The Crisis in Streaming Music Adoption

A few thoughts, quickly assembled and barely edited because I’m getting ready for the 15th Future of Music Policy Summit (Oct. 26–27, Georgetown University, Washington, DC).

Despite better-than-some-may-have-expected Apple Music numbers (definitely check out Mark Mulligan’s analysis), streaming subscription may soon hit a wall.

Here’s why.

If we were to entertain the oft-repeated claim that as streaming music “scales,” artist payouts will increase (at least for those who achieve a certain level of plays), there is still the matter of how big paid subscription can get. My sense is that, much like radio in the “old days,” the passerby audience is much larger than the paying audience (though many ad-subsidized listeners still contribute to other parts of the music economy). I’d love to see some data here. Who has it, and who might be brave (or foolhardy) enough to share it?

The big players are clearly not fond of freemium models. But even if we drowned YouTube in the bathtub, made non-interactive impossible except for companies that can integrate it into other offerings, and turned Spotify into a subscription-only service, there there may still be a cap on subscription music growth. It’s entirely possible that if we did these things, paid on-demand would gain additional traction. Of course, there will always be people who simply don’t want to pay and will find ways not to. Aggressive copyright enforcement might help staunch the bleeding; it could also kick off an encryption arms race in which content providers are always several steps behind the freehadists.

Here’s another thing to consider: music is competing against a mind-boggling array of entertainment offerings. It is also competing against its own history. In 2015, the expectation is that everything is available one way or another. There are additional stressors. The cable television bundle is beginning to come apart, which means that any network in a position to develop a standalone subscription app will do so. Nobody yet knows what price the market will bear (and if they say they do, they’re selling something—most likely a subscription service). Regardless, if a consumer is subscribing to three premium cable apps, two second-tier cable apps, Hulu, Netflix and Prime, there’s probably not a lot of discretionary income left over for standalone music subscription services.

And let’s also factor in the cost of broadband, wireline and mobile. It’s north of 100 bucks on both sides at this point, and that’s not counting data overages. If you’re paying that much to access the pipe, it surely means less money to spend on subscription entertainment offerings of any kind. Of course, torrenting is free. And I guarantee Comcast understands this, even if they own NBC-Universal.

All of these factors may limit growth of subscription interactive music services. Throw in the bad PR from artists, and you’ve got a potential crisis in adoption.

And what happens then?