Why new lower cost streaming services might not move the needle

Why New Lower Cost Streaming Services Might Not Move the Needle

Streaming radio service Pandora recently announced the launch of a lower-priced interactive streaming platform, the result of its purchase of Rdio last year. Unfortunately, the launch might not have the result many in the music business are hoping for; while it will surely convert a handful of listeners who couldn’t afford the standard $9.99 USD per month price, it won’t move the needle in a meaningful way. That’s because the hardest jump for people to make is not from $5.99 to $9.99 -- it’s from zero to a penny.

Free is still a very good price

The simple fact is that too many decent free options exist to incentivise casual fans to sign up and pay for services. If you just want to hear a song, YouTube is free and on-demand, and all you need is a data connection to listen to what you want. Younger listeners are also becoming more adept at using stream-ripping services to download tracks for free, and although many services are cracking down on them, new ones pop up every day. Torrent services have also improved over time -- where Napster was slow, clunky, and riddled with malware, newer torrent sites are a vast improvement. Sure, streaming services offer better user experiences than the free options -- but are they $120 USD per year better? For many, the answer is no.

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To get users to pay for streaming, the gulf between free and paid services has to be vast -- and right now, using a free service isn’t painful enough to get users to put down money. Because many teenagers have grown up entirely post-Napster, they expect music to be free and widely available, and convincing them it has any value is a hard sell.

How brands can help cushion the blow

Needless to say, this doesn’t bode well for the music business. Ad revenues from YouTube and the free versions of some services doesn’t begin to make up the losses from the death of CD sales. By using their sponsor money and clout, brands can help fill in this gap by underwriting streaming services and offering freemium models and other promotions to help acclimate users to paying to streaming.

How brands can help convince listeners to pay for streaming music

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For instance, a brand could offer a package where a pair of pants and six months of streaming cost a certain price -- more than what the pants would cost on their own, but not so much more that consumers will balk. Airlines do this all the time -- if you’re buying a ticket that costs $20 more with the bag fee included and a marketing line about the first bag being free, you’re much more likely to respond positively than if you buy a slightly cheaper ticket and then have to pay the same fee at the airport.

Moving consumer behavior in increments

As long as there are free platforms, a big chunk of listeners will likely choose to deal with listening to ads or risking a few bad downloads over paying a monthly fee. But brands have the freedom and flexibility to shift consumer behavior by offering streaming services as part of a package, thus gradually acclimating some users to paying.

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Category: Music & Technology

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