Music Streaming Competition Forces Services to Focus on Fragmentson November 4, 2014 at 9:35 pm
When it launched to U.S. listeners in 2011, Spotify didn’t have to do much more than turn up to build its user base and convert subscribers. The streaming music market was thin and its name alone, encompassing some 20 million tracks that can with it, proved to be enough of a revelation to attract tens of millions of monthly active users, with 3 million now signed up as paying U.S. subscribers.
Since that early gold rush the listening landscape has changed, quickly; music streaming competition is hotting up. Existing competitors like Rdio and ramped up their promotional efforts, while major technology companies launched their own take on streaming, from Amazon and Google’s cloud storage services expanding into music streaming, to Apple buying the Dr. Dre-backed Beats Music earlier this year.
With many of the early adopters signed up and subscribing, services have to turn their attention to less ravenous listeners, who nonetheless are music fans with wallets that the likes of Spotify and Apple want to get into. This means a focus on market fragments, rather than broad-based appeals to regular listeners, and it’s leading to some intriguing promotional initiatives.
For Apple and its newly acquired Beats brand, that means looking to the skies.
A partnership with Southwest Airlines will see passengers offered a free in-flight exploration of the service on planes that offer a wi-fi connection. Although the demographic of flyers is clearly broad, those who don’t bring their own music collection or an existing streaming subscription will be a more casual yet captive audience for Apple on every flight. Even if the Beats name is wrapped up into the more broadly familiar iTunes store, the promotion represents a targeted move towards a specific set of listeners.
As the market leader Spotify has its own position to protect and is branching out into family plans as a way to increase its member base without marketing solely to completely new users. These plans build on existing premium subscriptions by offering 50% off the $9.99 of a full price plan, making the service more attractive to buy “in bulk” (especially for anyone who has shared their log-in and keeps getting shut out when a significant other decides to kick out the jams.)
Even new entrants into the U.S. marketplace realize that the days of rolling in and signing up willing listeners are over. French service Deezer for example, which has some 5 million paying subscribers around the world, is focusing its Stateside entry on audiophiles who use Bose and Sonos products. Offering specifically targeted “elite” and premium streaming plans at CD quality or higher bit rates, the company sees sound quality as a way to distinguish a service that is otherwise very similar to others.
Deezer also recently bought Stitcher, a San Francisco-based radio and podcast app, indicating that it plans to find some new friends on the spoken word side of audio, whom it can presumably convince to cross over to music once they’re familiar with the service.
All of this highly-targeted activity comes at a time when artists themselves are raising significant questions over streaming services as a legitimate business model for music. Spotify has born the brunt of the criticism, first from its artist outreach sessions as we mentioned last month, and this week from superstar Taylor Swift who has pulled her discography from the service. But because most of the services are based on the same revenue model and pay out royalties to artists at similar levels, none can be far from the firing line if artists choose to move against streaming en masse.
The challenge for any service that wishes to tackle music streaming competition head on is to win over more casual listeners to paid subscriptions, while at the same time developing a payment structure that compensates artists well enough to win them over. It’s a daunting task, but the passion and potential of dominating the music market must be intensely appealing to many brands, especially those with wider revenue streams such as Apple.
It all adds up to an intriguing market place with a diverse set of players, where the game is just getting started. When the next move is made, we’ll be sure to bring you coverage!