Has the time finally come for music streaming platforms to be profitable?

On September 21st, Deezer announced a price hike in five European markets, namely France, the UK, Spain, Italy and the Netherlands. In a macroeconomic context of globalized inflation impacting most countries and goods, such a hike might be overlooked. Nonetheless, music streaming subscriptions have long been remarkably stable. In early 2022, Deezer - already - led a wave of price hike by crossing the symbolic $10/£10/€10 landmark for its flagship plan. With its second price adjustment in less than 2 years, is Deezer about to launch a second wave of price raises? How does the near future look for music streaming service subscribers in Western countries? Pricing has always been a sensitive issue in the music streaming industry Before Deezer crossed the $10/£10/€10 bar in early 2022, streaming platforms were concerned such a decision would result in a high churn rate. That concern explains why the prices had remained stable for so many years. Indeed, streaming platforms have had a hard time differentiating their offers, thus making the pricing a particularly sensible topic. The digitization of music entailed the promise of unlimited content, thus considerably lowering the value of a given record company’s catalog. On the contrary, the video streaming market has differentiated the catalogs offered by the different platforms very early on in its development. Innovations in terms of features (karaoke, humming recognition, personalized recommendation algorithms) have not proved as attractive to users as content exclusivity in the video streaming market so far. With subscriptions fees being virtually uniform in the market, streaming platforms have steadily focused on subscriber acquisition to generate revenue. As a matter of fact, even the most mature markets are not completely saturated, most notably because of the relatively low take-up rate of music streaming services by the elderly. Hence, short term profit is only secondary to customer acquisition, which will entail long term profit. This strategy is best exemplified by the global market leader Spotify, which has never generated annual profit since its launch in 2006. Nonetheless, Deezer raised its prices above the symbolic bar, first in the UK in October 2021, then in a handful of other European markets in February 2022. It did it again last September in a tough context. One year after its IPO, Deezer’s latest financial results are not good. The service lost 100,000 subscribers compared to June 2022 and published a €13.1 million adjusted EBITDA loss. Therefore, its move partially stems from an internal and external pressure to generate more revenue. Contrary to most estimates from industry insiders, the churn rate was almost not impacted at all, which flagged Deezer’s move. Soon after, other tier-1 platforms followed suit, as detailed below. Amazon Music, which was cheaper than its...