Is inflation driving consumers out of the music streaming market?

With a cost-of-living crisis potentially threatening millions around the world and inflation rates in some countries exceeding double digits, there are signs that music subscribers are cutting back. But how will this affect the different platforms in the music on demand (MoD) market?

Q1 2022 highlights:

  • Over a million music subscriptions were canceled in the last quarter in Britain, with the desire to save money cited by 37% of consumers as the reason for cancellation.
  • Value for money remains the main driver of new subscriptions in 3 of the 4 regions in our survey, with only Germany having a different main reason (the music platforms my friends use)
  • The number of new music subscribers fell to less than 1% of the population in Britain in the first quarter of 2022, with the United States and Germany also seeing a drop in the number of new subscribers compared to the last year.
  • In Britain, subscriptions are falling fastest among young consumers; the percentage of under 35s with access to a music subscription rose from 57.0% to 53.5% in one year.

Cost of living crisis leading to cancellations

With inflation hitting 9% in the UK and further rises in the cost of living expected, rising music subscription churn rates show that UK households are starting to prioritize spending their disposable income. Over one million subscriptions were canceled in the last quarter, which also saw the highest number of consumers citing the desire to save money as the reason they want to cancel their subscription, at 37%. . This number is up 4% compared to the same period last year.

Q4 2021
Penetration rate

Q1 2022
Penetration rate

Q1 2022
Cancellation rate

GB

39.7

39.5

3.0

WE

48.8

48.8

4.6

Germany

35.9

36.6

5.1

Australia

48.6

Are young streamers cutting back?

These factors have led to a slight drop in penetration of the total number of individuals with access to at least one music subscription, now 39.5% of UK adults. This is well below the early 2020 peak of 43.6%. One of the reasons for this drop in penetration is the drop in the number of young subscribers. 600,000 under the age of 35 have access to a music subscription compared to the previous year, with the penetration of students with access increasing from 67% to 59%. Some of the main reasons under 35s are considering canceling and being over-indexed compared to the over 35s group include not having a wide enough music selection, too many ads, or technical difficulties.

The United States saw a steeper decline of nearly 5 million people under the age of 35 no longer having access to a music subscription service, from 69% to 63%. With three of the top 5 reasons across all territories related to saving money, it could show that consumers around the world are looking to cut back on spending during this cost of living crisis. However, the other issues highlighted show areas where platforms can focus to help retain younger users.

Amazon’s unwelcome price hike in May

In the UK, the price of certain Amazon Music Unlimited subscriptions increases in May. The single device and individual plans both increase by £1/$1 per month, with the annual price for the latter rising from £/$79 to £/$89 per year. With 7.1% of current Amazon Music Unlimited subscribers in Britain, the US and Germany already planning to cancel their subscription, the price hike could lead to an increase in the number of cancellations over the next coming months in all global markets.

When examining why consumers are considering canceling their music subscription in the next quarter, the top reason is that they plan to save money, with 37% of Amazon Music predicted cancellations Unlimited in GB citing this as one of the main reasons. This is above the market average, with only Spotify having a higher percentage of cancellations citing this reason at 41%.

Spotify rejects Rogan criticism

After Neil Young was among a group of musicians who deleted their music libraries due to continued support from Joe Rogan Experience podcast platforms, Spotify hasn’t suffered much of a ill-effect over the past quarter. . In the first quarter of 2022, Spotify saw its share of new subscribers increase compared to the last quarter, reaching 22%. The percentage of new subscribers who were driven to sign up by the variety of artists available on Spotify also increased from last quarter and from the start of the previous year, rising to 35.5%. The variety of artists available is one of the top three reasons subscribers sign up for Spotify, 1st in the US (31.5%), 2nd in Britain and 3rd in Australia (33.2%) and in Germany (27.7%). This highlights the importance of artists available on Spotify globally, but shows that a platform that loses a handful of artists won’t affect a new subscriber’s thirst to sign up.

In contrast, one area where Spotify has suffered over the past three months has been in the satisfaction of its current subscribers. Spotify’s record of having the highest Net Promoter Score since our UK recordings began is under threat, with their score of 33 being the lowest the platform has recorded since the first quarter of 2020. From a global perspective, Spotify’s NPS index relative to the average decreased in the UK, US and German markets compared to last quarter, suggesting competitors are improving their service quality.

Welcome Australia!

In Q1 2022, Kantar’s on-demand entertainment service expanded to Australia, enabling us to provide longitudinal insights into the video and music streaming industries. Early figures show that 49% of Australian households subscribe to at least one music streaming service, or 9.92 million households. This number is similar to the United States and higher than that of Great Britain and Germany. The market is dominated by Spotify, with 74% of MoD-enabled households using the platform, with Amazon Music Unlimited and Apple Music rounding out the top three. A similar trend is also seen for new subscribers, with almost half of them in Q1 2022 going to Spotify (43%), the second highest being Amazon Prime Unlimited (13%). With the addition of new territory to the on-demand entertainment service, it will be exciting to see the long-term trends that emerge in the Australian music streaming market over the next few years.

If you would like to learn more about our on-demand music services, please contact our experts.

About Victoria Rothstein

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