It seems like streaming services are all the rage lately. Beats just released their app (known mostly for headphones, the company bought MOG, and re-branded it) which gives you unlimited downloads and access across 10 devices for $14.99 a month. Spotify has now removed the limit to the number of songs subscribers on the free plan can access each month, as well. So the services are upping the ante by trying feverishly to differentiate themselves. Beats is adding a human element by bringing curators to the service instead of a computer algorithm to help you discover songs/artists you like. Spotify is stressing its social utilities and focusing on playlists based on your mood.
To carve out market share, the streaming services have offered subscriptions at a ridiculously low price: $9.99 a month on average, or even better discounts if you buy a year’s worth in advance. The paradigm shift for the general public has been moving from “owning” songs to “renting” them. While the streaming services seem to be taking hold, there’s new research that shows they can never be profitable. According to the report, the number of streaming users will balloon to 1.7 billion by 2017, up from 767 million in 2013. Paid subscribers will leap to 125 million, up from 36 million currently. It seems like the labels are the culprits: taking 70% of the profits for themselves in royalties. On top of that, the freemium model that Spotify has adopted is convincing consumers that music is a commodity, and not really worth paying for. And, of course, there’s the controversy with what the artists are actually being paid.
As the services evolve, they’re going to have to figure out a revenue model that allows for scalability. And consumers, at some point, are going to have to pay up.