When Should Subscription Services Raise Prices? – Billboard


The Ledger is a weekly publication concerning the economics of the music enterprise despatched to Billboard Pro subscribers. An abbreviated model of the publication is revealed on-line.


Over the past decade, streaming platforms have largely held costs regular whereas racking up over half a billion subscribers globally. However for years, music executives have questioned subscription providers’ choice to sacrifice increased costs — and with them increased royalties to labels and artists — to realize extra subscribers.

Music streaming is following an age-old enterprise tactic: launch at an inexpensive value, acquire prospects and, as soon as persons are hooked, elevate costs. The query is when to boost costs. Too early a elevate may danger alienating subscribers, whereas one which’s too late dangers leaving income on the desk as soon as subscriber acquisition fades. The standard of the product comes into play, too. Folks will stick with a subscription service they love. However elevate the worth on a mediocre product and fewer fervent prospects will depart. That’s a nightmare state of affairs for a music business whose enterprise is more and more depending on buyer retention. Paid subscriptions accounted for 57.2% of U.S. report label revenues in 2021, in accordance with the RIAA.

That call-making course of is presently enjoying out within the streaming video-on-demand (SVOD) market. Disney shortly grew to 221.1 million subscribers for its numerous streaming providers (Disney+, Hulu, ESPN+) on the finish of the second quarter, narrowly edging out Netflix’s 220.7 million subscriptions. However Disney’s common income per consumer was solely 39% as great as Netflix’s ARPU, and the corporate is feeling the stress to show streaming right into a worthwhile enterprise. As well as, progress has slowed: Disney+ added solely 100,000 home subscriptions within the quarter, in comparison with 1.5 million within the earlier quarter. Now, similar to clockwork, a value improve is coming. On Dec. 8, Disney will raise the price of the premium, ad-free model of Disney+ by 38% to $10.99 and launch an ad-supported tier for $7.99.

Music platforms have been hesitant to boost costs — however they’ll. “We see actual ARPU alternative,” stated Warner Music Group CFO Eric Levin through the firm’s August 9 earnings name, “and Spotify and Amazon which have executed types of value will increase, I believe, have confirmed to the market that it doesn’t have an effect on churn and that value will increase are actually out there.” That’s true. Spotify executives have stated they haven’t seen a significant degree of churn after modest value will increase on choose plans in some markets.

It’s assured that music subscription costs will rise – one thing extra important than the small will increase seen not too long ago – finally. However when? Many analysts imagine the SVOD market has run out of subscriber progress and count on firms to develop revenues by means of value will increase. Music has a distinct timeline, nevertheless. Subscription firms may wait to boost costs till they get increased penetration charges in each developed and rising markets.

Developed markets “are roughly 30% penetrated in combination,” stated Levin. “We’ve seen each analysis research but in addition market forecasts that confirmed that [penetration rate] rising into the 50s and even 60s p.c over time. Rising markets are nonetheless penetrated within the mid-single digits and are beginning to present actual, actual improved progress.”

Kroll Bond Scores Company additionally highlighted music subscription’s progress alternative in its August 2nd report on the Hipgnosis Music Property royalty-backed safety. “Streaming is a rising market that also has low penetration charges,” wrote Kroll analysts. That’s vital to bond buyers as a result of, as Kroll famous, streaming is the principle driver of business progress. “Consumption is growing at a subscriber degree,” the report continued, “and your entire music business is rising because the variety of customers improve in addition to the frequency at which they stream.”

As a result of each ARPU and penetration have room to develop, “subscription streaming progress stays fairly robust, stays within the double digits,” stated Levin. “Within the brief time period, we see that as being a really robust signal regardless of a [challenging] macro surroundings.” Over the long-term, added Levin, “subscription streaming progress has great upside potential.”



By means of August 12, the % change over the past week, and the year-to-date change.

Common Music Group (AS: UMG): 21.44 euros, +0.0%, -13.5% YTD
Spotify (NYSE: SPOT): $123.63, +4.1%, -47.2% YTD
Warner Music Group (Nasdaq: WMG): $30.30, -3.8%, -29.8% YTD
HYBE (KS 352820): KRW 183,000, +4.6%, -47.6% YTD
Stay Nation (NYSE: LYV): $97.89, +1.2%, -18.2% YTD
iHeartMedia (Nasdaq: IHRT): $10.23, +16.3%, -51.4% YTD
SiriusXM (Nasdaq: SIRI): $6.78, +3.0%, +6.8% YTD
Deezer (PA: DEEZR): 4.55 euros, -1.9%, -24.2% YTD

NYSE Composite: 15,804.38, 3.5%, -7.9% YTD
Nasdaq: 13,047.19, +3.1%, -16.6% YTD
S&P 500: 4,280.15, +3.3%, -10.2% YTD


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