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Are There Too Many Music Streaming Services?

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Earlier today Pandora announced their move into the Australian music market and TMV understands Deezer is not far behind. In this market alone that would mean Rdio, MOG, Spotify, Pandora, Deezer, five global music streaming services as well as a further two local services for a market with a total population of 22 million.

Apple, Amazon and Google are all also looking to launch their own streaming music services before the end of this year. That would make eight global streaming music services in the Australian market, not including the two or so purely local offerings.

The question is, whether the audience is there to sustain so many services over the medium term? Sadly, in the UK the first music streaming service in that market We7 has recently fallen by the wayside. The only subscription passed streaming service not to enter the Australian market to date seems to be Rhapsody (US) and Simfy (Germany).

Simple economics will tell you that Australia with such a low population has no way in hell in providing a viable ecosystem for all previously mentioned streaming music services.

In the realm of the al-la-carte market Apple currently has a 94% share of the Australian market. Numerous competitor services have come and gone and have not managed to take market share away from iTunes. A good question is if only one company manages to sustain its business in the al-la-carte market within Australia, what is there for 10 streaming services?

Whilst yes TMV would argue it is great for consumer choice. On the flip side it could also be argued that too much choice can lead to consumer confusion and to much market fragmentation. It will be interesting to see what demand is there for such services.

Undoubtedly, the labels are laughing all the way to the bank in terms of the licensing ransoms they have managed to collect. It must be like the gold rush, with so much money being thrown around. But the critical question that needs to be answered by all these labels is how much are the artists on their rosters receiving from these licensing ransoms? If you’re a manager and your distributor and/or label is distributing to all these services you might just want to enquire what your artist is receiving…

Drilling down, which services does TMV believe will last the marathon in the Australian market? Well Spotify is growing fast and soon to be valued at $4 billion – yes you read rightly. So, it is definitely a contender for the long haul. So is Rdio due to its backers being the founders of Skype – albeit previous forays into the digital music market have not been successful for them. MOG will no doubt have a good chance in the Australian market due primarily to the fact it comes unmetered to all Telstra subscribers.

The question of data consumption when streaming music over the air to your mobile device is the critical issue at hand folks, as TMV are pretty sure numerous music fans are soon to be burned by telcos with bill shock at $1000 plus monthly bills they receive. TMV’s main fear is that once music fans experience ‘bill shock’ due to streaming direct to their mobile device they will blame the music companies involved and not the telco’s. This is what Apple managed to achieve through its own propriety DRM where consumers blamed the labels and not Apple.

It is clear to TMV just looking at the streaming music services on offer in Australia that there will be a market shakedown. The key question is when and who will be affected and the same goes on a global basis as well…

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