Each week, The MBW Review gives our take on some of the biggest news stories of the previous seven days. This time, we react to the IFPI’s latest global music industry numbers – and we might do so again this week. The MBW Review is supported by FUGA. (The views in these articles are those of the writer and are not necessarily endorsed by our supporter.)
The music industry in the UK and Europe has grown used to the idea of a $9.99/£9.99/€9.99-per month premium streaming customer.
Even YouTube’s subs service in the US, YouTube Red, has mirrored it.
Yet to transpose this trend with the idea that all premium subscribers are paying $9.99 a month would be an error.
Because the truth is, on average, they’re paying a third of that figure.
Why? For one thing, outside of the US and Europe, the actual price in US dollars people are paying for unlimited streaming varies greatly – especially in territories that are economically challenged.
A recent example: Spotify Premium has just launched in Indonesia for Rp 49,990 per month. That’s the equivalent of US $3.80, or $46 a year.
Apple Music, meanwhile, made a bold move by launching in China in September last year, but did so at a standard monthly price of 10 RMB – the equivalent of just US $1.50.
In addition, Spotify and others have been heavily discounting their initial subscription price of late to bump up their premium armies.
In the last quarter of 2015, Daniel Ek’s firm ran a very aggressive deal to tempt in new punters – offering three months of premium Spotify for just $1 in the US market.
“We can reasonably estimate that the average streaming subscriber paid $3.50 a month in 2015. That’s Less than a dollar a week. For all the music ever made.”
And then there are long-running bundle deals; whereby the amount of cash coming back to streaming services is dependent on the offer they have secured with telco partners.
All in all then, the idea of the ‘standard $9.99/£9.99/€9.99 streaming customer’ is a bit of a misnomer.
Today, more so than ever.
According to IFPI’s new numbers for last year’s global recorded music business, premium streaming services generated $2.0bn for labels and artists – across 68m paying customers.
That equates to an AARPU (Average Annual Revenue Per User) for the music biz of $29.41 across 2015.
Divide that by 12 months, and the true average monthly amount that each subscriber is generating becomes clear: $2.45.
It’s important to say ‘generating’ instead of ‘paying’ as the IFPI’s data is compiled from wholesale figures – ie. the cash coming into labels after a streaming service’s margin is removed.
In most cases (Spotify, Apple Music, Deezer etc.) this margin stands at around 30%.
We can therefore reasonably estimate that the average streaming subscriber paid somewhere in the region of $3.50 per month throughout 2015 – an annual tally of $42.
To continue the divisional fun (in every sense of the word): that payment equates to around $0.87 a week, and just $0.12 a day.
Less than a dollar a week. For all the music in the world ever made.
A dollar. Also known as: the price of a song on iTunes.
Now, those subscribers on a streaming promotion – Spotify’s $1 for three months deal, for example – are clearly benefiting from a loss leader strategy, after which they will revert to the standard monthly payment.
This should bring up the average revenue coming from these consumers across the course of 2016.
Yet if you’re feeling a little exasperated by how little $3.50 a month seems for (almost) all the music in the world, check this.
According to IFPI’s figures, 900m people played music on ad-funded platforms in 2015, which generated a total of $634m.
That would mean that each music listener on ad-funded platforms – such as YouTube – only contributed $0.70 to the music industry across the whole of last year.
That works out at less than six US cents a month.
Or, alternatively, not far off one cent a week.
The MBW Review is supported by FUGA, the high-end technology partner for content owners and distributors. FUGA is the number one choice for some of the largest labels, management companies and distributors worldwide. With a broad array of services, its adaptable and flexible platform has been built, in conjunction with leading music partners, to provide seamless integration and meet rapidly evolving industry requirements. Learn more at www.fuga.com
Music Business Worldwide