Students, Cross-Border Pollination And Streaming Growth

Streaming’s big challenge for the next couple of years is how to reach new audiences as it nears saturation of the hard core music aficionados in key markets. Telco bundles, emerging markets and mid price subscriptions are all tools that will be used. But one of the most important segments is the student population. Students comprise some of the most ardent music fans, living and breathing music. However, they also happen to spend most of their time skint. Though students are generally better off now than they were a couple of decades ago, $/£/€10 a month is still a stretch too far for many, competing with PAYG phone credits, a shared household Netflix subscription and, most importantly, beer money. The good news, for streaming services, and students, is that rights holders understand the importance of flexibility in reaching students and have enabled the likes of Spotify and Deezer to launch half priced subscriptions for them. In effect making the AYCE proposition a mid tier product for the student population. The initiatives have proven highly successful. But there is more to student streamers than simply a mid price success story, they also help drive adoption in markets that are approaching scale.

We were fortunate enough to have Spotify share some German streaming data with us that helps illustrate just how important the student segment is and also how a diverse mix of local factors can impact streaming adoption.

The Power Of Student Ambassadors

Subscription revenue represented just 5% of German recorded music revenue in 2014. In a market dominated by CD sales (70% – including vinyl) streaming was struggling to make much of a dent in the market. Fast forward to 2015 and subscriptions nearly tripled their share to 14%, helping the total market grow by 3.9% – though interestingly physical lost less than 1% of market share.

There were many factors underpinning that subscription growth and one of them was the German student population. As in many markets, Spotify recruited a network of student ambassadors to spread the word on campuses across the country. As the graphic shows, 10 out of 12 of the cities with student ambassadors went onto become half of the German cities with highest streaming penetration, while one of them – Giessen – was the fastest growing. While it would be inaccurate to suggest that students were the only factor in driving growth in these cities, they played a significant role in pushing German streaming penetration to the next level.

Cross Border Pollination

There are also a couple of other interesting insights that emerge from the Spotify data.  The first of which is the that the economic disparity in Germany is illustrated by the significantly lower adoption in east German cities compared to western German cities. But the most interesting of all is the northern town of Flensburg, which emerged as both the earliest adopting and fastest growing town or city for Spotify in Germany. Flensburg probably doesn’t feature in many people’s list of ‘important music towns’. So why the stand out streaming adoption? It transpires that Flensburg’s music fans routinely hop across the border to see gigs in Denmark and Danish acts come over to play in Flensburg. So what took place was cross-border-pollination of streaming. The fusing of the music cultures across the border exposed Flensburg’s music fans not just to Danish music but also to Spotify. A Viking raid of culture and technology.

If there’s one big take away from the Spotify data, it is that streaming adoption is a multi faceted beast with countless anomalies and hyper-local market factors that combine to create macro trends. Streaming’s success is thus the accumulation of a multitude of micro events.

Thanks go to Will Page and Paulus Yezbek at Spotify for having compiled the Spotify data in this post.