Is music streaming reaching subscriber maturity? Not according to bullish Merck Mercuriadis, which presented aggressive streaming growth projections on Thursday.
There are more than 550 million paid music subscribers worldwide, according to MIDIA Research estimates. Of this amount, Spotify claims 182 million, according to the company’s latest disclosures. But how many other paying subscribers are there?
According to Hipgnosis Songs Founder and CEO, Merck Mercuriadis, more than 1.5 billion people have not yet created paid music streaming accounts. During a keynote at Canadian Music Week in Toronto on Thursday, Mercuriadis announced bullish projections for the next 10 to 15 years.
“When I presented [the Hipgnosis] investment case to the financial community, I told them this was going to be a great way to make money, because Spotify and streaming were going to go from 30 million paid subscribers to 100, 200, 300, 400, now we’re at 500 million,” Mercuriadis relayed.
“When we get to the end of this decade, we’ll be over a billion. And by the time we enter the next decade in the 30s, we’ll be at 2 billion subscribers. And this money comes from all over the world.
This is bullish stuff, which is not surprising coming from Mercuriadis. In jaw-dropping style, Hipgnosis has invested billions of dollars in catalogs of top-tier music, often at 20x+ ratings requiring a high level of optimism (and moxie) to execute. It also requires a very strong belief that streaming music platforms will retain their current subscriber bases and grow them aggressively in the future.
But what about the music industry’s hesitation in the face of the monetization problems of the “streaming shelf” and “post-streaming”? In the last quarter, Spotify added a modest 2 million subscribers from 2021, but with 1.5 million subscribers purged from Russia. This suggested a possible slowdown, with high-dollar markets like the United States and Western Europe potentially reaching saturation points. This shifts the focus to emerging markets like Africa, India, and Latin America, all of which offer less revenue per user (or “ARPU”).
But when asked if streaming growth is leveling off, Mercuriadis offered a much different analysis. “I’m pretty sure it’s not,” Mercuriadis told Digital Music News. “You probably saw Spotify’s Investor Day yesterday, where they were pretty optimistic that they themselves will have a billion users by 2030.”
Which brings us to Spotify’s problem.
“I think what caps [for Spotify] is because of the negative stance they’ve taken on songwriters – and because they’re preoccupied with other things. I think Spotify may not end up with the same global market share that I expected them to have.
The erosion of Spotify’s market share could create distortions in the broader analysis of the market, according to Mercuriadis. “If you had asked me two years ago, I would have expected Spotify to have a third of the global market by 2030,” Mercuriadis continued. “I think at this point they may have 25%, or somewhere between 20 and 25%, and because people are looking at Spotify data rather than aggregate streaming data around the world, they think streaming may be leveling off.”
Responding to concerns about subscriber defections, Mercuriadis clarified that Spotify is not Netflix for several reasons.
For starters, Netflix operates in a competitive audiovisual space that offers highly differentiated content. This forces subscribers to make tough choices and cut platforms to manage spending. With music streaming, most subscribers only pay for one service – it’s usually a selection from Spotify, Apple Music, Amazon Music, YouTube Music or another similar platform. But multiple music subscriptions are the exception.
“But if you look at what’s on offer, because that’s really what matters – access to all this amazing music for $10 a month – even in an environment of high interest rates and massive inflation, it will always be the last thing people let go of.”
“When you look at something like Netflix, where they’ve lost subscribers, I think it’s very different. It’s one of the six or seven AV services you might need to get all the TV programming so when you get those six or seven subscriptions, one of them will eventually disappear.
“But if you have a Spotify subscription or if you have an Apple subscription right now, these things are going to stick with you, no matter the price in the world. The value is tremendous.