2014: Music Services Lost Subscribers…And That’s A Good Thing

Last year was a banner year for music subscription in the US. The RIAA reported big time growth, primarily driven by Spotify’s gains in paying subscribers.

But at the same time, the market stalled a bit in terms of actual subscribers. The RIAA in its midyear report had paid subscribers at 7.8 million, but by the time we got to the end of the year, it was only 7.7, a loss of 100k subs. So what gives?

Well, we had another year of consolidation. Two big players came off the market. The biggest driver of losses is Muve Music, which at its peak, reportedly had two million subscribers. Granted those subs weren’t generating much in revenue for the industry, but it was a big number. AT&T acquired Muve’s parent Cricket Wireless and then treated it like a redheaded stepchild.

Conventional wisdom is that Muve delivered a big number of subs, but it was primarily a sleeper service, where most of the users were inactive. There was a ton of media flaunting how great Muve was for the industry, which in retrospect, now seems absurd. AT&T shuttled off Muve’s subscribers to Deezer in January. However, these kinds of deals generally mean retaining 50 percent of subscribers at best. I’ve seen acquisitions deliver less than 30 percent of subscribers to the new service.

After a big marketing blitz, Beats turned off their acquisition channels once Apple purchased the company, which adversely affected its numbers.

Just totaling up subscribers isn’t the best way to judge success of subscriber. The key number to get the total picture is revenue plus subs. In the first half of this year, streaming subs increased to $371.4 million, and increased even more in the second half to total $799 million for the year.

Perhaps the old adage about lies, damn lies and statistics applies here. It’s easy to fall into the trap of writing provocative headlines based on precursory numbers. But it requires digging a level deeper to understand what the numbers actually mean. Spotify had a great year in 2014. In some respects the company, along with the massive increase of internet radio revenue, kept the industry afloat through another transition.

There’s no need to bemoan the loss of garbage subscribers. We need to focus on revenue and subscribers to get a true sense of what streaming subscribers is delivering to the industry—and where the real growth will come from.

More Reading

RIAA: 2014 Industry Shipment and Revenue Report

CNETCricket’s Deezer Music Partnership Rises From The Ashes of Muve Music

Fierce WirelessCricket’s Muve Music’s Fate Is Up In Air Following AT&T Deal

Billboard: Muve Music Surpasses 2 Million Subscriber In US

6 thoughts on “2014: Music Services Lost Subscribers…And That’s A Good Thing

  1. Hi Jon,

    Excellent posts

    2 Questions if you wouldn’t mine.

    If rumors are true, and Apple launches for $10 per month. What would they need to do for the service to be profitable? About how many users?

    If you were Apple, what would you do to regain the advantage in music?

    Thanks

    1. Hi Logan,

      On the second, Apple dominates retail. It is the largest music retailer. So I already think it has a big advantage over everyone in the industry. Granted, digital sales are starting to slip and it needs to address streaming. Which is why I think the product is coming.

      On the first, it would depend on the deals with labels and publishers and its subscriber acquisition costs. Since it already owns a massive channel (iTunes App Store) one could say that its SAC could be negligible, but that depends on if the company has any success going directly through its channels. Apple is also a huge company with enormous costs for its worldwide reach, so what markets streaming is offered in is another factor in costs. There was a report out from MIDIA that suggested as many as 75 million US consumers would consider the Apple streaming product at $7.99. Apparently the price is $9.99 so we’ll see if Apple is able to get anywhere near Spotify’s worldwide subscribers. But I would think something in the 20 million range for a company without a free tier would start to see a profit.

  2. Jon,
    Thanks for giving such a good rundown of the subscription trends in 2014. One comment about the headline though – the industry didn’t lose subscriptions in 2014 – in fact year-over-year the industry gained subscriptions by a pretty significant amount – from 6.2 million in 2013 to 7.7 million for full year 2014 (up 26%).
    Thanks,
    Josh Friedlander
    RIAA

    1. Hi Josh,

      In this case, I’m referring to those low-revenue inactive subscribers that were lost, not the overall industry. I think if someone reads the whole piece, they will get the context. It was a very good year for subscription.

      And thanks for all your help with the data.

      Jon

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