Description: When Spotify, the digital music company of the moment, announced this week an exclusive deal with Led Zeppelin and free access on mobile devices, it also reported impressive numbers. Its listeners have streamed 4.5 billion hours of music this year, and it has paid more than $1 billion in music royalties since its founding.
Date: Dec. 12, 2013
Yet even as they have grown, streaming companies have encountered a stubborn problem: Music lovers will consume large amounts of music as long as it is free, but getting them to pay a monthly subscription has proved much more difficult.
Pandora, the only publicly traded streaming company, delivers about 1.5 billion hours of music each month to more than 70 million users, but only about three million of them pay. The rest listen free but must endure advertising. Even though it has a market value of $5 billion, Pandora has yet to turn an annual profit.
“There is this irrational resistance for people to actually plunk down their credit card for streaming services,” said Ted Cohen, a digital music consultant with the firm TAG Strategic. “We’re 13 years into the Napster phenomenon of ‘music is free,’ and it’s hard to get people back into the idea that music is at least worth the value of a cup of Starbucks coffee a week.” READ REST OF STORY
Questions for discussion:
1. What are the various business models to revenue from online music?
2. Which business model has the best chance for success? Why?