None louder: hello improved audio upsell, please meet consumer indifference

The following MBW column comes from Eamonn Forde (pictured inset), a long-time music industry journalist, and the author of The Final Days of EMI: Selling the PigHis new book, Leaving The Building: The Lucrative Afterlife of Music Estates, is out now via Omnibus Press.

Eamonn Forde
It began with a roar but in less than a year it had become a whimper – which was, depending on whether or not you are Alanis Morissette, either ironic or just symbolic. 

In February 2021, Spotify used its Stream On event to bullishly announce that its high-res audio tier was finally coming.

It would be called Spotify HiFi and it would “begin rolling out in select markets later this year” according to the company.

It was positioned as a landmark product launch for Spotify because “[h]igh-quality music streaming is consistently one of the most requested new features by our users”.

And what service today can survive without listening to its consumers? 

They even got Billie Eilish to appear in a video saying how great it would be to hear music as the creator intended. Billie Eilish! Finneas also showed up:

It was expected that, as with other (albeit niche in market share terms) high-res streaming options from the likes of Tidal and Deezer, this would be a way for Spotify to add a new “luxury” tier to its different subscription packages.

This could finally be the catalyst to justify increasing monthly subscription fees for those who wanted a premium aural upgrade. 

Prices being sanded down for students or bulk discounts being offered for families and couples would no longer have to provide a growth engine based more on user numbers than on revenues: high-res audio could bring in more listeners and, crucially, charge them more. Users would be up and revenues would be up: it would be a double digital miracle.

It was also positioned as a marketing slam dunk. This was a product that consumers were, by all accounts, practically ready to storm Spotify’s grandiose offices to get their hands (ears) on. Here was proof the service was investing in new features for a bolder future. They even had one of the biggest pop stars in the world putting their name to it. And Finneas. 

The music industry was avariciously licking its lips at the upsell opportunities for this (hopefully) luxury subscription tier when it eventually appeared. What could possibly go wrong? 

Well, as it turns out, a lot of things. 

The biggest, of course, was a broadside from Apple in May when it said it was bringing Spatial Audio to Apple Music to let subscribers “listen to more than 75 million songs in Lossless Audio — the way the artists created them in the studio”. Amazing. Another DSP seeing the upsell potential here. This was going to be a commercial pincer movement and those sunlit uplands were tantalisingly close. 

Except four words took the wind out of those sale sails. Apple’s improved audio would be available “at no additional cost”. It was simply another feature to hold existing subscribers where they were. More bang for the same number of bucks.

Then Amazon swiftly responded to Apple’s power play by saying that its own premium high-res tier, Amazon Music HD, would be extended to eligible Amazon Music Unlimited subscribers at the same price they were currently paying. 

This all, as you might expect, left Spotify in somewhat of a pickle. Would it bite the bullet and launch HiFi with an increased price point? Or would it lose its nerve and – like Nigel Tufnel from Spinal Tap explaining his customised amps – make its current service “one louder” but not charge extra for it? Would the subscription cost not even go up to 11 (dollars/pounds/euros)?

There was, for a very long time, radio silence from Spotify. (Please refer back to the Alanis Morissette-esque ironic/symbolic dichotomy above.)

In the end, a Spotify moderator called Yordan appeared on the Spotify Community thread where the Scarlet Pimpernel-like nature of Spotify HiFi was being discussed. “We know that HiFi quality audio is important to you,” he wrote in the first week of January. “We feel the same, and we’re excited to deliver a Spotify HiFi experience to Premium users in the future. But we don’t have timing details to share yet.”

Maybe its triumphant launch will come soon, high-res audio will go mainstream and the ARPU of Spotify subscribers will shoot through the roof. 

Or maybe – just maybe – it will dissolve into the background as most consumers out there do not want or care about “music in CD-quality, lossless audio format”. Or they certainly do not care enough to want to pay extra money for it. 

Let’s imagine it as two parallel conversations:

Conversation #1

Spotify: “Do you want CD-quality, lossless audio in your streaming service?”

Consumer: “No. I’m fine, thanks.”

Spotify: “It’s included free. Do you want it now?”

Consumer: “Not particularly, but seeing as it’s free, go on then.”

[Curtain falls]

Conversation #2

Spotify: “Do you want CD-quality, lossless audio in your streaming service?”

Consumer: “No. I’m fine, thanks.”

Spotify: “It costs twice as much as you are currently paying. Do you want it now?”

Consumer: “…”

[Exit, pursued by a bear]

(Of course, if Spotify launches HiFi, charges a hefty premium for it and it’s all a roaring success, I reserve the right to claim this piece was all a richly complex work of satire and that I didn’t actually mean any of it. Otherwise, like the current British government, I’ll simply deny that I said any of this.)

As with the two imaginary conversations above, there are two ways to look at high-res streaming and what it connotes. 

Way #1 to look at it: high-res streaming is the new DualDisc

The DualDisc (CD on one side, DVD on the other) was a short-lived format, launched in 2005, that few demanded and fewer still needed. It was really a gimmick format aimed at squeezing extra money out of fans before the physical market completely cratered. It was never the first-choice format for anyone. Its runaway success in the market was haughtily presumed by an industry that haughtily presumed too much and too often. It was never something many people would pay a premium for and it was ignominiously discontinued in 2009. 

There is a long history of failed formats in the music business – where they were wrong for the time or simply couldn’t compete with what was already established in the market. High-res could be a failed format too – but not in the general adoption sense; rather it could fail purely on economic terms as a standalone/premium format where it will just become “normalised” as part of a standard subscription. High-res will not be special; it will just be commonplace. 

The market justification for people wanting to pay extra for it becomes weaker by the day – a situation exacerbated by Apple and Amazon’s parallel moves. People will take it as part of a general refinement of their subscription but they would never think of it as something they should pay extra for.

Way #2 to look at it: high-res streaming sold at a premium is not the best ammunition in the middle of a pricing cold war

In the 1990s, the British newspaper industry entered into a bitter pricing war – initially started in the broadsheet market as The Times dropped its cover price from 45p to 30p to boost sales and steal a march on titles like The Telegraph and The Guardian

It was a tactic the tabloids quickly embraced in their sector, pushing prices down in order to try and drive their competitors to the wall. It has been returned to sporadically over the years – where the newspapers involved all boasted of offering much more for much less. None of them were audacious enough to offer more for more. 

And so it is in the streaming world. Scared to break from the pack, the default setting now seems to be offering more features for the same price. The scope of the core product grows but the cost to the consumer does not. 

Services know they cannot drop the price; they can only increase the features. 

The one feature some thought could wholly justify a mainstream service pulling a price hike out of its hat has now become neutralised with the fiscal vasectomy performed without anaesthetic last year by Amazon and Apple. It is unlikely Spotify will have – ahem – the balls to launch HiFi at a higher price. This is less of a pricing war and more of a feature war. Dial the extras up but never the cost.

The major mistake is that Spotify told its rivals what it was doing long before it actually did it – effectively showing them a drawing of its warheads and then strolling off to build them. This allowed those same rivals to develop and launch the greatest warhead deterrent of all – the same product but for no extra money.

What Spotify HiFi proves is you shouldn’t announce something and then take your sweet time actually taking it to market. That way your rivals can steal your thunder as they then look to steal your lunch. Or, in this case, steal your launch. 

The bitter lesson ringing in high-res audio in the industry’s ears here is this: a press release is not a product. Music Business Worldwide

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