Back in March, respected industry researcher Mark Mulligan unearthed a fairly shocking statistic about Deezer. That is, nearly three-fourths of all Deezer registered users were completely inactive zombies. They had all signed up and ditched out completely, even though it was all completely free.
But this isn't just a Deezer problem; it's a problem that affects all streaming music services according to Mulligan's calculations. Yes, the churn on these applications is this damn bad.
- Paid: 12%
- Active Free: 15%
- Inactive: 73%
- Paid: 8%
- Active Free: 23%
- Inactive: 70%
Which means, not only are a small percentage of people paying or even sticking around, a large majority simply aren't interested. "The important point is not whether Deezer has more inactive users than Spotify, but that streaming services as a whole have a problem with churn," Mulligan relayed.
"Again, this is not a Spotify problem, it is a fundamental issue with the freemium music model: many more people decide it's not for them than continue using the service."
There's an even more worrisome issue: both Deezer and Spotify are plowing tons of cash and getting crappy retention. But does all this cash-burning eventually lead to a financially-sustainable happy place? "Currently Deezer and Spotify are in growth stage and are more focused on acquisition than retention, but sooner or later they're going to have to recalibrate their metrics if they want to move towards sustainable financial models," Mulligan noted. "It can be done, as Rhapsody shows us, but it is not an easy task, and it also doesn't leave a lot of spare cash in the kitty for aggressive growth."
"Any established subscription business – such as a cable or satellite TV provider – will tell you that managing churn is the overriding strategic objective. Any subscription service – especially a nice-to-have like music – is going to be vulnerable to churn."