What is Streaming 2.0?
Streaming 2.0: What the future of music streaming means for fans, artists, and the industry. Here’s everything you need to know.
Click below to jump to one of the following:
- Shifting from customer growth to customer value
- Targeting new and established markets
- Artist-centric principles
- Early initiatives and industry cooperation
- Is Streaming 2.0 beneficial or is it simply a money grab?
- The future of streaming?
In September 2024, Universal Music Group (UMG) unveiled its vision for the future of music streaming- “Streaming 2.0”. This concept aims to redefine the streaming landscape by focusing on customer value, expanding markets, and adopting artist-centric principles. UMG predicts there will be more than one billion paying music subscribers by 2028, marking a transformative era for the music industry.
Shifting from customer growth to customer value
The traditional model of music streaming has prioritised subscriber growth and a single value proposition to every customer: access to a vast music library. While this simplicity helped facilitate the rapid adoption of streaming, UMG argues it’s time to pivot. Streaming 2.0 emphasises a more nuanced model that maximises both subscriber growth and average revenue per user (ARPU) by:
- Offering premium subscription tiers.
- Selling merchandise and branding opportunities.
- Targeting superfans with exclusive and high-value content.
UMG envisions moving beyond the one-size-fits-all approach by offering a “segmented customer proposition”. This means tailoring experiences and pricing to different audience segments, creating deeper engagement and broader monetisation opportunities. In particular, ARPU growth is tipped to come from developing “new products and premium tiers” designed for superfans to unlock their spending potential.
“While streaming has delivered robust growth to UMG for over a decade, streaming 2.0 will represent a new age of innovation, consumer segmentation, geographic expansion, and greater value through both subscriber and ARPU growth.”
UMG Chairman-CEO Lucian Grainge
This strategy reflects the industry’s need to evolve beyond the simple access-to-music model and create more meaningful experiences for its listeners.
Targeting new and established markets
Alongside pushing subscriber revenue, Streaming 2.0 seeks to expand streaming’s reach into high potential markets where streaming is rapidly growing like China, Brazil and Mexico. These regions in particular have untapped potential due to increasing technological and economic infrastructure that led to the widespread adoption of streaming in established markets.
UMG’s SVP of Global Insight, Gaby Lopes, believes that there are already around 220 million potential subscribers in the “consideration set” in these regions. This refers to individuals who understand the concept of music streaming, are interested in it, and are willing to pay at least the current subscription price.
In established markets, the strategy includes appealing to audiobook subscribers, those paying for satellite radio, and existing high-ARPU regions. These efforts are designed to bolster subscriber numbers and revenue, both in high-growth and established markets.
Artist-centric principles
A more controversial aspect of Streaming 2.0 is its commitment to “artist-centric principles”, which aim to:
- Combat stream fraud that takes money from the revenue pool through automated plays of AI-generated tracks.
- Reallocate revenue pools to established artists over hobbyist musicians with less than 1000 monthly listeners.
While the second aim tries to solve the problem of the first, it risks sidelining emerging talent by prioritising top-performing artists. In turn, this may reduce the revenue and opportunities for smaller creators.
Early initiatives and industry cooperation
UMG has already begun laying the groundwork for Streaming 2.0. Partnerships like the one with Amazon Music exemplify this. Together, they aim to:
- Innovate fan engagement with exclusive content from UMG artists.
- Enhance fraud protection and combat unauthorised AI-generated content.
- Expand Amazon’s offerings in audiobooks, audio programming, visual and live streamed content.
Steve Boom, VP of Audio, Twitch and Games for Amazon
UMG has also pressured platforms like TikTok to increase royalty rates by removing their music from the platform last year, advocating for fairer compensation for artists. The company additionally helped to launch the Human Artistry Campaign, rallying artists and organisations to protect their music copyrights from AI companies.
One report suggests that industry-wide cooperation will be essential for Streaming 2.0 to succeed. Spotify’s officially-announced “Supremium” tier and Deezer’s adoption of artist-centric payout models indicate some movement towards the next era of music streaming.
Is Streaming 2.0 beneficial or is it simply a money grab?
While many may view Streaming 2.0 as the new way to rip-off music fans, there could be some rationale behind it.
Despite streaming’s widespread popularity, music subscription remains under-monetised. Per head, people are only spending about 50% of what they were on music at the peak levels in 1999. Superfans, a particularly lucrative audience, spend no more than the average listener in the current model.
In the past, fans would have to buy more music in order to listen to more music, increasing spending in doing so. However, the current subscription model means that all listeners pay the same fee, regardless of how much music they consume. Streaming 2.0 seeks to address this by creating premium experiences that tap into superfans’ willingness to spend, potentially benefiting the revenues of the music industry as a whole.
The future of streaming?
UMG projects an annual sales growth of 7% over the next five years, driven by Streaming 2.0’s improved subscription models and enhanced monetisation strategies. While the concept is in its infancy, Streaming 2.0 offers a glimpse into a future where streaming platforms, labels, and artists could all benefit from a growing revenue pie.
For now, the music industry’s evolution remains relatively unchanged, and hinges upon the actions of key industry players. Whether these changes will usher in the next generation of music streaming remains to be seen. One thing is certain: the next chapter of music streaming will be one to watch.