Unintended consequences – the year ahead for streaming

Streaming may be maturing from a revenue perspective but with two-tier (‘artist centric’) licensing and supremium, 2025 is set to be a year of transformative change in both product and business terms. While each of these initiatives were designed with clear objectives, it is not so much the immediate consequences but the second order consequences that warrant most attention. As is so often the case, it is the unintended knock-on effects of actions that will likely prove to be most impactful, for both the business and culture of music. Here is what some of these may be for two-tier licensing and supremium.

Second order consequences of two-tier licensing:

• An industry underclass: It is all too easy to dismiss small, long-tail labels and artists as ‘garbage’ and ‘flotsam and jetsam’ but it risks being seen as an elitist view from the top. The long tail is a mix of the good, the bad, and the ugly – just as commercially successful music is. But the demonetisation of <1,000 play tracks transforms an attitude into commercial segregation. Inevitably, this will result in a music industry subclass of demonetised artists and labels
• Indie insurrection: While there has not (yet) been much of an independent artist backlash against two-tier licensing, things will likely be different for indie labels, as they pay a lot more attention to the economics of streaming. As more labels see more of their catalogue demonetised, a trickle of indie label frustrations could easily turn into a flood
• Culture drain: With the ‘you are not welcome here’ sign firmly nailed on streaming’s front door, more artists and labels will look elsewhere to build fanbases. This will hasten the rise of bifurcation – which might be exactly what bigger labels want, but these artists and labels will take tomorrow’s culture with them
• Post-streaming: A new generation of artists will increasingly build their businesses outside of music rights monetisation (i.e., royalties) and seek non-traditional partners. This may set the stage for management companies to become more important to tomorrow’s artists
• New success metrics: Label A&Rs, festivals and concert bookers, music supervisors, will all have to look elsewhere for success metrics as emerging artists deprioritise streaming
• Fewer releases: Labels will inevitably focus marketing efforts around a smaller number of songs, not wasting time on tracks that will not break 1,000 streams. This may finally see labels stop playing the volume and velocity game
• Ossification: There will bean even bigger focus on promoting the perennial catalogue tracks with streaming becoming one big ‘hits radio’, ossifying around golden oldies and mainstream hits
• Dumbing down of listeners: Streaming audience’s ‘fandom IQ’ may end up being lowered, further widening the gap between ‘listener’ and ‘fan’, perhaps even making it harder to sell supremium to them 

Second order consequences of supremium:

• Streaming’s underclass: The problem with giving a segment of your customer base an upgrade is that by default you have given the rest a downgrade. While this should, in theory, act as a spur to upgrade, not everyone will have the financial means to do so. The risk is that non-supremium subscribers become streaming’s underclass, no longer able to get new music when it hits, not able to get all the extras they can see supremium subscribers getting – which is especially important for those subscribers that cannot afford to upgrade or do not have permission from the household bill payer. Classifying fandom through the lens of spend depends on both fandom AND spend on fandom. Superfans with low spending power stop looking like superfans
• Weakened value proposition: The next step of this would be that non-supremium subscribers start to question the value of a standard subscription. Near term, this could result in rising churn for standard premium in the worst case scenario. Mid-term, it could dent new-subscriber acquisition rates if there is a perception that the standard tier value proposition is lessened. Sure you can subscribe to the entry-level tier, but you know from the outset that it is only a partial proposition that you are signing up to
• Everyone is super: The problem with giving people access to scarce perks (early access to music, tickets, merch, etc.) is that the very scarcity you are selling becomes less scarce. In this context, the value proposition of Supremium becomes weakened as more consumers sign up – until eventually, everyone getting early access means no one getting early access. Fan frustration could build as tickets and merch sell out even when they pay for early access. To quote Syndrome from The Incredibles: “When everyone is super…no one will be”
• Missing expectations: A version 1.0 of a new product rarely meets expectations. The risk is that version 1.0 of supremium underwhelms, denting demand among early adopters – a segment whose initial (positive) experiences are vital for spreading the word and driving uptake among later adopters. The risk for new products (rather than new versions of old products) is that you often only get one chance of making it work. Get it wrong and that may be it, with consumer sentiment damaged for a generation
• Exceeding expectations: The counter-scenario is that supremium has even more impact than hoped for: that it acts as a rejuvenating force for streaming as a consumer proposition, becoming a new driver of subscription adoption – with a wave of superfan subscribers skipping standard subscriptions entirely and going straight to supremium

On balance, the potential, negative second order consequences skew likely for two-tier licensing and less-likely for supremium, with there also being significant potential positive consequences for the latter. Whatever specifics do actually transpire, both will change not just the economics of streaming but the culture of it and music more broadly too.