Online Music Streaming Services in the UK

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Table of Contents

Background
Purpose of the Study
Gap in Knowledge
Significance of the Study
Research Questions
Research Objectives
Summary and the Structure of the Paper
Reference List

Background

With the development of technology, every business is continuously evolving quicker than ever before, and such sectors as music and filmmaking have been significantly influenced by the ever-developing internet. Two decades ago, none of the streaming services that are ubiquitous at present were available to the public. While people started downloading music to their portable players, they still had to rely on acquiring individual tracks or albums in order to listen to music. In the last ten years, the music industry transformed completely, following the introduction of online subscription-based platforms. Now, many people do not own music but have access to an endless supply of old and new tracks if they have an internet connection. Although the time period seems small, it saw a significant amount of competition and race to accommodate customers’ needs that were rooted in innovation and business strategy.

One of the reasons for developing streaming platforms was piracy which, in turn, grew due to the availability of the internet. In 1999, Napster, an online website for sharing free downloadable music, introduced people to the concept of peer-to-peer sharing. The site challenged labels with new ways of bootlegging their products (d’Astous, Colbert and Montpetit, 2005). Despite the ethical issues, the development of Napster was significant for the industry – it needed to offer its customers a better deal than piracy that would still generate revenue. First, such brands as Apple introduced online stores for purchasing downloadable music (Kwong and Park, 2008). As such, tracks could be bought online, but the capacity of the devices and the internet quality did not allow for music to be streamed. However, this change was not enough to combat the appeal of piracy and people’s lack of motivation to purchase separate tracks – the value of purchased and pirated downloadable tracks was too similar to create a reliable customer base (Borja, Dieringer and Daw, 2015).

At the same time, computer algorithms suggesting new songs were becoming better and online radios allowed people to forego downloading songs and conserving their memory space while getting songs that they would enjoy. Thus, the second change happened in 2008, when Spotify combined the benefits of online streaming, personalisation and legal access to thousands of songs (Lin, Hsu and Chen, 2013). Other platforms followed the same path, offering subscriptions that would charge clients monthly to get access to the full library of tracks without advertisements as well as free options with advertising and some curated playlists. Now, people can not only listen to millions of songs without downloading, but they can also create their own playlists, share and recommend tracks and choose between several platforms.

This change was monumental in impacting the ways people consumed music and engaged with labels and artists. First, the relationship between platforms that provide access to music and artists has evolved. Second, promotional methods for famous and less popular musicians became dependent on different factors. Finally, one of the major areas that were impacted was the consumers’ satisfaction with services and their perception of the music’s perceived value. Currently, people’s music habits, as well as the ubiquitous presence of the internet and smartphones, influence their choice of music platforms, pricing considerations and factors that make them prefer one service to another.

The centre of most research studies is the streaming services use in the US. In 2019, US consumers spent $26 billion on subscription services, which is double the amount spend in 2017 (Roettgers, 2019). From this amount, about a third belongs to music services, which signifies a strong position of streaming platforms in people’s entertainment. However, other markets are also highly developed – in the UK, consumers have spent around £3 billion on streaming media, including music, television, and movies, in 2019 – this is a record for the country, and the number of subscribers is expected to grow (Sweney, 2020). This amount is equal to about 80% of all spending in the entertainment category in the country (Sweney, 2020). Thus, the digital market for streaming services in the UK is massive, attracting the majority of consumers.

Purpose of the Study

The purpose of this quantitative study is to evaluate the relationship between customer perceived value (CPV) of various streaming services and the satisfaction of people who subscribe to these music streaming services. First of all, it is vital to consider how has customer perceived value changed with the digitisation of music consumption and what place do the platforms now have in this activity. CPV is a measure that helps guide companies in predicting consumer choices. It is the difference between the evaluation results that customers perform when comparing the benefits of every product or firm and their costs (Kim, 2012). For example, in this case, the competition is held between music streaming services, such as Apple Music, Spotify, Pandora Radio and others, and the factors of choice may include price, music library, software interface and individual requirements of clients. By assessing consumer’s value of these platforms, one may also research what factors are the most influential in making some platforms more popular than others.

