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 Now That's What I Call Music, a joint venture between
Universal Music Group and Sony Music Entertainment that releases
a popular series of compilation albums, is finalizing a
streaming app called NOW Music+ that will offer playlists of hit
songs for $6.62 a month, or 5.99 pounds if purchased in Apple's
App Store, people familiar with the matter said.
"NOW Music+" was quietly activated this summer amid preparations
for a broader rollout, according to two people with knowledge of
the matter. Although the app is limited to the UK for now, "this
may change in the near future," the company writes on its
website.
The move comes at a pivotal moment for the music industry:
streaming is rapidly emerging as the labels' leading source of
revenue, but they continue to engage in tough negotiations with
tech companies over licensing terms, which heavily influence
final pricing for consumers.
With streaming companies struggling to turn a profit and overall
music revenues remaining well below the CD era, labels are under
pressure to bridge the divide between the free, ad-sponsored
tiers popularized by Spotify and YouTube and $9.99
all-you-can-listen-to subscriptions without ads.
Amazon is working on a service that will let users stream music
on their voice-powered Echo speakers for less than a normal
subscription, according to a person with knowledge of the
matter. Meanwhile Pandora is putting the finishing touches on a
premium radio tier that will cost users about $5 a month,
according to a person with knowledge of the matter.
"We are moving away from one-size-fits-all subscriptions," said
Ted Cohen, Managing Partner of TAG Strategic, a digital
entertainment consultancy. "There is a certain spoken and
unspoken imperative by all the rights holders to make the pie a
little bit bigger."
Sony and Universal declined to comment. Amazon, Spotify and
Pandora also declined to comment.
Although the NOW app features a limited catalog and does not
allow users to listen to songs on demand, it will put the labels
in a somewhat competitive position with the streaming companies,
which are increasingly important partners, said analyst Mark
Mulligan of MIDiA Research.
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As they launch the NOW app, the labels must "tread carefully because
you can only go so far competing with your retail partners,"
Mulligan said.
Still, Mulligan said, the industry is taking an overdue step in
creating more options than a $9.99 monthly subscription or a free,
ad-supported stream.
"They're making people choose between a Lexus and getting the bus
with nothing in between," Mulligan said. "There's no other market
that behaves like that."
Introductory discounts and special plans for families and students
have already begun to lower the price that many consumers pay.
"The services are exhausting the number of people who will pay $10 a
month, and the way to continue to grow the industry is to offer
discounts in some way," said David Pakman, a partner at Venrock who
headed early Apple music efforts.
Nevertheless, it can be challenging to persuade consumers to pay for
a limited subscription service with so much free content at their
fingertips.
Rdio, the streaming service whose assets were acquired by Pandora
last year, rolled out a plan that let consumers download 25 songs
per day for $3.99 per month, but the company had to accept worse
financial terms to get the labels on board, according to a person
with knowledge of the matter.
Cür Media, a high-profile music startup touting budget
subscriptions, disclosed to the Securities and Exchange Commission
last month that it had laid off all its employees.
Still, many in the tech camp say they are eager to experiment with
price.
"I happen to believe in my heart of hearts that there is an entire
host of transactions between $0 and $10," said Ethan Rudin, chief
financial officer of online music store Napster.
($1 = 1.33 GBP)
(Reporting by Julia Love. Additional reporting by Kate Holton in
London.; Editing by Jonathan Weber and Alan Crosby)
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