Maybe all of the investors plowing tens of millions of dollars into music startups are on to something: a new report predicts that more than 161 million people will subscribe to music services in five years.
Today, less than 6 million do.
This prediction seems wildly optimistic, given the struggles of subscription music companies so far.
Rhapsody has been around for almost a decade and still has only 750,000 subscribers. European service Spotify has more than 10 million free users, but just passed a million payers a couple weeks ago. Other music services — MOG, Rdio, and the like — are much smaller still.
So how can ABI be so optimistic? Practice director Neil Strother explained that most of the growth will come from mobile phone users, and offered several specifics why mobile music is poised to take off:
- Asia. Huge populations in Asia — mainly India and China — don’t have access to a computer with Internet access, but mobile phones are common.
- Smartphones. Over the next five years, a lot of feature phones in these countries are going to be replaced by smartphones, which are much better for consuming audio.
- Networks. Wireless data networks in these countries will make quantum leaps in bandwidth — from 2.5G to 4G or higher — making streaming services more viable.
- Partnerships. Wireless carriers will begin to offer music (and other content) subscriptions as part of their monthly billing plans, probably through partnerships with Spotify and other music providers.
- Social. Social discovery is another relatively new trend — only Rdio has really embraced it. As more services add social features, they will begin to draw customers who previously preferred single-song downloads from iTunes.
- Capitulation by the music industry. As sales of other formats of music continue to collapse, record labels and publishers will be more willing to strike deals with subscription services. This should allow for lower-priced services — instead of $10 per month being the standard fee, services could cost as little as $2 per month.
On that last point, ABI cautions that the rise in subscription services won’t necessarily mean a great deal for musicians: “For musical artists, there are both positives and negatives: it will be more difficult to make a living by selling recorded music, but the barriers to wide product distribution are falling fast.”
Here’s ABI’s prediction of subscription growth by geography: