Listen to Our Music (But Please Not Too Much) — Music Streaming Services
Services like Spotify and Apple Music pay record labels and distributors on a per stream basis. This is a simple breakdown of how much they pay.
On occasion artists and labels get additional money to have their music be exclusive to a platform. However exclusives are apparently losing momentum as they could hurt overall revenue.
So the primary goal of these streaming companies is to have users listen to music on their platform for about $10/month or with some ad-supported services (like Spotify). Now the latter model is a bit different. It’s an appetizer to attract new users with the idea that some will convert to premium services. And even if they don’t the ads make it somewhat cost-effective for the company. The focus of this post is on the paid-model dependent services.
Once you are successful in signing up a premium member, as long as you provide a quality service most users won’t leave (personally speaking Spotify suckered me in good and I’m glad I don’t “borrow” music anymore). As result you have a very healthy revenue stream per user.
The question is if you already have users who are highly sticky do you want them to listen to more or less music on your service? The answer is most likely less.
These services want users to listen to enough music so that they keep on coming back to use and pay for the service. But not enough so that the cost of overall streams per user is greater than their monthly fee. Right now it’s about 2500 streams a month on Spotify or about 7 days of listening (highly unlikely). Ideally I’m sure they prefer their users listen next to nothing so that they don’t have to pay anything to the labels and they can just collect that monthly fee.
All that said you can’t really fault them for wanting less listening per user, they run a for-profit business (Spotify is a fantastic product). But it is definitely interesting that for music streaming service providers, their performance is majorly tied to users listening less music.
Some more data on this.
And of course this applies to many other businesses — cable, internet, cell phone service, even gym memberships.
