UMG Is ‘In Conversations’ With Multiple Streamers on Super-Premium Tiers. That’s Good News for Everybody
Written by djfrosty on March 7, 2025
Get ready for a new era of innovation by streaming services. That was the message sent by Universal Music Group (UMG) chief digital officer Michael Nash during the company’s fourth quarter earnings call on Thursday (March 6), during which he noted that the label is currently in talks with all of its streaming partners — not just Spotify — about super-premium tiers.
“There’s a continuing wave of innovation that we’ve seen really transform our business and transform the digital landscape in particular, over the last decade, and we anticipate that that’s going to continue as the market grows,” said Nash.
Not that streaming services haven’t been innovating since day one. Listeners have enjoyed new ways to discover music (the growth of playlists, personalized listening and algorithm-driven radio stations), follow their favorite artists (album pre-saves) and view concert listings and lyrics. From 2011 to 2014, Spotify allowed developers (Rolling Stone, Billboard, Tunewiki and Songkick, among others) to build apps that lived inside its platform and utilized its song catalog. Services such as Tidal and Qobuz have made high-fidelity audio a part of their brand identities. And over the years, the types of subscription offerings expanded from individual plans to encompass family plans and affordable student options.
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But the type of innovation that Nash referenced is different. Except for high-fidelity audio, streaming innovations haven’t resulted in greater revenue per user — all the features packed into streaming services haven’t cost the consumers anything extra. That’s going to change. The next wave of music streaming will have products and services that carry higher prices. After decades of providing the same service to all customers, streaming platforms will segment the market and offer premium products to a subset of their subscribers.
Super-premium streaming is one component of what UMG calls “streaming 2.0.” On Thursday, CEO Lucian Grainge explained that streaming 2.0 “will build on the enormous scale we’ve achieved thus far in streaming’s initial stage. This next stage of streaming will see it evolve into a more sustainable and growing, artist centric ecosystem that improves monetization and delivers great experiences for fans.” Offering multiple tiers rather than a single subscription plan, Grainge said, “enabl[es] us to segment and capture customer value at higher than ever levels.”
Conversations about superfan offerings have extended as far as concert promotion and ticketing. Live Nation CEO Michael Rapino revealed during the company’s fourth-quarter earnings call that streaming services are interested in pre-sale ticket offers. “We’ve talked to them all about ideas on if they wanted inventory,” he revealed on the Feb. 20 call. “There’s a cost to that, and we would entertain and look at that option if it made sense for us in comparison to other options we have for that pre sell.”
Spotify is known to be working on a superfan product — CEO Daniel Ek revealed in February that he is testing an early version — but Nash suggested other streaming services could follow suit. “We’re in conversations with all of our partners about super-premium tiers,” he said. “We think this is going to be an important development for segmentation of the market.”
JP Morgan believes the customer segmentation that Nash referenced will be a component of UMG’s growth over the next 10 to 20 years. “In a streaming 1.0 world UMG was reliant on DSPs raising retail price rises if it was to benefit from a higher wholesale price; in a streaming 2.0 environment UMG has visibility on wholesale price rises that underpin its growth algorithm, while still having potential upside should DSPs raise prices above the minimum,” analysts wrote in a March 6 investor note.
UMG’s market research suggests that 20% of music subscribers are likely to pay for a superfan streaming product, according to Nash. If Spotify reaches that threshold, it will have converted roughly 53 million of its 263 million subscribers into higher-paying customers (as of Dec. 31). It’s already worked for at least one company outside the U.S., as Tencent Music Entertainment has already proven there’s demand for a high-priced, value-added streaming product: Its Super VIP tier, which costs five times the normal subscription rate, had 10 million subscribers at the end of September — over 8% of TME’s 119 million total subscribers. If other streamers can successfully follow suit, new superfan streaming products will generate more revenue for artists, rights owners and streaming platforms — and help the music business continue to grow for years to come.