The coronavirus pandemic quickly shined a light on broader pre-pandemic industry trends. Last year,
according to the RIAA, streaming accounted for 80% of music industry revenue, which is why the spring shutdowns of entire countries didn’t just see music sales jump off a cliff, like what happened for live music companies. Instead, record labels took an initial hit, as did Spotify’s advertising business, but by the summer there appeared to be a rebound once restrictions were lifted and listener behavior adapted. This new reality does make me more curious about potential limits to streaming, particularly because recorded music hasn’t diversified over the last decade.
Last month, Page wrote in
Billboard about the future of streaming, focusing on the concept of “peak streaming.” “Peak streaming” is a riff on the phrase “peak oil,” the idea that there is a limit on the earth’s supply of oil that can be mined. (In the context of the music streaming business, consumers are the oil.) Page writes (emphasis mine):
But the 1:1 ratio of subscriptions to households, which the United States has now passed, is the point when the traffic light goes from green to yellow. Regardless of how much growth there is, the days of easy, viral expansion are behind us. The subscribers ahead are the ones who can only be reached with marketing — just like much of the oil we’re now producing requires expensive extraction methods like fracking.
Unfortunately for streaming platforms, we’re now at the fracking stage (!) of finding new customers. At first glance, this makes sense. Spotify’s well over a decade old in many of its most mature markets, and though the shift from desktop to mobile usage was huge for the company, there have been few new developments that could create similar opportunities for growth. This is all a fairly intuitive read on music’s current digital political economy, in which the entire record business is centered around streaming, whereas other modes of revenue struggle with fairly anemic investment and follow-through. What’s odd to me is the conclusion Page reaches through this analysis (emphasis mine):
At the same time, services may need to raise prices — which haven’t really changed from $10 a month in the United States since Rhapsody launched in 2002 — in order to maintain revenue growth. Other options include more exclusive content, which can be expensive (Spotify has exclusive podcasts, but they’re all available on the service’s free tier), and tightening the restrictions on family plans to encourage kids (or anyone) to subscribe on their own. Since every service is facing the same challenge at once, competition could get brutal.
If you’re Apple, Amazon, or YouTube, there’s little real concern about there being a limited number of paying consumers. Music press might tip-toe around this fact, but it’s clear that music streaming’s profitability isn’t a priority for these firms. That doesn’t mean there aren’t individual teams tasked with making sure numbers on graphs are going up, but if Apple Music were competing with Spotify, we would not go months (or years) between official releases of subscriber numbers. (The same goes for YouTube.) But Spotify does care! The company still needs to prove to investors it can become a sustainable business, so Page’s concerns around user acquisition are valid. The concept of “peak streaming” is less about an actual threat to the music industry as it is a way to head off potential investor concern. There may be a day companies max out on people’s willingness to pay for music streaming, but they will have moved on to a new monetization strategy well before such a concern enters their front mirror.
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