The second part of the study’s purpose is the exploration of the customers’ satisfaction with the service they use. While CPV provides companies with information about consumers’ needs and expectations, it does not guarantee that higher CPV always aligns with one’s final decision (Chen and Fu, 2018). Therefore, the idea that a customer will be satisfied with the product with the best-perceived value is subject to investigation. Customer satisfaction can be defined by a variety of aspects, and it greatly influences one’s use of the product and the brand’s retention rates. However, in general, satisfaction includes one’s loyalty to the brand, continued use of the service (retention), positive feedback, endorsement and the growth of the platforms’ user base (Chen, Leon and Nakayama, 2018a). Therefore, the investigation of the relationship between CPV and satisfaction provides further data on how consumers engage with streaming services and what they see before and after subscribing.

Gap in Knowledge

Music streaming services entered the industry in 2008 with the creation of Spotify. Nevertheless, the competition became tenser in the middle of the 2010s, when such platforms as Apple Music and TIDAL were developed (Maftei, Gerogiannis and Papageorgiou, 2016). Pandora Radio, while available from 2000, has a limited reach – it is only available in the United States. All streaming services offer similar products (music) at comparable prices. The industry is rather young, and the shortage of studies evaluating the CPV of music streaming services and its impact on customer satisfaction creates a gap in knowledge for the industry. To begin with, the primary type of studies of CPV is based on the PERVAL (PERceived VALue) framework which allows one to use a scale for assessing customer’s value of products in a particular industry.

This model has been adopted for various digital services, including video games and players’ CPV. The research by Kim (2012) shows which of the value factors are the most important in ensuring that consumers recommend or repurchase products in video games. Several other studies consider ‘freemium’ platforms (services that offer both free and paid options with different tiers of access to the product) and the behaviour of people connected to this system (Chen and Fu, 2018; Hamari et al., 2017). At the same time, the lack of identified studies focused on music streaming platforms that implement the PERVAL model and evaluate customer satisfaction implies a gap that should be investigated further.

In particular, it is unclear how the different features of streaming platforms impact consumers’ choices and how their CPV is connected to the opinions of these platforms. While the research of digital services and their CPV, as well as the studies of music streaming services, exists, it focuses on music purchasing or the view of freemium services by customers, and not on the connection between CPV and customer satisfaction in the long-term.

Moreover, as such services as Pandora Radio operate only in the US, studies that consider the UK market can show different results due to the dominance of other competitors among consumers. As noted above, the demand for entertainment streaming services in the UK is vast, and more than three-fourths of all consumers spend money on online entertainment (Sweney, 2020). At the same time, the UK market, as shown by statistics, prefers different services to those most popular in the US. This suggests a difference in factors that are vital for customers when selecting a platform, including aspects that are not linked to availability in the region.

Significance of the Study

As it is discussed above, the gap in research about CPV of various streaming services and its impact on customer satisfaction can be identified. This topic is vital for the industry for several reasons. First, value creation is the foundation for business success in the long term (Chen, Leon and Nakayama, 2018b). By showing customers that one service is better than others, a company can increase its chances of generating a broad audience and growing retention, loyalty, endorsement and, subsequently, revenue. This view of CPV is supported by a plethora of studies that demonstrate the impact of CPV on consumer choices. Kim (2012) shows how various features of video games influence them to purchase or forego certain games and features, while Chen and Fu (2018) demonstrate how CPV impacts the selection of mobile applications. Streaming services exist in the constant competition since customers can change the product they are using every month. Therefore, the exploration of factors that contribute to high CPV among subscribers is invaluable for the services and the research surrounding these platforms.

Second, customer satisfaction is another vital measure that allows companies to grow their audience and revenue. For streaming services, the issue of customer satisfaction is especially crucial due to the intense competition on the market and the dependence of customer feedback online. The lack of focus on freemium streaming services in the research of customer satisfaction means that one cannot clearly determine what impacts consumer choices in maintaining a relationship with a brand in this segment. For instance, the leaders in the US and UK markets among streaming services differ rather significantly. In the US, Apple Music, Spotify and Pandora Radio share the majority of all users as shown in Figure 1, while such platforms as YouTube and Spotify dominate the UK market, as can be seen in Figure 2. The number of Pandora Radio users can be explained by its regional restrictions; however, other factors are likely to be connected to CPV and customer satisfaction.

