opinion Opinion August 19, 2019

Would Australian music streamers pay more for subscriptions? [op-ed]

Would Australian music streamers pay more for subscriptions? [op-ed]

Unconfirmed reports late last week have suggested that is set to trial a higher price in the Scandinavian market.

The pilot is for the highly popular family plan (for up to five members), and expected to raise the price by 13%.

The current family plan in Sweden is 149 krona per month, or the equivalent of A$22.75,

Comparatively, Spotify’s family plan in Australia (for six members) is $17.99 – also the same price for family plans with Apple Music:, Google Play Music and Tidal (though the latter also charges $35.99 for premium).

So far, the reports only suggest the price hike is for Scandinavia, and only for the family plan; and not even sure if it’s just a temporary test.

So why the apprehension for Australia?

Because unlike video streaming subscriptions, music streaming pay tiers have remained the same – $11.99 a month for Apple, Google Play, Spotify and Tidal (the latter $23.99 per premium).

In fact, they have gone down, if anything, with family offerings, and student prices down to $5.99.

An additional woe for Spotify is that its average revenue per user (ARPU) has been steadily slipping down over the years.

In Q2, it was $8.71, down less than 1% YoY due to its various strategies to grow numbers, like in India (where it charges A$2.45 a month) and like in the US where its deal with AT&T which gives its unlimited and more premium customers get Spotify for free.

In its second-quarter report, Spotify stated:

“Downward pressure on ARPU continues to moderate, and we continue to expect that ARPU declines through the remainder of the year will be in the low single digits.

“As we mentioned last quarter, the declines in ARPU are a result of shifts in both product and geographic mix.”

WHEN IS THE PRICE RIGHT?

What is worrying consumer groups is that record companies have been pressuring streaming services to increase prices and stop free tiers if they want to keep licensing their music.

On the other hand, independent analysts argue that real growth for streaming will only come if the streamers drop the price to a monthly $4.95.

Secondly, with competition so fierce, will other streaming services automatically jack up their prices if one goes up?

Thirdly, how will Spotify approach its pricing moving forward given the difference between the number of users and subscribers?

In Europe for instance – its largest market – only 36% of its users (or 83.5 million people) are paid subscribers.

A small price jump might not necessarily annoy existing subscribers who’d then have to build up a new library with a new service.

However, the price move will affect new subscribers – and these are not a small number.

In the three months to July 31, Spotify added 8 new million subscribers.

Apple officially added 6 million new payers (although there’s a slight dispute over how many of them are on a free trial).

Spotify CEO Daniel Ek has often stressed that the audio streaming sector is relatively new, and that pricing is still something that is being worked out.

He said in July, “Pricing obviously ends up being a function where we said for a long time that we believe in the current pricing strategy that we have in order to drive future growth.

“But we’re actively investing a lot in both improving our product capabilities and the content mix on the service.”

This sentiment applies to all streaming services, of course.

But the pressure is not so much on Apple and Amazon which has more profitable and wider divisions to prop up streaming financials and keep shareholders happy.

It’s a different story for Spotify for whom streaming is still the sole dominant money-spinner.

Spotify counted 108 million paid subscribers and 232 million users globally at the end of Q2.

A forecast by US company Futuresource Consulting puts the number of global music streaming subscribers for all services at 350 million by 2022.

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