Streaming Music Pricing: Inelastic Stretching

20,000 Foot View: Pricing has long been an issue for streaming music subscriptions, with the $9.99 price point having the double challenge of reducing the spending of the most valuable music buyers and being higher than the average spend of most music buyers. Streaming services have worked around the issue with a combination of telco music bundles and aggressive price discounts. However, these tactics place long term pressure on the $9.99 price point as they create a consumer perception that streaming music should be cheaper. For now, discounts are doing a great job of converting users and of easing consumers into the $9.99 pricing but the next phase of the streaming market requires a more sustainable approach to pricing strategy.

Key Findings (Data points removed from this preview):

  • Between 2013 and 2015 the average monthly revenue per music subscriber fell from $X in 2013 to $X in 2015
  • X% of the 9.99 subscription opportunity across established markets has already been tapped, rising to X% in Sweden and falling to X% in Australia
  • At the end of 2016 there were X million subscribers, a X million net increase since 2015, compared to a net increase of X million in 2014 and X million in 2013
  • Subscriber growth will accelerate further but peak in 2017, culminating in X million commercially active subscribers by 2020
  • Fully featured free streaming and aggressive promotional price discounts for 9.99 services have sucked the oxygen out of the mid-tier opportunity
  • All You Can Eat (AYCE) streaming is price inelastic, with a value of just X for the range of $6.99 to $9.99
  • 19:99 is a sizeable opportunity with X% of existing subscribers interested in a premium plus, multimedia, high definition audio tier
  • $X continues to present the best balance for AYCE streaming music subscriptions with $X reducing revenue and only marginally increasing reach
  • A gaping hole exists between ad supported and standard AYCE premium that can be filled with niche services and innovations such as Amazon Echo
  • In the US there are X different streaming video subscription main price points, ranging from $X a month to $X, compared to X for music
  • Though emerging market pricing is more diverse, on a Purchasing Power Parity (PPP) basis many price points are equivalent to much more than $X

Companies and services mentioned in this report: Amazon, Amazon Echo, Anghami, Blinkbox, CÜR Music, Deezer, Disciple Media, Facebook, France Telecom, FreqsTV, GigRev, Hulu, MusicQubed, Naxos, Orange, Pandora, psonar, Rokmobile, Spinlet, Spinnr, Spotify, SupaPass, QQ Music, The Overflow, YouTube

Charts: 16
Pages: 6
Words: 3,573
Includes PDF, Slides and data set