David Pakman offers interesting case for lowering entry cost of streaming services.
Streaming music has arguably been one of the hottest and most divisive topics in the music industry in recent years. With the rise of Spotify and the recent launch of Beats Music, as well as the ongoing woes of the likes of Pandora, Last.fm and more, there’s hardly a week that goes by without some sort of debate about what it means, where it’s going and who’s to blame for artists not seeing much in return for music being a service instead of a product.
Earlier this week David Pakman, ex-CEO at eMusic, joined the fray in a piece for Re/Code entitled The Price of Music. Pakman’s central question, which has been doing the rounds for a while now, is how big will the streaming slice of the pie become now that other revenue streams have constantly dried up. Using his experience and some data crunching he points to one answer that for once strikes a different tune to most: the pricing of the services.
As he explains, one issue lies with how major labels are able to dictate pricing to retailers:
This is because the three major record labels, as part of their music licenses, have mandated a minimum price these services must charge. While it may seem strange that suppliers can dictate to retailers the price they must charge end users for their service, this is common practice in digital music. The services are not able to charge a price they believe will result in maximum adoption by consumers.
His conclusion offers two potential solutions for an increase in recorded music revenue, one of them being: “major record labels allow the price of subscription music services to fall to $3–$4 per month.” Whether or not this sort of move happens remains to be seen but Pakman’s argument is certainly worth considering.