A new study by Kantar claims that the cost of living crisis, alongside rising inflation, is forcing vast numbers of music subscribers in major markets like the UK and the US to cancel their subscriptions.
Kantar’s report claims that over 1 million music subscriptions have been canceled in the UK in the opening quarter of 2022, with 37% of respondents saying they did so in order to save money. This is steeply up from 4% for the same period in 2021.
Of all the markets under analysis, the UK and the US are seeing the sharpest drops in active paid subscriptions. “[T]he percentage of under 35 having access to a music subscription having dropped from 57.0% to 53.5% year on year,” says Kantar of the dynamic in the UK.
For the US, over 5 million consumers under the age of 35 no longer have an active subscription to a streaming music service.
“With three of the top 5 reasons in all territories linking back to money saving, this could show that consumers around the world are looking to cut down on their expenses during this cost-of-living crisis,” argues the report.
This is a whole new level of existential crisis for the streaming music business. The average cost of a music streaming subscription, outside of a handful of test markets, has not increased in over two decades.
Former Spotify chief economist Will Page dissected this dynamic and paralleled it with the rising cost of other products (notably wine), calling his thesis “Malbeconomics”.
Pushing through price increases in a period of mounting consumer uncertainty is going to be a very difficult sell.
Kantar notes that the cost of an Amazon
Neither Spotify nor Apple Music, for now, wants to test the boundaries or the robustness of this market duopoly by increasing prices across the board, fearful that their biggest rival will not follow suit or may even temporarily reduce prices to lure in subscribers who might not be overjoyed at the news of a monthly subscription price hike.
This report comes hot on the heels of two separate forecasts, one from JP Morgan and another from Goldman Sachs, that confidently projected music streaming numbers are going to rise sharply in the coming years as are overall music revenues.
JP Morgan predicted that Apple Music would reach 110 million paying subscribers by 2025 and be worth $7 billion a year. Meanwhile, Goldman Sachs recalibrated its estimates for the value of combined music business by 2030, increasing it from $139.7 billion to $153 billion.
There are two, seemingly contradictory, dynamics at play here: a forecasted steady rise for the digital music business; and a concurrent increase in consumer anxiety about the affordability of subscription offerings.
The two dynamics can co-exist as there are wider demographic issues impacting here that need to be considered.
According to Kantar, it is currently younger consumers who are most likely to cut their subscriptions, but the growth of subscription services in recent years has been driven in a large part by appealing to older (and more affluent) consumers who might not be so pressed to make decisions about what subscriptions they can and cannot keep.
For a music business that is, to a large extent, built around the consumption habits of a youth audience – and who are essential for the breaking of new talent – this is a whole new type of worry.
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