Apple and Music Streaming Services Push to Lower Monthly Prices to $5

Spotify recently announced a family plan that enables premium subscribers to add 4 “family members” to their plan for $5 month, and each member gets their own fully functional Spotify premium account.

So why is Spotify discounting their price? There are rumors that the $5 price point is is where the market if moving for music streaming and subscription services, determined largely in part by the recent Beats Music purchase.  Although his new price point may be good for customers, it may cause an issue for record labels.  The reason for this is because if a label allows one music service to offer $5 subscriptions, that same price drop will need be applied fairly to all of their competitors e.g. Spotify and Rhapsody.

Apple has suggested that iTunes buyers spend approximately $60 per year on download music ($5/month), so if subscription services dropped that low, any buyers that switched to the streaming model would generate just as much more for the labels.  An additional point that is very important is that the market for potential subscribers would also get much larger in the process.

Consumers have a lot of power in this situation too.  They are pushing for price cuts by spending less money on music.  Although this can be advantageous to consumers, the artists may ultimately lose out on royalty payments due to price pressures from both consumers who want cheaper prices, and the labels and streaming services which will likely trying to be holding on to as much money as possible with these ever shrinking margins.