Apple thinks streaming music should cost less. Spotify agrees.
Spotify Lowers Its Music Prices, Using a Family Plan. Apple Wants to Go Lower.
If paid subscription services are going to get bigger, they may have to get cheaper.
Peter Kafka covered media and technology, and their intersection, at Vox. Many of his stories can be found in his Kafka on Media newsletter, and he also hosts the Recode Media podcast.
Spotify is effectively offering a price cut on its subscription music service by giving family members a 50 percent discount on additional accounts. So if you have a $10 Spotify Premium subscription, your husband can get one for $5 a month.
Spotify says the new pricing scheme will roll out globally over the next few weeks. The company has said it already has more than 10 million people paying for a subscription, and 40 million users overall. The discounts, made with the blessings of the music labels, could help boost those numbers.
They are also a sign that Spotify, and its CEO Daniel Ek, agrees with the pitch Apple has been making to the music labels: If paid subscription services are going to get much bigger, they will have to get cheaper. While $10 a month is now the industry standard, that’s much, much more than people spent on music during the industry’s peak.
Apple has been pushing the labels for more extensive price cuts. It wants to relaunch the Beats Music subscription service it bought last spring next year, and industry scuttlebutt is that it’s trying to get the price cut in half, to $5 a month.
The logic of Apple’s argument, relayed by people who’ve heard the pitch secondhand: Apple’s best iTunes buyers spend about $60 a year on downloaded music — $5 a month. So if subscription services dropped that low, any download buyers that switched over to the streaming model would generate just as much revenue for the music labels. And, more important, the market of potential subscribers would get much larger.
My hunch is that Apple doesn’t think the labels, who have just gotten used to the idea that streaming services can be big money generators, will want to cut prices in half. A more modest goal would be to get rental music down to the price Netflix charges (some of) its users for rental video: $8 per month. Bear in mind that any price cuts that Apple got would have to be offered to all of its rivals, too.
Meanwhile, consumers are also pushing for price cuts — by spending less on music. Download sales are dropping significantly this year, and that pace may be accelerating.
This article originally appeared on Recode.net.
