Is there a big gap in the streaming music market for lower-priced subscriptions? Yes and no.
It’s not that there haven’t been companies exploring ways to offer streaming for £5 or less a month by taking a different approach to the £9.99-a-month on-demand services.
They just haven’t had the kind of success yet that evangelists for the idea of cheaper subscriptions have predicted once someone gets the model right.
One reason why the industry hasn’t thrown its weight behind the idea is a lack of hard data to prove that (for example) launching a fully on-demand service for half the price of Spotify, Deezer, Beats and the rest would reel in enough previously-price-conscious subscribers to make up for any decline in revenues from people trading down from £9.99 plans.
Until someone tries, nobody will know whether cheaper subscriptions are the next big leap forward for the music industry, or a disaster.
2015 may give us more of a steer on that question, with Apple pushing rightsholders on cheaper subscriptions, and Deezer poking again – with Cricket Wireless in the US – at the idea of a telco-subsidised model.
So it’s interesting to read economist David Touve’s latest blog post on this topic, drawing on a presentation he gave arguing that the largest “pools of revenue” for subscription-based streaming would be found at $4.99 or even $3.99 a month.
Oh, and he gave the presentation in… 2011. His workings are based on UK survey data from New Media Age asking people how much they’d spend on a subscription music service.
“The £3.99 price point would derive nearly ten-times the revenue of a £10.99 price point. That’s elasticity: a 50% drop in price led to a 400% increase in quantity demanded,” writes Touve.
The fact that four years on, the idea of a £3.99-a-month fully on-demand service remains un-launched in the west points to what Touve describes as other “forces that make it difficult for the music industry to think solely about total revenue” in this way.
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