Here’s a question: if all the streaming services are basically the same and if I can listen to any one of them for free rather than paying a monthly subscription rate, then which streaming service should I use and why should I pay for it?
Yep. That’s the question that no one in this business wants to be asked. So I’ll ask it again even more bluntly. Does it matter at all which streaming service you use?
Now the answer to this question is tricky since it really depends on whether you are a music consumer or someone working for one of the current streaming companies. As a consumer, there is no significant difference. It’s like being asked if you’re better off listening to 93.1 or 98.5 on your FM radio. As if one radio station was inherently better than the other. Sure, one might have a programing format that you enjoy more than the other but that’s immaterial. They’re both free and you switch back and forth depending on your mood. Streaming services should be thought of the same way. Why on earth would you ever lock yourself into just one radio station? And why would you pay for it when you can easily turn the dial and get the same content on a different channel for free.
Of course, the streaming companies and their investors don’t see it like this. But let’s be honest. They’re simply middlemen in this equation. They are music distributors and they are moving commodities. The streaming file that I’m listening to right now on Rhapsody is the same as the file on Rdio and it’s the same as the file on Spotify and Deezer. (Technically, there are compression differences which lead to sonic differences but these will all balance out into an equilibrium as the companies continue to compete for customers.) So the only thing that keeps me as a consumer from jumping ship from one company and going to another is the community that they build and the added value services like music discovery and/ or personalization.
And this is why we keep reading about new feature roll outs. Deezer just launched Hear This, their version of a discovery tool. Read more about it via Context is the key to cracking the music discovery problem.
And expect to see similar offerings cascade throughout the rest of the services. Because that’s what you see in a commodities market. No feature set will be unique. Each firm will have all the same offerings of all the other firms. Just in their own unique flavors.
It really all comes down to the Network effect. Users will gravitate to the services that have the most people. From an investor’s perspective, this is a zero sum game with the winner taking all. This is why so much is being plowed into marketing and advertising for firms that loose money. Spotify is burning cash with the hopes of acquiring more users so that eventually they can have a business model.
Which is precisely why Deezer’s real announcement is so newsworthy. That in spite of all its attempts at dominating the streaming world, Spotify is flat and Deezer is in fact growing. They now have more than 5 million paying subscribers. They multiplied their subscriber base by 2.5 in one year. And they did it outside the US, so it’s a very strong footprint. Read the full article here.
So what’s the news really mean and what’s the inside scoop.
1) The streaming fight is far from over and there’s still no clear winner even with Spotify’s massive publicity lead.
2) As music consumers get hipper to streaming, they’ll get more tuned in to the fact that all the services are really the same. It will be a race to the bottom for pricing even as more community building services are added.
3) More and more and more of investor money will be burned in trying to acquire customers who may not be brand loyal in the end.
4) Musicians and content creators are gaining a voice in this war. Thom Yorke and David Byrne and all the others who have spoken out are shining a spotlight on what’s really going on.
5) The streaming distributor that works best with artists AND WHO CAN COMMUNICATE that message to consumers while still being price competitive, will have the best chance of convincing consumers to pay for the service.
6) Consumers want to see content creators get paid. That component will be vital to the next evolutions.
And in the end, once it all plays out. We’ll realize that YouTube won the war without even trying. But more on that later. For now, hat’s off to Deezer for fighting the good fight and for reminding us to ask questions.