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Digital Watch: If Streaming Music Were Cheaper, but Limited, Would Listeners Buy?

Terrestrial and satellite radio still lead music discovery in the U.S. according to Nielsen’s new 2015 Music 360 report, released this week. Although 75% of the population now reports listening to music online, 61% of Americans say they found out about new music from radio. Surprisingly, this represents a 7% increase over 2014.

Despite the growth in online listening, there are still challenges for streaming services. Only 9% of people say they are somewhat or very likely to subscribe to a paid service in the next 6 months, with the top reasons being that they are too expensive, music can be streamed for free, and that people don’t think they’ll use the service enough to justify the cost.

Those reasons reminded me of a recent blog post by music industry analyst Mark Mulligan who argues that the “all-you-can-eat” access to an enormous catalog of music provided by services like Spotify and Apple Music is actually more than what the average person wants. He says these services and the roughly $10/month price combination “constrains appeal to the aficionados and the upper end of the mainstream.”

Instead, Mulligan suggests that “mainstreamers” may be more interested in subscriptions costing $3 or $4 a month for access to apps serving up genre-specific apps that feature “a dozen curated playlists, a handful of featured albums and a couple of radio stations.”

I find myself agreeing with Mulligan, in spirit, if not in absolute specifics. Although I happen to really enjoy the deep catalog of my music subscription, I also recognize that I am–and always have been–an outlier. I’m a music nerd and and audiophile (a deadly combo, I know), who also owns thousands of CDs and hundreds of vinyl LPs. I suspect there are millions like me in the US, but probably not enough to make even just one of the paid music services float.

While ten years ago I might have bought several full-price albums a month–adding up to much more than the cost of a Spotify subscription–most people probably bought only a handful a year. Today that person–who may only buy individual song downloads now–may be willing to spend about $50 a year on music, which is roughly equivalent to what her music budget has always been. By that logic a $4/month service seems about right.

Where I differ with Mulligan is his supposition that people would be happy with genre-specific apps. My experience and intuition is that most music listeners like more than one genre of music. Someone who likes Taylor Swift probably likes country and pop music, for instance.

However, taking a cue from over-the-top video services, this average listener might be interested in something that is more like Netflix or Hulu. That is, a service that offers a much smaller catalog of music than Spotify or Apple Music, but which crosses genres and periods. Neither video service offers up a comprehensive catalog of films or television available in the U.S., but each has a decent mix of new releases, combined with classics and obscurities.

I could imagine a music service that emphasized on demand access to selected tracks and singles from the Billboard 200 for folks who want to keep up on what’s popular across genres, or a separate one that focuses on the Hot 100, for listeners most interested in the hottest tracks. Providing immediate access to these tracks–combined with a curated selection of older tunes–might be just the thing for listeners who would otherwise listen to contemporary hit radio, but would like more control, without commercials.

What I don’t know is if such a service would actually be less expensive to operate than a Spotify. However, it may just be a numbers game–if Spotify could offer more constrained, but cheaper, services to many more subscribers the influx of cash might might be plenty to offset the additional streaming hours. Such service could have listening limits, capping a subscriber at maybe 20 hours a week or 80 hours a month, which would also keep royalty costs in line with the subscription price.

Adding curated playlists and stations to the mix would probably also help attract listeners, though I think on demand access is critical feature. We have to imagine someone spending much of their music budget with streaming, and one of the main reasons to buy a track is to listen to it whenever you want. So even if the new service doesn’t offer every track someone might want, as long as it offers enough songs that someone wants to hear, whenever she wants, a $3 or $4 monthly price still will be attractive. It may also be a better gateway to an unlimited plan down the line.

Funnily enough, as I was writing this it occurred to me that I was sort of describing a service that already exists. Amazon Prime Music offers a much smaller catalog than Spotify or Pandora, but available on-demand and ad-free. It does feature new albums, along with curated genre and thematic playlists drawn from that catalog. I’ve described it as the bubble gum in the pack of baseball cards, since it’s unlike anyone subscribes to Amazon prime to get the music–they’re more typically after the free 2-day shipping.

Amazon Prime costs $99 a year, but also includes commercial free streaming movies and TV and free Kindle books. At just $20 less than a year of Spotify or Apple Music that hardly makes Amazon Prime Music a bargain on its own. However, it might be a hit as a stand-alone service if it were available for half as much.

Of course, it could also be the case that most people are satisfied with streaming songs from YouTube and putting up with ads from Spotify’s and Pandora’s free tiers. But if Spotify actually follows through in imposing rumored limits on its free commercial-supported tier–like reserving new releases only for paid subscribers–then the low-priced, limited access service starts looking pretty good.

Let me know what you think. Do you pay for a streaming music service? Would you pay for a cheaper service, even if it had a slimmer selection? Share your thoughts in the comments.


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