Streaming’s next growth phase The necessity of differentiation

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20,000 foot view:  DSPs have long been able to grow their subscriber bases despite all offering essentially the same experience. Yet the freemium model is reaching a saturation point, putting slow but steady pressure on DSPs to find new ways to grow subscribers and revenue. Most remaining people who do not already pay for streaming either lack enough interest in music or cannot afford to subscribe. The cost-of-living crisis, the attention recession, and growth of non-DSP streaming as a free alternative will make converting these consumers even more challenging. The path forward necessitates that DSPs change and evolve their offerings, giving way to the format’s first phase of differentiation. 

Key insights 

• Year-on-year growth for both subscriptions and ad-supported revenue will slow from double to single digits within the next four years
• When asked which costs they would cut if forced to reduce entertainment spend,        of music subscribers would cancel a music streaming subscription and downgrade to the free version
• There is still much long-term subscription growth to be had in emerging markets, particularly Asia Pacific, but revenue growth will be offset by those regions’ lower ARPU
       of consumers who do not subscribe to streaming would be willing to convert, and        are likely to do so
• Not all non-subscribers are addressable; most either do not listen to enough music to pay for it        and / or cannot afford or justify the price       
• Roughly        of today’s consumers think music is worth regularly paying for, compared to        in 2016
• Non-DSP revenue will grow        faster than DSP revenue to reach        billion by 2030, driving down subscriptions’ share of total streaming revenue from        in 2021 to        in 2030
• The path forward for DSPs will be about reinventing the ad-supported model; converting more users to paying subscribers through new features and expanded tiering; and getting more spend out of existing subscribers through add-ons
• This combination of financial and cultural pressures will push DSPs to differentiate, with potential ‘personas’, including the Creator Destination, Music Social Network, Super-Streamer, Audiophile’s Club, and Live Streaming Powerhouse

Companies and brands mentioned in this report: Amazon, Amazon Music, Amp, Apple, Apple Fitness+, Apple Music, Apple One, Audible, Audiomack, Bandcamp, ByteDance, Criterion Collection, Deezer, Dreamstage, Driift, GarageBand, Google, Instagram, iPhone, Logic, Meta, NetEase Cloud Music, Netflix, Peloton, Platoon, Repost, Resso, SoundCloud, Soundtrap, Spotify, Tencent Music Entertainment, TIDAL, TikTok, YouTube, YouTube Music, YouTube Shorts