Mark Mulligan posted a very perceptive blog post on what a price drop has done for Spotify’s premium numbers in the last quarter. The company featured three different initiatives: a family plan and student plan that cut the monthly cost in half, and a special that offered three months of service for a buck a month.
Price has always been a big issue for streaming services. When the first mobile apps were introduced, my company did consumer research about price for an on-demand streaming music service. The takeaway: $5 a month was considered ideal, $8 a month was considered pricey, but still attractive and $10 a month and above was far too much to be considered by a majority of potential customers.
Instead of creating a huge pool of potential customers, full catalog on-demand streaming services have become services that only the most ardent music fans would consider. Labels have attempted to keep the premium tier at $10 to protect their current revenue, but unfortunately it has limited its mass appeal. The upshot: very few people subscribe to services. Even Spotify’s 15 million premium subs could be considered disappointing in comparison to other subscription companies like Netflix or Sirius XM.
But with Spotify showing significant growth in subs with lower prices and Apple pressuring labels to cut prices, expect 2015 to be the year that we have a significant shuffling in premium pricing.
Music Industry Blog: What Spotify’s December Growth Tells Us About Pricing