Figure 1: Most popular music streaming services in the US in 2019

Figure 2: Most popular music streaming services in the UK in 2018

Third, the connection between customer satisfaction and CPV, as shown by previously discussed studies, exists and can assist brands in establishing their product as the industry leader. The study’s aim of using CPV as a predictor of customer satisfaction should help brands review their current offers and suggest new ways of attracting clients based not only on price but also social and technological aspects. According to Kim (2012), the social factor plays a great role in influencing video game players, and this dimension of CPV impacts customer satisfaction the most. Similar research performed for the music industry may reveal what consumers want to see in the streaming services’ future.

Finally, the ongoing pandemic has changed the way people use online services, which also has had an effect on streaming services. According to Dormehl (2020), the service economy has evolved in the last six months, with spending on theatres, books and physical music dropping from 50% to 100%. In contrast, subscriptions to streaming services continue to rise – Spotify and Apple Music reported an over 20% increase in consumer spending (Dormehl, 2020). More people are switching to online platforms which can produce new opinions about streaming services and change the customers’ perception of their usability in the current setting and the future. Therefore, the research in CPV may aid brands in evaluating whether their existing models of operating are suitable for the changing environment.

Research Questions

The identified gap in the knowledge and the potential significance of the present research allow one to outline one central research question as well as several guiding questions that explain the steps in data collection and analysis. The connection between CPV and customer satisfaction lies at the centre of this discussion. Thus, the main research question is as follows: How does customer perceived value (CPV) impacts customer satisfaction in using music streaming services in the UK?

It is important to point out that most services considered in this study offer a freemium model which includes free listening of music with a limited selection and advertisements and a paid monthly subscription that removes ads and opens up the whole catalogue of music. Subsequently, all music can usually be purchased and added to the free option if desired (Naveed, Watanabe and Neittaanmäki, 2017). Therefore, both subscribers and free users can be included in the sample, which explains the research question’s general use of the term ‘customer’ rather than ‘subscriber’. It is possible that these two groups of users have different experiences with using services – the information about their payment plan status should be added to the descriptive data for results transparency.

The guiding questions for the study relate to the steps needed to answer the final research question. First, the question, ‘What CVP factors are considered important by users of music streaming services in the UK?’, is necessary to answer to determine how consumers of streamed music make their decision when choosing a platform. To address this question, the PERVAL framework has to be adapted for the industry of online music streaming. Second, an inquiry into the UK customers’ satisfaction with online streaming services has to be made. This question should demonstrate the rates of satisfaction that can be then used to show potential correlation with CPV. The satisfaction’s measurement is multifaceted, and the strategy for its calculation will be considered further.

The present research selects an inductive approach which relies on research questions. In contrast to the deductive method, the inductive analysis does not establish hypotheses prior to collecting and analysing data. By choosing this type of study, the investigators aim to use the gathered data and the information from other existing literature and concepts to conduct the analysis and propose new theories for future exploration (Liu, 2016). The inductive approach is the most appropriate one for this study due to the research gap discussed above – it is currently impossible to identify hypotheses based on the dearth of data relating to online streaming services, CVP and customer satisfaction. One of the limiting factors is that the present study is focused on the UK market, which is less researched than the US market, where the range of available streaming platforms is different.

Research Objectives

Similar to the three research questions outlined in the previous part, three research objectives are needed to address them. The following goals are set to conduct the research effectively:

To measure customers’ perceived value (CPV) in using the online music streaming services in the UK;
To determine the level of satisfaction of UK consumers in using online music streaming services;
To identify the influence of customer perceived value on customers’ satisfaction of the UK online music streaming services.

Summary and the Structure of the Paper

The service industry has changed under the influence of the internet and portable devices. Music no longer requires physical copies or downloadable files to be listened to – streaming platforms are quickly taking over the market. Currently, more than 80% of all entertainment spending occurs online, and such countries as the US and UK see increasing numbers of subscriptions for music, television, and movie streaming. The industry’s history demonstrates that consumers’ preferences for listening to music have evolved together with the technology, and now several streaming services dominate over the sales of physical copies. At the same time, both famous and small artists strive to deliver their music online.

The choice of which streaming service to choose depends on the variety of factors, including accessibility, price, design, music library and others. These aspects are measured in customer perceived value (CPV) that is used to gauge the potential of a business to succeed on the market. Currently, Apple Music, Spotify, Pandora Radio, and YouTube hold leadership positions in the US and UK. However, the existing research does not show which of the CPV factors are the most important for consumers, particularly in the UK. Moreover, the data on the connection between CPV and customer satisfaction is also absent or understudied.

