The Ledger is a weekly newsletter about the economics of the music business sent to Billboard Pro subscribers. An abbreviated version of the newsletter is published online.
The music business should watch what Netflix is doing in select Latin American countries to bring in more revenue as painlessly as possible.
In the next few weeks, Netflix will begin testing new two features in Chile, Costa Rica and Peru:
- “Add an extra member,” which allows subscribers to standard and premium plans to add up to two people they don’t live with for a few dollars a month;
- And “transfer profile to a new account” for people to take their profile information — namely their viewing history and recommendations — to a new account rather than create a new account from scratch.
“We recognize that people have many entertainment choices,” the company wrote in the blog post announcing the new features,” so we want to ensure any new features are flexible and useful for members, whose subscriptions fund all our great TV and films.” To be sure, Netflix is offering carrots rather than sticks to deal with account sharing between people in different households. Previous efforts to reduce password sharing were delicately handled. Contrary to some news headlines, Netflix is not exactly cracking down on the problem. But with subscription growth slowing and its share price in decline, Netflix is not ignoring the matter, either.
What does this have to do with music subscriptions? Plenty. People share accounts to Spotify, Apple Music and other music subscription plans just as they share accounts to video subscription services. Music services are also under pressure to generate more revenue for rights holders and creators. Spotify has opted to experiment with small hikes in multi-user subscriptions such as family plans rather than broad price increases. Instead, Spotify et al. have focused on attracting more subscribers, which brings more paying customers into music streaming, and reducing churn, which has raised the average subscriber’s lifetime value. By and large, prices have stayed flat for more than a decade.
The latest data show account sharing remains widespread in the U.S.: 15.2 million people used a music streaming service log-in and knew it wasn’t for a family plan, according to the MusicWatch Annual Music Study 2021. That was down from 18.6 million in 2020 but higher 2018 (9.2 million) and 2019 (12 million). MusicWatch’s previous survey in 2019 found that about one in nine Americans using a music subscription were streaming using someone else’s password. About 30% of people who admitted using somebody else’s password said they would pay for the service. That segment would be worth $300 million annually at $9.99 per month — even something less would be an opportunity to convert non-paying users. The remaining 70% of account sharers said they would opt for the free, ad-supported version. That’s also an opportunity. Streaming services and rights holders would be better off if they could pay a few dollars a month rather than turn into low-value, advertising-based listeners.
Improving monetization doesn’t require widespread, unpopular price increases. Small tweaks can help build the marketplace and convince more people to become paying customers. Netflix’s option to transfer a profile to a new account eliminates some of the pain in starting an individual subscription. If a music streaming service followed suit, a person could start a new subscription and keep all their playlists created under a previously shared account. Giving non-family members the ability to join a shared account would result in marginally higher revenue per user without making everyone else pay more.
Music streaming services are increasingly under pressure to deliver more royalties to creators and rights holders. Tackling account sharing is a sensible option. Even gentle nudges, not heavy-handed tactics, can produce results.
STOCKS
Through March 18, the % change over the last week, and the year-to-date change.
Spotify: $144.78, +16.5%, -38.1% YTD
Universal Music Group: 22.78 euros, +11.7%, -8.1% YTD
Warner Music Group: $37.21, +17.0%, -13.8% YTD
Believe: 12.90 euros, +11.3%, -23.7% YTD
Reservoir Media: $8.96, +8.7%, +13.3% YTD
Live Nation: $112.98, +4.1%, -5.6% YTD
Tencent Music Entertainment: $5.06, +47.1%, -26.1% YTD
