Morgan Stanley
Spotify’s less expensive subscription plans that exclude audiobook listening have been adopted by about 14% of its U.S. subscribers, according to a new Morgan Stanley survey.
In June, Spotify allowed existing subscribers to opt into “basic” plans without free audiobook listening in exchange for a slightly lower price. The basic plans arose from Spotify’s decision to bundle 15 hours per month of audiobook streaming with the standard premium subscription plans. Around the same time, the company increased the monthly premium subscription fee in the U.S. to $11.99 for individual plans and $19.99 for family plans that allow up to six people per account. The basic tiers provide access to music and podcasts while allowing subscribers to opt out of the audiobook offering.
So far, not many Spotify subscribers are opting for the music- and podcast-only tier. Morgan Stanley’s 11th annual Audio Entertainment Survey found that in 2024, 17% of U.S. individual premium subscribers opted into the less expensive basic plan, while 10% of family plan subscribers chose the less expensive basic tier. While the premium family plan’s percentage of all subscribers dropped only slightly to 25% from 26%, the premium individual plan’s share of subscribers fell to 48% in 2024 from 61% in 2023.
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The basic tiers’ light adoption rates help shed some light on the financial impact of Spotify’s decision to pay a lower mechanical royalty allowed for bundled digital services. In May, Billboard estimated that Spotify would pay $150 million less to songwriters, publishers and PROs in 2024 than they would have if Spotify had not bundled music and podcasts with audiobooks in the premium plans. (That estimate was calculated before Spotify raised premium rates again in June and gave subscribers the option to pay a lower rate for a plan that excludes audiobooks.) Less than a fifth of subscribers have opted for the basic plan, meaning the lower royalty rate of the music-audiobook bundle still applies to the vast majority of subscriptions.
The cost of the premium tier appears to have had a slight impact on consumer sentiment, however. The introduction of the basic plan and the second price increase in as many years coincided with a decline in Spotify’s user satisfaction. The survey found that the percentage of Spotify users who are “very satisfied” with the service slipped to 57% in 2024 from 61% in 2023, while “somewhat satisfied” users increased to 29% from 26%. Among streaming services, YouTube Premium was No. 1 in user satisfaction with 87% of respondents either “very satisfied” or “somewhat satisfied” with the premium video platform. Spotify, last year’s No. 1, was No. 2, followed by SiriusXM at No. 3, YouTube Music at No. 4 and YouTube at No. 5. Apple Music had the biggest decline, dropping from No. 2 in 2023 to No. 7 in 2024. Tidal ranked last in user satisfaction with 80% of users either “satisfied” or “somewhat satisfied” with the service.
Spotify fared well among young consumers. Overall, the platform accounted for 11% of listening time, third behind AM/FM radio’s 25% and SiriusXM’s 12%. But amongst the 18-29 age group, Spotify dominated with 19% of listening time, well ahead of YouTube and AM/FM radio’s 13% shares a piece and SiriusXM and Apple Music’s 9% shares a piece.
Spotify ranked behind only AM/FM radio in terms of U.S. active users. The survey puts U.S. AM/FM listenership at 316 million, about triple Spotify’s 106 million (including both subscribers and free users). Pandora ranked No. 3 with 44 million active users, ahead of Apple Music’s 41 million and SiriusXM’s 38 million. Amazon Music was estimated to have 13 million active users.
Kobalt, the digital-focused publishing administration company, has teamed up with investment funds managed by Morgan Stanley Tactical Value to invest more than $700 million into music IP in the next few years. The partnership will see Kobalt managing the creative, sync, licensing, administration and investment services for the copyrights that are purchased.
The deal, which was advised by Goldman Sachs, marks Kobalt’s return to managing investment for outside capital. Previously, Kobalt had two funds it worked with under Kobalt Capital, its investment management arm, both of which were sold in recent years. Kobalt’s first fund contained over 33,000 songs, including songs recorded by Lindsey Buckingham, Steve Winwood, the B52’s, 50 Cent, George Benson, Bonnie McKee, Nelly and Skrillex. It sold to Hipgnosis Songs Fund in late 2020 for a price tag of $323 million or 18.3 times the net publishers share, and it realized a $20 million gain for Kobalt. While it was the biggest sale for Kobalt at the time, the first fund represented less than 30% of Kobalt’s IP holdings at the time.
The second fund, Kobalt Music Royalty Fund II, sold to an investment group comprising of KKR and Dundee Partners the following year for $1.1 billion. To manage the investments of the royalty fund as well as other IP previously acquired by KKR, the partners formed a platform Chord Music Partners, which tapped Kobalt Music Publishing to continue to handle publishing administration for the works. The fund is believed to have included the SONGS publishing catalog, Insieme Music catalog, which it acquired from Glassnote, and the David Hodges catalog.
Since that sale, Kobalt has not worked with outside money for catalog acquisition.
Outside of Kobalt Capital, the publishing administrator, helmed by chief executive Laurent Hubert, has made a number of other major changes in its business. In 2021, it also sold off AWAL, the artist services company and distributor to some of music’s most successful independent talent, and its neighboring rights operations to Sony. In September 2022, following reports of its first-ever profitable year, Kobalt sold a majority stake to Francisco Partners.
“Kobalt is a pioneer in investing in music, increasing the value of copyrights, and creating music as a viable asset class,” says Hubert. “Morgan Stanley Tactical Value’s trust in Kobalt is a testament to our platform and leadership in the music industry. We are proud to form this unique partnership.”
“Morgan Stanley Tactical Value has profound respect for songwriters and the immense value of their art,” said Cameron Smalls, managing director, Morgan Stanley Tactical Value. “We are thrilled to partner with the leading creator-first publisher that is a pioneer in maximizing royalty collections for songwriters and rightsholders. Together with Kobalt’s infrastructure and deep commitment to bettering the music industry, we are excited about our partnership and the opportunities ahead.”
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