The Pricing Paradox
For over a decade, standard music subscription prices have remained static as services chased
growth over profit — but now, that’s starting to change. The question is: Which way will they go?
BY GLENN PEOPLES
pricing $1 or $2 above $9.99 “with minimal disrup-
tion.” Pricing consultant Rafi Mohammed agrees.
Mohammed encourages his clients to employ a
three-tiered approach he simply calls “good, better,
best” pricing: The good version of a product has a
regular price; the better option is priced higher but
provides more value; the best price adds even more
value. This tiered approach lets buyers choose their
best price without cannibalizing sales. If you’re will-
ing to pay $15 but only pay $10, the seller is losing
an opportunity to make an additional $5. A service
that provides high-definition audio, for example, can
separate the $10 and $15 customers. “There’s some-
thing psychological about having more than one
option,” says Mohammed. “If you give them choice,
they’re open to the higher price.”
Steady prices generate declining returns for
streaming services: A standard $9.99 price in 2011,
the year Spotify launched stateside, is worth about
$11.40 today when adjusted for inflation, while
streaming companies face increases in salaries,
rent and administrative costs. Without price hikes,
HAT HAPPENS WHEN AN
unstoppable force meets an
immovable object? The music sub-
scription business is about to find
out, as the force of competition
ratchets up the pressure on long-rigid streaming
prices. The standard $9.99 monthly charge in the
United States — other countries differ — hasn’t
budged in over a decade.
But now prices are starting to move. Amazon’s
new Amazon Music HD, launched Sept. 17, will test
consumers’ acceptance of higher prices. Costing
Prime members $12.99 and nonmembers $14.99, the
new tier provides audio ranging from CD quality to
lossless, audiophile-level clarity. Experts say even
standard tiers — with less than CD-quality audio
— could command higher monthly fees for extra
features. About half of music streamers age 21-45
surveyed by MusicWatch said they would pay $15
for an enhanced subscription service, says managing
partner Russ Crupnick. The higher-priced version
could have features such as recording-studio-qual-
ity audio, early access to music, live streams and
artist-curated playlists, he says.
As paid subscription growth slows, prices could
finally start to swing both higher and lower. Nielsen
Music data shows that paid subscriber growth is lev-
eling off and that growth in the number of streams
— not the outright number of streams — dropped in
the first half of 2019 from the same period last year.
It makes sense: The most popular services have ac-
quired the early adopters; Crupnick puts the market
at 60 million accounts, out of 120 million potential
subscribers; the RIAA estimates 61 million current
subscriptions in the United States. One digital music
executive believes competition over the untapped
market could be creating downward pressure on the
$9.99 price: “If Apple and Spotify are starting to feel
like their growth is slowing, and Amazon is gobbling
up share, streaming becomes about price, promotion
and retention.”
Some experts believe higher prices wouldn’t
necessarily turn away subscribers. Crupnick says
subscription services could raise their standard
Market
ILLUSTRATION BY GEORGE WYLESOL SEPTEMBER 21, 2019 • WWW.BILLBOARD.COM 6 3
● RIHANNA signed a publishing deal with Sony/ATV, reuniting with chairman/CEO JON PLATT. ● MEGAN THEE STALLION signed a management deal with Roc Nation.
W
PG. 72 POST-MMA ADVOCACY PG. 74 GLOBAL CITIZEN TURNS 10 PG. 76 DUGAN’S FIRST INTERVIEW