Thus, the present study aims to examine UK customers’ CPV of music streaming services their satisfaction with these platforms. There are three research questions, the central of which is: How does customer perceived value (CPV) impacts customer satisfaction of using music streaming services in the UK? Apart from focusing on this link, the research will also consider how consumer’s view of music streaming has evolved due to the current COVID-19 pandemic, which drastically impacted all segments of the service industry. The questions outlined above are important for the industry because they allow brands to see which factors of their strategy can result in customer base growth and higher retention and revenue rates. Furthermore, the study is significant for adding knowledge about the state of streaming services in the UK.

In Chapter II, the literature review will present the history of music streaming services and their impact on the industry. Studies considering the relationship between customers and various subscription services will be discussed. Moreover, the review will consider the theoretical foundations for the research and the use of CPV and customer satisfaction frameworks for the study. Chapter III, Methodology, will explore the research methodology and design, explaining the role of the quantitative methods as well as the models used to collect and analyse data to answer research questions. Next, the data analysis will be recorded in Chapter IV, along with calculations needed to assess CPV and customer satisfaction. Lastly, Chapter V will contain an interpretation of the results achieved during data analysis and a discussion of the data’s potential uses, connection to other existing research and considerations for future research and implementation in practice.

Reference List

Borja, K., Dieringer, S., and Daw, J. (2015) ‘The effect of music streaming services on music piracy among college students’, Computers in Human Behavior, 45, pp. 69-76.

Chen, C. C., Leon, S., and Nakayama, M. (2018b) ‘Converting music streaming free users to paid subscribers: social influence or hedonic performance’, International Journal of Electronic Business, 14(2), pp. 128-145.

Chen, C.C., Leon, S. and Nakayama, M. (2018a) ‘Are you hooked on paid music streaming? An investigation into the Millennial generation’, International Journal of E-Business Research (IJEBR), 14(1), pp. 1-20.

Chen, J.H. and Fu, J.R. (2018) ‘On the effects of perceived value in the mobile moment’, Electronic Commerce Research and Applications, 27, pp. 118-128.

d’Astous, A., Colbert, F., and Montpetit, D. (2005) ‘Music piracy on the web – how effective are anti-piracy arguments? Evidence from the theory of planned behaviour’, Journal of Consumer Policy, 28(3), pp. 289-310.

Dormehl, L. (2020) ‘Coronavirus lockdown isn’t stopping U.S. spending on streaming music services’, Cult of Mac, Web.

Hamari, J. et al. (2017) ‘Why do players buy in-game content? An empirical study on concrete purchase motivations’, Computers in Human Behaviour, 68, pp. 538-546.

Kim, B. (2012) ‘Understanding the key factors of users’ intentions to repurchase and recommend digital items in virtual social worlds’, Cyberpsychology, Behaviour, and Social Networking, 15(10), pp. 543-550.

Kwong, S. W., and Park, J. (2008) ‘Digital music services: consumer intention and adoption’, The Service Industries Journal, 28(10), pp. 1463-1481.

Lin, T. C., Hsu, J. S. C., and Chen, H. C. (2013) ‘Customer willingness to pay for online music: the role of free mentality’, Journal of Electronic Commerce Research, 14(4), pp. 32-39.

Liu, L. (2016) ‘Using generic inductive approach in qualitative educational research: a case study analysis’, Journal of Education and Learning 5(2), pp. 129-135.

Maftei, V.A., Gerogiannis, V.C. and Papageorgiou, E.I. (2016) ‘Critical success factors of online music streaming services – a case study of applying the fuzzy cognitive maps method’, International Journal of Technology Marketing, 11(3), pp. 276-300.

Naveed, K., Watanabe, C. and Neittaanmäki, P. (2017) ‘Co-evolution between streaming and live music leads a way to the sustainable growth of music industry – lessons from the US experiences’, Technology in Society, 50, pp. 1-19.

Roettgers, J. (2019) ‘U.S. consumers to spend $26 billion on music, video subscriptions this year’, Variety, Web.

Statista (2018) Which sites or services have you used in the past three months to stream/access, or share music tracks or albums through the internet? Web.

Statista. Most popular music streaming services in the United States in March 2018 and September 2019, by monthly users. Web.

Sweney, M. (2020) ‘UK spent a record £3bn on streaming music, films and TV in 2019’, The Guardian, Web.

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