Nielsen's Music 360 Report

By Spencer Ritchie from Berklee’s Music Business Journal, thembj.org. 

Nielsen recently published its annual Music 360 Report, detailing consumer spending in music, especially subscription services. According to Nielsen, the appetite for music in the United States is high. Apparently, 91% of the US population is listening up to 24 hours of music a week, a much larger number than reported for similar surveys in the 1990s.

This could bode well for streaming sites, and yet demand for recorded music continues to fall—which suggests that demand for free streaming is strong. Almost four-fifths of Americans surveyed claimed that they were ‘unlikely’ to join a paid subscription service within the next six months. And only one-tenth of those surveyed indicated that they were ‘somewhat’ or ‘very likely’ inclined to join a streaming service. If so there would be tepid subscriber growth.

After streaming a collective 164 billion tracks over the course of 2014, the first half of 2015 alone has seen the flow of 135 billion streams. This is good, but few pay. Nielsen finds a mere 3% rise in subscriptions and concludes that the central factor that is inhibiting mass adoption of paid subscription services–and, therefore, the abandonment of freemium and unpaid streaming–is price. 

Ease of use and strong song libraries impact people’s choice of services to begin with, but the specter of cost puts them off and they elect not to continue through with payment. The problem is that free streaming, which accounts for the lion’s share of overall streaming users, doesn’t generate much revenue through advertisements. That is why Nielsen’s suggests a more nuanced tiered pricing system. This may be possible now that Apple has endorsed paid streams only and Spotify seems to be moving in that direction too: a market without free streams helps their case.

At $71 billion, Americans spend more money on the lottery per year than they do on both live and recorded music. The same could be said of weddings, and for about the same amount. Live and recorded music, ticket sales, and digital and physical recordings, including streaming, are worth instead a total of only $6.8 billion. Nielsen puts the average per capita consumer spending on music in 2014 at $104, and this includes live performance and festival spending. This figure seems to be much exaggerated. For a population of 350 million, it would mean a total music spending in the US of nearly $35 billion, making festivals and, perhaps, artist performance income much more significant than ticket sales or recordings.

It is worth noting that were subscriptions in Spotify and Apple to pick up, regular payments of less than $10 a month would boost the average spend in music a lot (payment of the staggering $240 a year membership to TIDAL would certainly help!). Moreover, streaming services have incentives to grow their paid subscriber base by selling cheaper services. Paid streaming in the industry accounts for 73% of all streaming revenue. Spotify currently receives up to 90% of its receipts from its over twenty million paid subscribers and only 10% from its 55 million unpaid users. Moreover, the 3% increase in the total population of streaming subscribers last year was worth an overall increase of 25% in subscription revenue to the industry. In short, any paid subscriber, as Spotify knows, is better than a free rider.

Streaming services may be also using the wrong keys to turn on subscribers. Price point considerations (83%) trumped ease of use (82%) and song variety (73%), as mentioned above. Apple, Spotify, and Tidal should take notice. Spotify rolls out new features that have little to do with price, such as Discover Weekly. Apple invests heavily into Beats One radio. Tidal purports to feature the highest quality of audio streaming. In the meantime, YouTube is seeing higher user growth than all other interactive streaming websites combined. There is no curated or exclusive content there, but much functionality at no cost. 

The problem with YouTube, of course, is that it doesn’t own the music that the public loves the most, as Spotify, Apple Music, and Tidal do. A paid user is far more valuable than a freemium user, but freemium users could be enticed to become paid subscribers with the right incentives. This is perhaps the most significant finding of the Nielsen Report. 

By Spencer Ritchie

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Bibliography:

Mulligan, M. (2014, 10 31). Why It’s Time For A Streaming Pricing Reset. Retrieved from Music Industry Blog: https://musicindustryblog.wordpress.com/2014/10/31/why-its-time-for-a-streaming-pricing-reset/

Nielsen. (2015, 9 28). Digital Formats Are Among the Most Trusted Advertising Sources Despite Slow Growth . Retrieved from Neilsen: http://www.nielsen.com/us/en/insights/news/2015/digital-formats-are-among-the-most-trusted-advertising-sources-despite-slow-growth.html

Nielsen. Nielsen Music 360 Report. New York: Nielsen.

Peoples, G. (2015, 10 1). Don’t Worry, the Growth of U.S. Streaming Isn’t As Bad As It Looks. Retrieved from Billboard: http://www.billboard.com/articles/business/6714606/us-streaming-subscriber-numbers-2015-muve-music

Neilsen's Music 360 Report