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Nielsen report confirms the streaming sector’s pricing and freemium challenges

By | Published on Thursday 17 September 2015

Nielsen SoundScan

Although based on a sample of just a few thousand, and exclusively US-focused, the latest Music 360 report from Nielsen, published this week, seems to confirm what a lot of commentators have been saying about the next phase of growth in streaming music, that price point remains an issue.

Coming as the three-month free trial period reaches its final few weeks for the day-one-adopters of Apple Music, and with the tech giant set to ramp up its marketing efforts as it tries to persuade people to actually pay to continue receiving its on-demand streams, the Nielsen study says 46% of those surveyed still give the $10 a month subscription price of Spotify and Apple Music as their reason for not signing up. 38% say they just don’t think they’d use said services enough to justify that kind of monthly commitment.

We know that Apple wanted to enter the streaming market with a considerably cheaper price point, though with the tech firm keen to pretty much match the Spotify service, the music business resisted, nervous of allowing Apple Music such a competitive advantage when its more established rival in the streaming music space is so key to the one record industry revenue stream that is in mega-growth.

But everyone knows that for streaming music to go truly mainstream – and however impressive Spotify and Apple Music’s user figures may be, worldwide they are still pretty modest – the music industry needs to develop mid-market packages that are more affordable, and which can be bundled up with non-premium mobile phone subscriptions.

Previous attempts at variable pricing in streaming have tended to be based around functionality or sound quality (pay more for mobile access or higher quality audio), though it seems likely that the best way to provide a range of price points is to slice up the content, cable TV style, offering an entry level option closer to $3-4 a month, but with some content – whether brand new, specially curated, premier league acts – costing extra.

Though those already dabbling in that space will quickly hone in on the other reason given in the Nielsen survey for not signing up to the $10 a month package, that consumers can stream music for free elsewhere, which may mean the freemium levels of Spotify and Deezer, or more likely YouTube and SoundCloud. Which brings us back to that old (not really that old) debate.

YouTube and SoundCloud’s power, of course, is in their respective role as marketing channels. In that while labels are trying to pressure the big freemium platforms to find and increase revenues in which rights owners can share – by talking tough on safe harbour reform and getting ever more prolific with takedowns – the marketing teams at the same record companies say they need YouTube and SoundCloud to promo new material.

Actually, the Nielsen report reckons that more traditional channels, especially radio, remain some of the most important music discovery platforms for consumers, though that will depend very much on demographics of course. So the YouTube/SoundCloud dilemma remains.

Meanwhile, the former continues to try and distract the industry – maybe – with its continued promise that Music Key will go properly live, so that the Google-owned service itself can play its part in turning freemium users into premium customers.

For a moment yesterday it looked like Music Key was coming out of beta as early adopters signed up to the currently free in-development service received an email telling them they would now be charged. But when Music Ally checked in with the Googlers, it turned out that email had been sent out by mistake “due to a bug in our system”.

We’re still trying to work out whether the press release announcing the launch of Music Key last year was also sent out due to a bug in the system.



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