A few weeks ago I was driving in my car listening to NPR during a pledge drive. As I listened to the announcer hawk mugs and even special solar/crank powered radios in exchange for signing up for a monthly “pledge” and heard him referring to donors as members, I realized that public radio is actually selling subscriptions, but calling it something else.
As we know, NPR is an audio service supported by its members (as well as some other revenue sources). In 2011, which was the most recent year I could find info for – NPR received an average weekly donation of just under ten bucks per listener per week. (That’s the total $ amount of pledges divided by listeners and weeks.)
While Pandora One and Spotify struggle to get users to pay less than $10 a month for their service, NPR manages just fine, netting 4 times that per listener.
Why is NPR is so successful at getting listeners to pay for programming? For one thing, they don’t call them subscription fees. Instead, they call them pledges – a far more honorable term, and they make every listener who donates a member, and send them a hat or a mug. It’s a clever marketing approach!
What else are they doing that online audio subscription services can do as well? Well, for one, they hold annoying on-air pledge drives, where they stop the programming, not for a few short commercials, but for highly intrusive on-air begging by personalities. It’s really obnoxious, and it works. Listeners respond.
Other tactics that NPR uses to extract donations – err, I mean pledges – from its listeners include bribery (as in the mug, hat, or solar powered radio mentioned above), flattery (our listeners like you are so smart), making listeners feel guilty, and – this is the best one – threatening to continue the on-air fundraising tirade unless everyone calls in with pledges right away.
So what can subscription services learn from NPR? I think the membership approach is a good one – remember the old American Express campaign “Membership has its privileges?” Creating a strong brand that people want to associate themselves with, and then selling that association – that seems to be a formula that works for public radio and a strategy subscription services may want to go to school on…
Muve Music, a music subscription service that is a division of Cricket Wireless, recently announced that they have more than a million subscribers in the US. Cricket sells prepaid, no contract wireless service for smartphones and cellphones.
The million mark for subscribers in the US is a number that in the past year Spotify and Rhapsody have mentioned as well. Other subscription services that are a factor are Pandora, with their Pandora One service, MOG and Rdio. No one really knows how big those services are, although I’d guess that Pandora One is well over a million, and MOG and Rdio are under. Sirius XM also sells subscriptions as add-ons to their satellite music customer base.
According to a recently released annual study of music sales by IFPI, the number of people paying to use subscription services grew 44 per cent in 2012 to 20 million globally. Subscription revenues are expected to account for more than 10 per cent of digital revenues for the first time in 2012. (again, that’s a global report). Subscription services are credited with replacing illegal download activity, and also with replacing music download sales.
With several services in the US hitting the million subscriber mark and subscription based revenues projected to make up 10% of digital revenues for the music industry, it’s certainly become a viable business model for streaming. The upcoming RAIN Summit in Las Vegas on Sunday April 7th will feature several speakers from subscription based streaming services, including Rhapsody CEO Jon Irwin, who will deliver a keynote speech. Speakers from SiriusXM and Spotify will join panels as well.
For more information on RAIN Summit West and to register, click here. See you there!
A newly released report takes a look at the digital music landscape in the UK. The British Recorded Music Industry reports that over the past ten years digital music has become a key part of the record industry in the UK, with revenues from downloads and streaming accounted for more than 50% of record label income last year for the first time.
What’s more, consumers are highly satisfied with streaming music services – 93% of those subscribing to a streaming service are satisfied with it. Access to an extensive music collection, music discovery, and mobile access are some of the key values that streaming services offer that consumers don’t mind paying for.
This is a dense report that’s a must read for folks in the streaming business. While it’s focused on the UK, the analysis and strategic discussions are comprehensive and applicable to other markets as well. Here’s the link.
In an interesting approach to growing their audience, Rdio has launched a new “Artist Program” which rewards recording artists for bringing new listeners to the service. From their blog: “We’re committed to supporting the artist community and the music industry as a whole. That’s why today we’re launching the Rdio Artist Program — the first program of its kind, offering an innovative new model for artists to directly earn money from streaming music.”
