Interest in superfans and their revenue potential has become so strong that market research firms and equity analysts are digging into the topic. This week, Bernstein released a report on music streaming services’ potential moves and MIDiA Research released a new report about music streaming pricing strategy.
For the uninitiated, a music superfan has been defined by Luminate as those fans who interact with artists and their content in multiple ways, including streaming, social media, physical music purchases and buying merchandise. These superfans make up 19% of U.S. music listeners, according to Luminate, and are more likely than the average fan to buy physical music, spend more on music, discover new music, connect with artists on a personal level and participate in fan communities.
Efforts are well underway to tap into superfans. Labels and artists employ e-commerce to sell merchandise, LPs and CDs directly to consumers, circumventing traditional retail channels and building a direct billing relationship with the most valuable fans. Startups such as EVEN and Fave — Sony Music and Warner Music Group are investors in the latter — are focused on connecting artists with their most fervent supporters. Given the multi-billion-dollar size of the music streaming market, though, Spotify’s plan to launch a superfan tier could be the most impactful play.
Bernstein’s “Superfan Economics 101” report argues that a super-premium tier will help music streaming platforms achieve “sustained success in an increasingly competitive environment.” Analyst Annick Maas sees superfan-focused products as a function of the shift from mass consumption to direct-to-consumer tactics. Reaching out to smaller subsets of a larger audience, he writes, allows a streaming platform to “create a sense of belonging for its subscribers” and increase loyalty and engagement. That an equity analyst would highlight superfans in a report to investors speaks to the revenue potential in targeting subsets of consumers and the likelihood that publicly traded companies will make superfans a larger priority.
MIDiA Research also added to the superfan knowledge base this week by releasing a report based on a survey of 2,000 U.S. consumers. The main takeaway is that MIDiA found widespread interest in paying a higher price for a streaming service with additional features: Just under three-quarters of people surveyed have “some level of interest” in paying for a super-premium tier as an add-on to the basic subscription plan.
Exactly what people are willing to pay varies greatly, though: 22% of respondents are willing to pay an additional $1.99 per month fee while 10% are willing to pay an additional $13.99, more than double the current $11.99 price for an individual subscription.
To give an idea of the amount of revenue at stake, consider that there was an average of 100 million subscribers of subscription music services in the U.S. in 2024 who paid an average of $8.91 per month, according to the RIAA. (That figure does not include limited-tier subscriptions such as ad-free internet radio.) Those 100 million subscribers generated $10.69 billion over the year, which works out to $106.87 per subscriber per year.
If 10% of those 100 million subscribers — which include student and family plans in addition to standard individual plans — paid more than double the current price, total revenue would increase 10.8% to $11.76 billion, equal to $117.56 per subscriber annually or $9.80 per month. The 10.8% revenue growth is equal to $1.15 billion of incremental royalties.
The RIAA’s average revenue per user (ARPU) of $8.91 for 2024 is lower than the $11.99/$12.99 price being charged for the most popular individual plans, suggesting the 100 million subscribers figure includes many student and family plans. So, to measure the effect of the price increase on the RIAA’s ARPU, I multiplied ARPU by the ratio of the super-premium individual plan ($12.99 + $13.99) to a standard individual plan ($12.99).
So, without an increase in the number of subscribers or a price hike, doubling the fee for a tenth of subscribers would deliver a 10.8% revenue boost. Not all of those consumers would jump to the super-premium tier at once, however, meaning a double-digit increase in subscription revenue would accrue gradually over multiple years.
Charging an additional $1.99 super-premium fee on top of a standard subscription price would result in an incremental $334 million. Total revenue would increase 3.1% to $11.02 billion and ARPU would rise from $8.91 to $9.18.
Another option to expand the subscription base is a low-priced, “subscription-light” tier that incorporates advertising into paid subscriptions. Music streaming subscriptions have kept advertising out of their paid products, but there have been suggestions — namely from Goldman Sachs analysts who prepare the influential Music in the Air report — that a subscription-light tier that includes ads could help expand the subscription market.
Paid video subscriptions used to be a respite from the advertising world, but advertising has become well established on video platforms like Netflix, Amazon Prime and Hulu. Amazon Prime now inserts ads in movies, and Netflix and Hulu offer a low-cost, ad-supported option to make their products palatable for more price-conscious consumers.
But MIDiA’s survey suggests a subscription-light option is unpopular. About three-quarters of respondents who aren’t currently subscribed to a music streaming service aren’t interested in starting. This sizeable group of consumers doesn’t listen to music often enough to pay, or they find the current prices too high. Excluding the 100 million U.S. subscribers, there are approximately 188 million Americans aged 13 or older who do not subscribe to a streaming service (there are 51.9 million people under 13). Based on MIDiA’s findings, roughly 141 million of them aren’t interested in paying for a subscription. For them, there’s also YouTube and ad-supported radio.
What’s more, a subscription-light offering could be problematic. MIDiA found that ad-supported paid streaming attracted interest only “at very low price points” and warned it could harm overall subscription revenues by cannibalizing normal subscription tiers. With paid subscriptions currently creating the majority of U.S. recorded music revenue, and with subscription growth playing a prime role in Wall Street’s expectations for music companies, both platforms and labels may be unwilling to put that revenue at risk by offering a less expensive choice to millions of consumers who may soon be looking for ways to tighten their belts.
