Freemium Falling?

The ongoing debate around free tiers of streaming services is heating up, with senior figures in the recording industry divided on the subject.

Speaking last week on a panel at the Mobile World Conference in Barcelona, Ministry of Sound’s Lohan Presencer (pictured) lashed out at such services, saying that limited free tiers effectively turn casual paying customers into non-paying browsers of music and were not an effective alternative to piracy- It’s a popular argument from the ikes of Spotify et al that they have effectively delivered the silver bullet against piracy.

Representatives from Deezer and Rdio were also on the panel.

Presencer said: "They don't have to engage in the subscription model. The reality of some of the bigger streaming services is that 75% of their user base are free, which has a horrific impact on the music industry and its ability to invest in talent going forward".

Presencer went on to make an important point about the objectives of such companies in relation to investors, stating: “Your objective is to grow your user base, to tell a story such that you can IPO or you can sell, and you can exit, and you can put money back in the pockets of your investors. You are not the ones who are investing in developing talent. You are not the ones who are signing artists”.

The panel is well worth watching here, especially from the way that it descends from another cosy, boring panel about digital into a full blown and meaningful debate.

Universal Music Group CEO Lucian Grainge unsurprisingly echoed such sentiments last month, stating: “We want to accelerate paid subscription. Ad-funded on-demand is not going to sustain the entire ecosystem of the creators as well as the investors”.

However, not everyone agreed with Beggars Boss Martin Mills saying that the industry would be “Insane to dump Freemium” as reported here by Music Business Worldwide.

Mills added: “The use of free to transition fans from piracy to monetised has clearly been a success – very visibly so in markets particularly challenged by piracy”.

Mill’s comments were supported by Glassnote's Daniel Glass and Kobalt CEO Willard Ahdritz. According to data published by Spotify, 25% of free ad-funded users then switch to premium, a figure that has remained steady over the last few years.

It will be interesting to see how this debate evolves, especially with the launch of Apple’s reportedly premium only streaming service launching later this year.