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The Answer for On-Demand Music Services Is Listening Caps

KurtHanson-modIn a Billboard article published yesterday, journalist Glenn Peoples looks at speculation regarding the upcoming launch of iTunes’s on-demand music subscription service — i.e., the probable rebrand of Apple’s Beats Music service.

There’s some needless speculation in the article as to whether Apple’s goal is to hurt Spotify or simply grow the category of on-demand music subscription services. Of course, as with any competitor entering a new business category with an established leader, the answer is that it’s both.

In a more newsworthy point, Peoples reports that it’s starting to appear unlikely that Apple can offer a price point lower than Spotify’s (e.g., $7.99/month vs. the industry standard $9.99/month) because the labels won’t let it.

This is typically shortsighted record-industry behavior.

The vast majority of consumers currently don’t spend $120 a year on CD and MP3 purchases — in fact, the vast majority don’t spend $96 a year on music — so trying to sell them an annual subscription at such a high price point is not going to bring the masses into the product category.

Also, the average consumer sees clearly what the average music executive doesn’t: Music ought to cost less than movies. (Movies have audio plus video, whereas music only has only audio! Bingo, done. Q.E.D.)

Plus which, movies cost up to $100 million or more each to produce, and albums don’t.

(Side note: I’m always amused when recording artists talk about “the value of music” being a function of the amount of heart and soul they put into the recording of their songs. Movie directors (or painters, or novelists, or poets) don’t think that the value of their creation is a function of how hard or how sincerely they worked; they realize the value to consumers is how much the consumers like the finished product.)

But, back to the topic of on-demand music services, I see a glimmer of hope in paragraph #15 of the article, albeit not exactly in the way that Peoples or the record industry executives he quotes intended: Listening caps.

Apparently, in other countries there have in the past been some limits placed on free, ad-supported tiers — e.g., only five plays of a given track per month — to “differentiate” those tiers from the paid tiers.

Here’s what I think is an better idea: Services like Spotify, Deezer, Rdio, and Rhapsody should be able to offer a budget-priced (say, $3.99/month) plan that allows consumers to experience the wonderfulness of the “celestial jukebox” concept, but only for a certain number of hours of listening per month (say, 20 hours).

This approach would allow the product category to start to expand into the mass-market, would condition more consumers to the idea of paying a monthly fee for music, and would have the potential to upsell those consumers to the $9.99/month price once they started becoming more-enthusiastic consumers of music.

It would be a win-win-win-win — for labels, artists, music services, and consumers alike. Not that I’m saying that would be enough to help make it happen.

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Kurt Hanson

One Comment

  1. I predicted the price point would remain even for Apple recently: http://venturebeat.com/2014/12/19/spotify-vs-taylor-swift-what-you-should-know. “All-you-can-eat on-demand services including Spotify and Apple’s forthcoming ‘iBeats’ will soon be relegated to subscription only. They will charge the current $10 per month”

    But this piece presents clear thinking Kurt, a solution simple enough that even labels may comprehend the math… one day 😉

    From the HotSeat,
    Thomas McAlevey, CEO Radical.FM

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