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2014: Music Services Lost Subscribers…And It's A Good Thing

Internet_radio"The RIAA in its midyear report had paid subscribers at 7.8 million, but by the time we got to the end of the year, it was only 7.7, a loss of 100k subs. So what gives?"

                                                                                             

Guest Post by Jon Maples on JonMaples.com

Last year was a banner year for music subscription in the US. The RIAA reported big time growth, primarily driven by Spotify’s gains in paying subscribers.

But at the same time, the market stalled a bit in terms of actual subscribers. The RIAA in its midyear report had paid subscribers at 7.8 million, but by the time we got to the end of the year, it was only 7.7, a loss of 100k subs. So what gives?

Well, we had another year of consolidation. Two big players came off the market. The biggest driver of losses is Muve Music, which at its peak, reportedly had two million subscribers. Granted those subs weren’t generating much in revenue for the industry, but it was a big number. AT&T acquired Muve’s parent Cricket Wireless and then treated it like a redheaded stepchild.

Conventional wisdom is that Muve delivered a big number of subs, but it was primarily a sleeper service, where most of the users were inactive. There was a ton of media flaunting how great Muve was for the industry, which in retrospect, now seems absurd. AT&T shuttled off Muve’s subscribers to Deezer in January. However, these kinds of deals generally mean retaining 50 percent of subscribers at best. I’ve seen acquisitions deliver less than 30 percent of subscribers to the new service.

 

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After a big marketing blitz, Beats turned off their acquisition channels once Apple purchased the company, which adversely affected its numbers.

Just totaling up subscribers isn’t the best way to judge success of subscriber. The key number to get the total picture is revenue plus subs. In the first half of this year, streaming subs increased to $371.4 million, and increased even more in the second half to total $799 million for the year.

Perhaps the old adage about lies, damn lies and statistics applies here. It’s easy to fall into the trap of writing provocative headlines based on precursory numbers. But it requires digging a level deeper to understand what the numbers actually mean. Spotify had a great year in 2014. In some respects the company, along with the massive increase of internet radio revenue, kept the industry afloat through another transition.

There’s no need to bemoan the loss of garbage subscribers. We need to focus on revenue and subscribers to get a true sense of what streaming subscribers is delivering to the industry—and where the real growth will come from.

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