Why the music industry should be very worried that Spotify has only 5 million subscribers, worldwide.

Today, in an event in New York, Spotify announced its most recent stats. The high notes in these statistics were the claims of 5 million paying subscribers, 1 million of which are in the US.

I believe it is time for the music industry to look at these numbers and feel very real concern, rather than moderate celebration.

Let’s focus just on the 1 million music service subscriber number for the US of A. And add to this number approximately 2.5 million subscribers across Rhapsody (1 million), MUVE (700,000), Rdio(?), Slacker (500,000), and MOG(?). That’s a total of approximately 3.5 million subscribers to subscription music services in the United States.

First, the US has had subscription music services since as early as 2002. And a grand total of 3.5 million subscribers in 2012 suggests that, quite frankly, the market for these services in the US is growing at a miniscule rate — which is why most modern services try to license and launch in as many countries as possible.

Second, 3.5 million account amounts to 1.1% of the total number of US mobile phone subscriber accounts.

So after a decade of music services being offered to customers with mobile devices here in the US, we have found service characteristics and a price point that appeals to 1.1% of the market.

How big might this market actually be, were the industry willing to shift its expectations for the characteristics and pricing points at which it is willing to license?

In other words, how much money might this industry be willingly leaving on the table, only to save the lives of a few CDs?

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3 Comments

  1. Is the addressable market every person who owns a cell phone or every person who is likely to buy digital music? Subscription services are being priced for the latter, not the former.

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    1. I reckon the answer to your question should be, “Yes.”

      Frankly, a loss of 45% of total retail/trade value warrants a degree of questioning as to who/what the intended market is and who/what that market should be.

      My math suggests the total pool of revenue may be much larger if these services were priced to appeal to a larger pool.

      We shall see.

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