With music streaming now over 10 years old and really hitting its stride as the power behind the music industry’s return to growth and Spotify marking a year as a public company, now is as good a time as any to take stock of this transformative technology.
In the spirit of my regular series on the most misunderstood people in pop (most recent entry #6 - The Bee Gees) I’d like to turn the lens onto music streaming. While it has rapidly become critical to the music industry health, there’s still plenty of unanswered questions and things we just don’t know or understand about it.
This is not meant to be an exhaustive list, and others will have their own thoughts, but this is my current top five things we still don’t understand about music streaming.
1. How long will 9.99 be the standard price point? 9.99 has been the basic price for music subscriptions for over 10 years now.
It isn’t of course the only streaming price out there. There have been attempts to introduce other prices, for example 19.99 for high resolution music, family plans cost 14.99 and if you subscribe to a non-Apple Music service via the App Store it’ll cost you 12.99. But 9.99 has stubbornly remained the standard for music streaming unlike all other media sectors.
When you have a market with very similar offers dominated by a small number of players that’s a perfect recipe for the kind of pricing inertia we’ve seen. Nobody wants to risk jumping first to change their terms in case their competitors exploit that, and even if they also wanted to follow suit they’d have to be extremely careful so as not to arouse anti-trust suspicion.
I wrote recently on my thoughts for how this impasse could be broken - essentially developing new offerings at a range of price points so that 9.99 is no longer the only game in town. A brand new entrant could charge in and shake things up by undercutting the incumbents to aggressively gain market share, as Jio has in the Indian mobile market. Jio only launched in late 2015 and has grown incredibly rapidly to become the third largest network through a disruptive and innovative pricing strategy that slashed the costs to consumers.
Or maybe it’s never going to change. If we’d been told 10 years ago that 9.99 would be unchanged as the standard subscription price point we’d be highly dubious and sceptical. But we’d be wrong. How sure can we be that the next 10 years will see any change? Nobody knows.
2. Is Spotify’s destiny independence or takeover?
Like all tech start ups, a future stock market listing was only one of the potential roads Spotify could have ended up taking. Indeed for much of its early existence it seemed a good candidate for acquisition, and according to the recent Spotify Teardown book that was something the founders were very much aware of as well, in particular from Facebook, with whom at times they were quite closely entwined.
Obviously that didn’t happen and while Spotify’s market capitalisation may currently be below its peak last year of $35bn it’s still a hefty $25+ billion. Add in a likely premium and any takeover bid could easily be $30bn or more. That’s a lot of money for anyone, especially to buy a company which has never made a profit. And not even touching on whether the company’s leadership would be supportive or interested in staying on under different ownership.
Not for the first time Spotify sits in a rather unique historical space. It’s a major force in the music business, but it’s neither part of an existing music player, technology or hardware company, or a business that has music as only part of its portfolio. It’s a giant standalone force in music.
So what’s going to happen? Will Spotify inevitably end up as part of a larger concern? Given its size that doesn’t leave a huge number of suitors - either its current rivals if they wanted to bulk up - Apple/Amazon/Google, etc, or a company that feels a music gap in its portfolio. Facebook still pops up as a possible, or maybe Liberty Media might want to combine Spotify with its existing SiriusXM and Pandora services. Maybe.
Or maybe Spotify will continue to expand outside of music. It’s currently expanding rapidly into podcasts and may want to go further into other media and subscription products.
Or it might continue happily as a giant of the music and audio streaming space and stick to that.
We just don’t know.
3. Will music be bundled with other entertainment?
Following on from that, is music streaming going to be able to continue as a separate service from any provider or is it inevitably going to end up bundled with other entertainment and media subscriptions?
Demands on consumers' subscription dollars/euros/pounds/etc are only increasing with the impending launch of Disney+, Apple’s various pluses, and others. Music had a head start in the digital subscription marketplace, but is it sustainable as a separate monthly bill? Either through consumer demands for a more general all encompassing entertainment subscription bundle or as an effect of future consolidation in the media and entertainment sector, does music have a long term future as a standalone subscription service apart from for the most avid music consumers?
In the pre-subscription age most consumers didn’t pay anything like 9.99 a month (120 a year) on music. Are we sure they’re going to now?
4. What is the future for countries who punch above their weight?
Almost since the birth of recording the vast majority of global stars and hits have come from America. With its vast home market, major US-based companies and a continent full of native speakers of the closest we have to a global language, English, American artists and American music have consistently taken the lion’s share of international successes.
Following America has been a second tier of also very successful countries whose musicians have taken a larger share of the international market than their populations would suggest. Mostly English speaking - UK, Canada, Australia, with the notable addition of Sweden which has a high level of English proficiency.
But in the streaming world, things have completely changed. While there is a difference in the value of paid for streams versus free streams in the charts, ultimately every stream counts and so sheer population size comes into its own.
We’ve already seen this effect with the explosion of the last few years of Latin music and a succession of Spanish language international hits, propelled by the 400+ million Spanish speakers in the world and their many areas of shared culture.
Lots of other linguistic and cultural giants are now part of the global playlist count in a way that they never were in the old days of record sales. Mandarin Chinese obviously comes in at number one with a billion odd native speakers, and there are other massive shared cultures, for example in India, or the Arab countries. Clearly these aren’t monocultures and there are multiple different languages and dialects at play, but the point is English isn’t the the only game in town any more for the biggest global hits.
As others have pointed out that doesn’t mean that a big hit in China or India say will necessarily crossover to other countries and regions, but the days of the most popular and listened to songs in the world being almost exclusively in English are over.
America is likely to continue to mint global stars given its huge and continuing soft power on so many levels. But will the next tier, the UKs and the Swedens, who have benefited mightily from English being the lingua franca of pop music, continue to punch above their weight? We just don’t know.
5. What comes next?
The history of recorded music has been a succession of formats and media who have had a period of dominance only to be succeeded by something new. From 78 records to LPs, AM radio to MTV, CDs to downloads and so forth, being the dominant platform for music listening and discovery is never fixed in time for very long.
Streaming music and its business model cousin subscriptions are where we’re currently at, but what’s next? Will there actually be a next or is this basically it?
The history fan in me is never impressed with any ‘end of history’ arguments about anything. In all areas of life throughout the human experience we have repeatedly fallen for the idea that the current state of things is the end point in a long line of evolution. That we uniquely are living in and experiencing perfection, there’s nothing further to find or develop. This is it.
And without exception, such hubristic ideas have been utterly wrong, laughably so the further into the past they drift. Streaming and subscriptions can’t be the end point of anything, just the today point. And one over 10 years old now. From experience the seeds of the next step, the next leap, should already have been well planted. So what will tomorrow look like?
Voice is obviously a potential contender, as is the augmented reality/virtual reality world. Today’s most exciting other tech ideas, from AI to blockchain, could provide some answers, while Chinese giant Tencent Music has had great success creating revenue and profits not from music streaming itself, but from monetising fandom around music. Another idea related to this is Mark Mulligan’s on social music.
It could be a combination of elements of all of the above, or of none of them. A music listening format or experience could be waiting in the wings, currently quietly under the radar, or could something be hiding in plain sight that we are all missing?
Or maybe I’m wrong and we really have uniquely reached an end of history moment, and streaming and subscriptions are the end point in the evolution of music consumption.
The truth is, we have no idea. Nobody does. Does that make you scared or excited?