Why aren’t people paying for music streaming subscriptions?

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Did you know less than 1% of the world’s population are currently paying for on-demand music streaming services?

The wider industry continues to hope that the likes of Spotify and Apple Music will provide salvation – and early signs from the Nordics and other territories certainly provide reason for hope.

But why are the vast majority of people refusing to put their hand in their pocket for ‘all the music in the world’?

New research out of the US from Nielsen Music brings us closer to the answer.

The research company has conducted what it calls ‘a comprehensive, in-depth study of consumer interaction with music in the United States’ for its Nielsen Music 360 Report – analysing the responses of more than 3,300 US music fans.

The Report covers a range of topics and provides reason to be cheerful: apparently 75% of US consumers now listen to music online in a typical week, for example.

There’s also a shot in the arm for radio.

According to Nielsen’s respondents, 61% of people say they discover new music on the wireless today, which has actually increased from the 57% who agreed in 2014.

Meanwhile, streaming services, including YouTube, inform 27% of people about new music.

That’s less than a third of radio’s influence, but also behind the recommendations of friends and family (45%) and movies / movie soundtracks (31%).

Radio vs streaming

There’s good news too for the growth of on-demand streaming revenues.

The share of this category’s total music spending across Nielsen’s research audience has doubled in the past year to 7%.

Combined with subscription radio services such as Pandora and Sirius XM, this percentage reaches 18%.

Yet as you can see, this category trails way behind live music, which claims 32% of every dollar, or 52% including DJ shows, festivals and small concerts.

Nielsenspend

Nielsen then directly addresses the elephant in the room: why aren’t more people paying a $9.99 subscription price for streaming?

The ‘under 1%’ stat that started this article, by the way, comes from the fact that out of 7 billion people in the world, just 41m coughed up for an on-demand music streaming subscription last year, according to the IFPI – 0.58% of the world’s populace.

That’s lower than the total number of people paying for a Netflix subscription around the world every month.

Even just in the US, we can deduce that music streaming isn’t exactly flying just yet.

According to the IFPI, paid-for music streaming services accrued $494.7m in the US in 2014. Across a population of 319m people, that worked out at an average of just $1.55 per person.

Another way to slice those figures: $494.7m equates to around 4.1m X $120-per-year subscriptions.

However, as MBW discovered earlier this year, the true monthly revenue generated by the average global Spotify sub in 2014 stood at €5.45 ($6.12) when special offers and telco bundles were applied – or $73.44 per year.

On this basis, there would have been around 6.7m paying on-demand streaming subs in the US last year.

For argument’s sake, let’s use that generous estimate.

It’s the equivalent of 2.1% of the total US population.

Conclusively, then, a streaming revolution is a fair way off right now.

So what’s the hold up?

According to Nielsen, the top three reasons for people refusing to subscribe to a streaming platform are pretty conclusive:

  • 46% of people said they are too expensive;
  • 42% said they can stream music for free elsewhere;
  • 38% said they don’t think they’d use a streaming service enough

What on earth could those 42% – the ‘stream music for free elsewhere’ mob – be getting at?

Need we remind you of these two little charts…

YoutuberevsUSYT1

It is also worth pointing out the biggest reason Nielsen’s respondents gave for subscribing to a streaming service:

  • 83% said it was the price

The combination of facts above are not unrelated.

Elsewhere in the Nielsen report, non-subscribing music fans were asked how likely it is that they will start paying for an streaming platform in the next six months.

  • 9% said it was very or somewhat likely;
  • 13% said it was neither likely nor unlikely;
  • 78% said it was somewhat or very unlikely

Worth noting that these responses were collected between July and August this year – after the launch of Apple Music’s much-heralded three month free trial.

