Netflix is transforming into an incumbent while Spotify and music services can’t make money.
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The Telegraph is reporting that internet piracy has hit record lows in the U.K., thanks to legal streaming alternatives led by the likes of Netflix and Spotify.
About 15 per cent of users illegally accessed movies, music and other material between March and May, according to the report commissioned by the Intellectual Property Office. That’s down from 18 per cent a year ago and the lowest in the five years of the study.
Conversely, 44 per cent of internet users are using legal options exclusively, up from 39 per cent at the end of last year. Officials say consumers are turning away from piracy and toward legal alternatives “en masse.”
That’s all well and good, and it shows that the system is working as it’s supposed to, but the question now is how long will this continue to be the case?
The music streaming business is a case study in tumult while video is already seeing price increases. With the shadow of incumbency hovering over both, it’s not a stretch to predict that a piracy renaissance is coming.
In the case of music, it’s becoming evident that standalone streaming services simply can’t make money within the current status quo. Record labels are demanding higher royalties on one side while consumers are wary of paying current, already-low fees, putting the pinch on both sides.
Spotify has 35 million subscribers paying around $9.99 (U.S.) a month, but that’s only about a third of its total, the rest of whom use the free, ad-supported version. Despite its market leadership, the company is still losing money.
Apple Music, which has no free tier, has 13 million paying subscribers. The rest of the field is otherwise pretty ugly: Rdio folded last year, Pandora is looking to be bought, Deezer cancelled its initial public offering and Rhapsody is hoping to remain relevant by renaming itself Napster.
Questions abound as to whether any of the standalone services can remain standing for much longer, and it’s entirely possible – likely even – that Apple will ultimately emerge as the music streaming super power at the end.
That’s not necessarily good for consumers, given Apple’s history of friendliness with the music business and its willingness to raise prices to appease content producers, as it did in the ebook collusion scandal.
With video, Netflix is rapidly transforming from disruptor to incumbent. The company is almost out of new countries to expand into, which means it will soon start to “monetize” its existing customers. It has already begun to raise rates.
Combine that with its stance on blocking virtual private network connections – done at the behest of content producers – and its recent set-top box deal with U.S. cable provider Comcast, its mortal enemy once upon a time, and it’s clear that pleasing customers is no longer Netflix’s only priority.
Interestingly, rumours continue to swirl that Apple is interested in buying Netflix.
In many cases – as in Canada – Netflix’s primary competitors are incumbent television providers who have also been forced into offering low-cost streaming. As Netflix eases off the gas, they will too, which means price increases are coming across the board. Continually rising prices, it should be said, are one of the biggest drivers of video piracy.
Put it all together and the future doesn’t exactly look good for the golden age of legal, consumer-friendly streaming. Faced with growing restrictions, the possibility of less choice and, of course, escalating prices, all those paying customers may soon find themselves heading back to the veritable high seas.