New Survey Of Leading Audio Streaming Services Shows Customers Willing To Pay Significantly More For Their Online Tunes
New online research aimed at measuring consumer willingness to pay for leading audio streaming services, suggests the parent companies of these products may be leaving a massive amount of money on the table. The survey of 857 American adults conducted by Atenga, a leading pricing consulting group, based in Woodland Hills, CA, has a 95% confidence level with a margin of error of 2.5%.
The methodology used to determine optimal pricing levels is called the Price Sensitivity Meter (PSM) and is based on the work of Peter Van Westerdorp, an academic and behavioral economist at the University of Leiden in Holland. In the mid-1970s he constructed a way to ask four simple, unaided questions, that when subject to statistical analysis, provide a dependable measure of willingness to pay. Atenga utilizes this sophisticated approach but presents the data in a simplified form to make it more conducive and actionable for businesses.
Overall respondents were almost unanimous (i.e. over 80%) in their strong dislike for advertiser supported audio streaming. They were more conflicted over the issue of music choice versus quality, with about half responding that audio quality is less important than music choice. Those who preferred Spotify and YouTube which allow users to select specific songs, not surprisingly showed a greater preference for choice over quality.
On the survey’s primary focus on pricing power, the findings were eye-opening to say the least. The survey assessed both price points where demand and aggregate revenue separately peaked. On average for all audio streaming services, demand peaked at $10 per month with revenue peaks between $15 and $20 per month. According to Per Sjofors, CEO of Atenga: “The key takeaway from this research is that Americans love their advertising free audio streaming services, and are willing to pay much more for them.”
The findings may be the most significant for market leader Pandora as the research shows a flat demand curve between $5 and $10 per month. This suggests the company could double its existing subscriber price from $4.99 to $9.99 per month without a loss of market share while doubling revenue. Spotify and iTunes Radio, which are seen as premium services, enjoyed a significantly higher demand curve (i.e. as much as 33%) versus Pandora and YouTube. For both of these audio streaming options, the PSM-based research suggested an optimal price point of $14.99 per month, far above their current price points.
Overall according to CEO Sjofors: “The research pointed to a continuing theme for all American businesses, of underpricing their products and services. He states that American companies as opposed to those in his native Europe enjoy a large and monolithic home market and seem to be more willing to make up in volume what they lose in average revenue per unit (ARPU). What this research shows is that market share and unit revenue can strike a far more profitable balance”.
Atenga is a global pricing consulting leader specializing in customer intelligence research, predictive analysis, pricing and sales growth. Founded in 2005, Atenga combines world class analytics with practical business insight to accelerate corporate growth, profits and shareholder value. With nearly 400 engagements in 70 different industries, Atenga has become a leading go-to source and thought leader for business improvement and enhanced profitability.
Source: Atenga
