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June 2021

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The Music Industry Just Took A Backwards Step On Streaming Pricing... In Glorious HD

The Music Industry Just Took A Backwards Step
On Streaming Pricing... In Glorious HD
Editorial By Tim Ingham, Founder Of Music Business Worldwide

 

The Music Industry Just Took A Backwards Step On Streaming Pricing... In Glorious HD

Amazon's Echo Studio launched in Q4 2019 at a $199.99 price point in the US.

 

"In 2019, Amazon launched Amazon Music HD, a high-quality audio streaming offering that is available to customers at a premium price in the United States. We believe the value proposition that streaming provides to consumers supports premium product initiatives."

This, from Warner Music Group's pre-IPO filing last year, is a key part of the modern music industry's big sell to investors.

Just you wait, it says: streaming is $9.99-a-month today, but tomorrow, oh man, the possibilities for building on this price-point are endless.

Today (May 17), those possibilities hit the floor with a thud. A thud captured in stunning HD sound.

It was a noise that hurt my ears and reiterated a troubling power balance between music rightsholders and Big Tech.

 

 

First came Apple Music, with the announcement that it's adding both Lossless Audio and Spatial Audio with support for Dolby Atmos to its service.

Apple says that Dolby Atmos is a "revolutionary, immersive audio experience that enables artists to mix music so the sound comes from all around and from above".

"Listening to a song in Dolby Atmos is like magic," said Oliver Schusser, Apple's VP of Apple Music and Beats.

That "magic" won't be costing consumers a single additional bean. From June 1, Apple is bundling these HD formats into its standard $9.99-per-month streaming subscription price, beefing up its run-of-the-mill price offering.

Moments after Apple Music made this announcement, Amazon Music stepped forward with its own news.

 

"All music fans should have access to this quality music, and they do!"
Steven Boom, Amazon Music in a press release today (May 17, 2021).

 

"Amazon Music HD For All, Now at No Extra Cost," proudly read a press release confirming that a range of HD audio options on Amazon's Music Unlimited Service will now all be available for just $9.99 per month.

That's $5 per month less than Amazon was previously charging for its Amazon Music Unlimited HD tier, which includes HD audio, Ultra HD audio, and 3D Audio options.

In perturbing news for artists and labels, Amazon confirmed it is cutting the price of existing subscriptions to Amazon Music Unlimited HD, from $14.99 to $9.99 per month.

"We're thrilled to make Amazon Music HD available to everyone at no extra cost," said Steve Boom, VP of Amazon Music, in a media release today. "All music fans should have access to this quality of music, and now they do!"

Erm, should all music fans have access? Or just those who can afford it?

Amazon and Apple might favor the former and we'll come on to why. But for record labels and music publishers, this move bears the hallmarks of a regrettable own goal.

 

 

If I had to guess, I'd suggest Apple and Amazon's motivation for scrapping the potential up-sell of HD audio is this: For global tech giants, it's a lot easier making money with HD hardware than it is HD audio subscriptions.

Tellingly, this was apparent in Apple's announcement today, which went to the trouble of explaining: "By default, Apple Music will automatically play Dolby Atmos tracks on all AirPods and Beats headphones with an H1 or W1 chip, as well as the built-in speakers in the latest versions of iPhone, iPad, and Mac."

Amazon was at it too. Its PR made sure to mention: "Listeners can stream... 3D [Audio] mixes when listening on Amazon's groundbreaking high-fidelity smart speaker, Echo Studio."

 

"The universality of HD audio at one streaming price point makes a heck of a lot of sense for Amazon and Apple... but for the music industry, it's a backwards step."

 

Apple launched its HD-ready Airpods Pro at a $249 price-point in October 2019. Amazon's Echo Studio speaker arrived a month later for $200.

Some expect Apple's latest earphone model, Airpods 3, to be announced any day now, once again at a pricey three-figure RRP.

The universality of HD audio at a bog-standard streaming price point makes a heck of a lot of sense for Amazon and Apple, then: it gives price-conscious customers a crucial perk to drive their desire for a hardware upgrade.

For the music industry, however, this all looks like a backwards step.