The Rdio Artist Program encourages artists to create their own pages by uploading photos and connecting Twitter accounts. They can then share their music (if they upload their own content, they also agree to grant Rdio a royalty free use of that content.) Artists get ten bucks for each listener that signs up for a paid subscription (and maintains it for a certain period of time). Subscriptions cost ten bucks a month if you want access on your mobile device.
Kudos to Rdio for taking a new approach to gaining listeners that tries to engage them through the artists that they are passionate about. They report thatScissor Sisters, Snoop Lion (aka Snoop Dogg), Chromeo, A-Trak and Brendan Benson — already fans of Rdio — are among the first artists to join the program.
For that matter, why limit this kind of thing to recording artists? Why not let anyone who is passionate about music create their own page, tweet about it, and make ten bucks when their friends sign up?
Spotify has moved to offer its mobile streaming options, previously locked down under a monthly subscription, free to listeners. In an obvious response to the exponential growth that Pandora has experienced in mobile listening, Spotify will now feature “free mobile radio – Spotify style”.
The offerings feature the ability to create a station from a song, artist or genre and unlimited listening. Calling it the only free radio that you can save, Spotify mobile offers interactive options to like or dislike a song to influence your station or save the song to a playlist. Until now, it cost ten bucks to get all that on your mobile devices.
It sounds like a good offering, one I’ll bet Spotify wishes they had jumped on a little earlier. Pandora, with 150 million registered users and direct connections on lots of dashboards and tuner devices, has had a handy headstart. This move by Spotify is recognition of the impact that a popular free app in the iPhone and iPad app stores can make.
Free users in the US will hear advertisements from the following launch partners: Chevrolet, Durex, Heineken, Red Stag by Jim Beam, Lipton Iced Tea, Macy’s, McDonalds, Progressive, Red Bull, Taco Bell, Verizon Wireless, and Warner Bros – all of which are current Spotify advertisers.
As for Pandora, I suspect they knew it was only a matter of time before Spotify moved to pick up a piece of all that mobile listening to Pandora for free. They may even welcome the fact that Spotify will now join in their efforts to monetize mobile streaming ads…
Sirius XM grew their subscriber base by 8% last year – from 20.6 million subscribers to 22.3 million. First quarter 2012 revenue meanwhile grew at an even more impressive rate of 11% to $805 million. That puts them ahead of the largest broadcaster Clear Channel Radio‘s $672 million. For this year, they are forecasting revenue of $3.3 billion, compared to Clear Channel Radio’s $3.0 billion.
What’s even more impressive is the way they are monetizing their listener base. They make close to $138 per listener/subscriber per year against Clear Channel’s $12.55 (and Pandora‘s $5.84). Sirius XM sure makes the subscription model look attractive. In fact, they have the same number of subscribers as Comcast. They’re projecting household penetration of 13% by the end of this year.
Meanwhile, as I have mentioned before, Sirius XM continues to expand their offerings online. They recently announced a suite of enhancements for their online offering that will allow listeners to pause, rewind and skip, start shows and songs at the beginning, set alerts and record programming. These features will give Sirius XM listeners a highly interactive online listening experience. They’re also redesigning their player and rolling out new mobile device apps.
Sirius XM’s subscriber base is huge, and their ability to monetize it is impressive. While lots of media attention is focused on Pandora, Spotify, Clear Channel and others, when it comes to assessing the new audio marketplace, Sirius XM is the elephant in the room…
Music industry analyst and fellow blogger Mark Mulligan posted an analysis of Spotify‘s progress in adding listeners and converting those listeners to premium subscribers recently. Spotify has enjoyed great audience growth in its first year in the US, driven in particular by its integration with facebook earlier this year.
Spotify just hit 20 million users on its facebook app, having added half a million in less than 2 weeks from the 3rd to the 15th of May. That number represents their global, not just US based, audience. Pandora has 100 million registered users in the US.