The music business has its work cut out…

You can download a taster of the Nielsen 360 Music Report through here. Email know@nielsen.com to find out how you can get hold of the full, in-depth survey.Music Business Worldwide

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  • Atomic Tango™

    YOUNG
    PEOPLE ARE BROKE. It’s never been more expensive to be a young person
    in the big city, and the college grads have never been in more debt.
    They’re already paying for monthly cell service and likely internet.
    Where do they have the cash for more subscription services? It’s not a
    matter of changing tastes, it’s simply good ol’ fashioned budgeting.

    • Marianne

      Completely agree, I cut my spotify subscription last year along with all other non-utilities simply because I couldn’t afford them anymore – wages didn’t increase, cost of living did. I listen to new music on Soundcloud and HypeM so as long as music is available for free somewhere, I won’t consider it as a necessary “utility bill”. Not proud of this but I think Atomic Tango makes a great point.

    • Erik Vansaren

      Young people who? teenagers? well you had to be a teenager in 80s to see how much did cost a CD. “Young people are broke” was our motto, since 96s you can download a track for few cents and still people refuse to do it but they have money for all the rest.

      The real truth is that you, like many others, are unable to recognize the value of the work of someone else, in this case of an artist.

      • ECE

        Value is a function of resource demand and scarcity. When a good can be copied almost infinitely at what is effectively zero cost, the value of that good approaches zero.

        My lawnmower’s value would drop to zero, for example, if I could copy it as often as I’d like, for free.

        This definition of value is very inconvenient to artists (I am one myself, after a fashion), particularly in the digital-only realm, so it is popular to latch onto the fiction that somehow, objective value is a function of a vaguely defined meta-object of time/labor contributed by the worker/creator.

        Exceptions include limited-run physical media, or merchandise.

        However you look at the concept of value, streaming services are a losing proposition for consumers. You never actually purchase any music; you only pay for the operations and maintenance of the distribution platform, and I suspect that at some point, a mass of people will figure it out.

        Like with sports, the market determines the compensation. If the market says your product is worth 0, I can see how that might hurt, but there’s really no point to getting upset over it.

  • Nikgee

    The comments below are utter rubbish. Comments like “It’s more expensive to be a young person…” So why must you have the latest iPhone? That designer clothing, the designer shades, To listen to Hi-Fi recorded sound come out of a tinny one inch speaker?
    And now we have today’s culture of a rip off society. You see the politicians do it on a daily basis, you see traders, bankers, and the list goes on until it reaches… YOU! Now you can see a problem, you are at the bottom of the pile of rip off merchants, frantically you look around to rip off someone else, or look for the dog to kick, just so you can feel a little better… you don’t feel right ripping off your mates so you look around the internet… A faceless organization like Spotify which you can rip off, because you can listen for free.
    So why not record it? It was done in the days of Napster and other peer to peer services… it was free. Hands up those who didn’t at some point use a free music download site since being on the internet (don’t worry, you can’t be seen holding up your hand).
    It seems the musician is the dog of todays lifestyle. He or she (from this point I’ll refer to musicians as a he) has had to practice his art for thousands of hours before committing to his trade, he had to purchase his instruments (from rip off merchants), he has to find places for his colleagues to practice, he does most of his own promotion, he has to arrange transport to a gig that offers to let him play for free for exposure… wtf? He then plays another gig for a few quid in a seedy dive somewhere, this money is split between his mates the rip-off hire company the rip-off petrol stations, the rip-off restaurants where they have to eat. What’s left has to fund their lodgings from their rip-off landlords, and probably a young family. He also has to fund the studio time to record a CD, which requires yet more practice time.
    And yet you complain about spending $9.99 for a years subscription to a music streaming site where you can, potentially, listen to over 100,000 5 minute long songs in a year.

  • Tim Tommersen

    It’s difficult. I canceld Apple Music cause I can only play the music as long as I’m paying. In the end I paid for something I never can hold in my hands. In plus I can’t even put the songs on a cd. It’s ugly. I still buy track by track to support my favorite artists. It’s my fucking music then. So fuck apple.

  • David Bowcott

    Why should I pay not to stream 99.9% of the content on streams?