 

 

Last month, Spotify finally announced small price increases to its monthly subscription in key markets such as the US, UK, and Brazil.

For music rightsholders, getting Spotify to hike these prices has been like pulling teeth. Lest we forget that Spotify's ex-CFO, Barry McCarthy, said as recently as April 2018 that any inquiry about Spotify raising its prices was "one of the really dumb questions I get".

That's because Spotify's agenda (global subscriber growth at all costs) is often at odds with the music industry's agenda (global subscriber growth... but only if the audience is paying a certain amount).

With Spotify's subscription ARPU (Average Revenue Per User) recently falling under $5 per month, it appears Daniel Ek and co have finally capitulated (a bit) to the music industry's demands.

 

"Getting Spotify to raise its prices has been like pulling teeth."

 

So when Spotify announced in February that it would be launching HD audio tier later in 2021, it seemed that Ek had another bonus piece of good news for the music industry's ARPU-fretters.

At this point, the industry-standard HD model as seen at TIDAL, Deezer, Amazon HD and others was to price your high-def music tiers at a more costly level than your standard subscription.

Spotify, it seemed, would follow this model. In doing so, for the first time, it would be able to up-sell consumers to a higher price point, and help push its ARPU figure back from the brink.

Good luck asking Spotify to set its HD tier at $14.99 per month in the wake of Apple and Amazon's announcements.

Doing so really would constitute a dumb question.

The music rights industry hasn't just lost real income (via Amazon's HD price reduction). More damagingly, it's lost the narrative too.

Defenders of the music business's decision to license a lower-price tier of HD audio at Apple and Amazon might point to the fact that these higher-price options simply weren't proving sufficiently popular. (Although Amazon itself recently asserted that its then-$14.99-per-month HD offering grew "100% globally year-over-year as of March".)

Music rightsholders might also suggest and I'm guessing here that some useful covert horse-trading has been going down, with Amazon or Apple somehow subsidizing or compensating the loss of a higher-price HD tier by other contractual means.

 

"The principle that HD audio set in the music industry the one that enabled consumers willing to pay more for an elite relationship with music streaming to actually pay for it has disintegrated in front of our eyes."

 

And they might additionally point out that, with HD audio now wrapped into Apple and Amazon's standard streaming tier, these tech giants should have an easier time following Spotify and raising the prices of their basic subscriptions by a fraction or two.

None of this matters. Because the principle that HD audio set in the music industry the one that enabled consumers willing to pay more for an elite relationship with music streaming to actually pay for it  has disintegrated in front of our eyes.

The saddest aspect of today's retraction to one-price-fits-all at Apple Music and Amazon Music is what it means for the future of streaming.

As mentioned, the tech giants of this world value music, but not half as much as they value its ability to sell higher-margin products (like Amazon Echo speakers or high-end Airpods).

Jimmy Iovine has correctly predicted that when "all streaming services are the same" what will naturally follow is downward pressure to become the platform offering the lowest price to consumers.

 

"Now, we can expect a slow war of attrition to trundle on between music rightsholders and the largest tech giants in the world over exactly this value calculation."

 

A high-price premium HD tier is a ballast against exactly this this price erosion.

It creates a platform on which to build a sophisticated Good-Better-Best pricing ladder, which takes a more sophisticated view of consumers than assuming they'll always take the cheapest option.

Most importantly, it also sets a marker for what music, when it's experienced at its best, is really worth.

Over the next decade, we can now expect a slow war of attrition to trundle on between music rightsholders and the world's largest tech giants over precisely this value calculation. (Even if an incremental base streaming price rise to match Spotify arrives at Apple and Amazon sooner rather than later.)

What was it Warner said before its IPO again?

"We believe the value proposition that streaming provides to consumers supports premium product initiatives."

I did too until today. Now, suddenly, I'm not so sure.

 

 

Music Business Worldwide

Enjoy the Music.com would like to thank Tim Ingham, Founder of Music Business Worldwide (MBW) for allowing us to reprint this article. MBW retains all publication rights. We encourage our readers to visit Music Business Worldwide at this link.

 

Copyright 2021 Music Business Worldwide 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

     
 

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