Spotify appears to be doing a pretty good job of converting those users to paying premium subscribers, their conversion rate globally against the 20 million registered users is 17%. (There is no way to understand what it is in the US alone). Spotify’s premium service comes with no ads, unlimited streaming, and at the higher tier the ability to use the services mobile apps.
Mulligan notes that conversion rates seem to be declining against the massive uptake Spotify has enjoyed via facebook integration. This is of course a natural phenomenon where broader reach is going to result in fewer conversions to paying customers. But among active users, Spotify is converting a strong 27% to subscribers. At that rate, they’ll have more than 6 million paying subscribers by next year.
Joining Coldplay, Paul McCartney and a few others, Adele – most likely with the encouragement of her record label, is boycotting Spotify, pulling her new album 21 from the service. This move is becoming more popular by artists looking to maximize sales of their new or newly award winning albums. There’s a growing opinion that giving listeners access to their new music on a service like Spotify, where listeners can select the song they want to hear whenever and as often as they would like, will hurt album sales, either digital or physical.
Apparently, Adele’s management was willing to license 21 to Spotify for premium, subscription paying listeners only, but this option was declined by Spotify. It’s not hard to understand why they declined it, as it could easily have a snowball effect on other artists.
There is a concerted effort by a growing list of popular artists to control the access that listeners have to their new music. Most of the recent moves have concentrated on limiting the kind of free, on-demand access that Spotify offers, although recently Paul McCartney reportedly blanked all streaming of his newly released album.
Note: Although there are multiple reports that Adele’s 21 is not available on Spotify, I do have access this morning to a “sampler” version of 21 in my Spotify library. I’m not sure if this is a new development, or a function of the fact that I have had it in my library for a while..
The streaming audio marketplace isn’t just about music – Audiobooks is a new service competing for listeners’ ears. This new service competes with Amazon owned Audible.com and offers a cloud based service that lets listeners stream, listen and sync between devices as they move around. One article I read called it “Netflix for audiobooks” and another “Spotify for books”.
The service offers a $24.95 subscription, after an initial free offer, that enables you to stream as many books as you want. It’s a price point that is more expensive than Audible, which offers a tiered rate plan starting at $14.95 for the equivalent of one book a month. Audiobooks has about 10,000 titles in their library.
Some may find the subscription price point a little high, but when compared to the price of books or audiobooks, it’s actually not a high price for consumers looking for more than one book a month. Trade paperbacks these days are around $14.95/month, and hardcovers often cost more than the Audiobooks monthly fee.
The question is, of course, how many subscriptions will users tolerate on a monthly basis? This is the question that no one really has the answer to in the new streaming audio marketplace.
Rumors that Facebook will announce a new music service at its upcoming developer conference f8 are circulating, but it doesn’t sound like that service will sell or stream music. Instead, it sounds like it’s a new set of tools that will enable music services such as Spotify, Pandora, MOG, Rdio and Rhapsody to integrate with its platform. Users will be able to share what service and songs they are listening to.
Reportedly, Rhapsody just launched a beta version of its Facebook integration that lets listeners “like” an artist or song and have that info show up in their friends’ news feeds. The idea is that friends would then want to hear the artist or song, or even sample Rhapsody if they are not a subscriber.
Spotify is already integrated with Facebook, listeners’ friends can access the playlists their friends have chosen to share. Rdio’s current integration enables users to follow other users and find out what albums they have been listening to the most.
Reportedly, the new set of tools will enable the services to enhance their integration with Facebook. Rhapsody spokeswoman Jaimee Steele said the company is “definitely interested” in improving its Facebook tools. “We think that music is a very social experience and we are always looking at ways to enhance that experience,” she said.
Facebook first embraced a higher level of integration with music services almost a year and a half ago with Pandora. Descriptions that I am reading of the new integration sound like an expansion of that experiment, with easier ways to like and share music. With 700 million users worldwide and roughly 150 million in the US, facebook has incredible clout and the ability to drive more listening online. This news indicates that they intend to work with third party streaming services rather than develop their own, which is good news for folks like Pandora, Spotify, MOG, Rdio and others.