the annual growth of subscription streaming services income was down in 2019 and in fact, the growth was the lowest since 2015. This suggests that the US streaming market growth is in fact slowing down and it raises the question about the future of the streaming market in the US. Has it already passed its peak?

Looking further at the figures it is obvious that the number of paid subscriptions to streaming services is actually up on previous years, growing by 15.1 million subscriptions to 75.5 million. So why had the income dropped?

It comes down to the average price per paying subscription, which has dropped in the US market. The conclusion is that the average price of premium subscription services in the US has dropped. This calls into question the relationship between price and growth for the future of paid streaming services.

Looking at the average revenue per paying subscription account, the first decline was in 2020 with an average of over $8 less being paid for a full subscription. Multiply this figure by the 75 million users it’s easy to see how the spending reduction came to be.

The obvious solution would be to raise the price of paid premium subscriptions. However, Daniel Ek, of Spotify, has ruled this out.

In the Financial Times last week, he reassured consumers that he did not want to raise prices. He feels that whilst many areas of the US have reached saturation for Premium Subscriptions there are many other areas in the US that are largely untapped. He appreciates the need to be careful with his decisions.

As ever, there is a fine balance between growing the market and retaining customers by understanding the price that they are prepared to pay for their services. For now, the focus of the streaming industry seems to be on attracting the remaining potential of the streaming market. Offering low prices will likely be part of the strategy to tap into a larger segment of the market, which is great news for consumers.