PRICE POINT FOR PREMIUM SCRIPS TOO HIGH (OPINION)

Exploring the implications of numbers that came to light earlier this week regarding churn rates and subscriber growth at Spotify and Apple Music, biz blog MIDiA concluded that streaming subscriptions simply cost too much.

“Spotify’s accelerated growth in Q2 2016 was driven by widespread use of its $0.99 for 3 months promotional offer,” the Mark Mulligan-penned piece reads in part. “Which itself comes on the back of similar offers having supercharged Spotify’s subscriber growth for the last 18 months or so. In short, 9.99 needs to stop being 9.99 in order to appeal to consumers. Which is another way of saying that 9.99 just isn’t a mainstream price point.”

Mulligan then references the IFPI calculation revealing that the average label revenue per music subscriber fell globally from $3.16 in 2014 to $2.80 in 2015, with price discounting a key factor.

So what is a viable price point? “I have long argued that mid-priced subscriptions are crucial to driving the streaming market, and the burgeoning success of Spotify’s mid-priced-subscriptions-by-stealth strategy provides a bulging corpus of supporting evidence,” Mulligan offers. “In fact, the average spend of Spotify’s 7 million net new subscribers in Q2 2016 was $3.09 a month. The tantalizing question is whether that 1.5 million promo users that are expected to churn out would take a $3.99 product if it was available?

Below is the graphic accompaniment to the piece.