A Business Administration studyWillingness to Pay for Concerts Impacted by Music Streaming Services

18 January 2024, by Newsroom editorial office

Photo: pixabay/pexels

People subscribing for premium music streaming services are usually also willing to spend more money on live music events.

The German music market has been increasingly shaped by the use of music streaming services for years. More than half of German respondents are using them. But how strongly do these platforms affect other distribution channels such as concerts? A research team involving Universität Hamburg investigated this.

The researchers focused on what happens after customers change their Spotify, Apple Music, or Deezer plans, i.e., switch, upgrade, downgrade, or cancel. Do so-called conversions make them more willing to also pay for concerts, analog recordings, or rather physical music albums? These “spillover” effects are particularly relevant in the current market environment, as most artists’ earnings from music streaming services are low.

Over 3 years, Janis Denk, Prof. Dr. Michel Clement, Dr. Michael Kandziora (Universität Hamburg), Prof. Dr. Rouven Seifert (University of Rostock), and Dr. Janek Meyn (start-up AIDAR) conducted biannual panel surveys for this study, thus compiling observations from over 10,000 streaming users willing to share details of their personal music consumption and spending. This data indicates that a conversion in music streaming subscriptions has very different effects.

More money spent for live music

A positive impact on live music market: switching from no or a free streaming service to a premium subscription boosted the willingness to pay and the demand for live events. Subscription cancellations, by contrast, led to a significant decrease of both.

Music subscription changes, however, did not affect analog or digital album purchases. This may indicate that, from the customer’s perspective, live music complements the consumption of music subscriptions in the streaming sector in a useful way.

The entire industry benefits

Artists can use this knowledge to further their streaming platform portfolios by adding information about concerts and playlists. The research results are also relevant for music streaming services, as the team investigated how streaming providers can most effectively increase their overall revenue in a scenario analysis. This showed that it is all the more promising to cancel the free streaming option completely. Customers tended to pick the premium product rather than the free variant with reduced features.

Janis Denk, doctoral researcher at the Faculty of Business Administration (Hamburg Business School) says: “Our research supports the industry, in particular non-superstar artists, by showing how to maximize total revenues and even achieve a surplus, thus increasing the probability of profit for all involved.”