The term “Streaming 2.0” has softly emerged in conversations within the music industry, yet it remains relatively unknown. What’s the strategy behind what is expected to be the future of music streaming? And who will benefit? Let’s explore in this article!
Streaming 2.0: the future of streaming
The concept of Streaming 2.0 was first introduced to the music industry in 2024 during Universal Music Group's (UMG) Capital Markets Day at Abbey Road Studios in London. At the event, UMG Chairman and CEO Lucian Grainge proudly announced that music streaming is entering a new era, and UMG has already articulated the vision for the industry’s future and their strategic approach.
Grainge predicted that by the end of 2028, music streaming will surpass 1 billion subscribers, marking a transformative milestone for the music industry. The next ambition: reaching 2 billion subscribers. “How long could it take?,” Grainge asked. And more importantly, what will it take to get there?
Ultimately, Streaming 2.0 represents a new model of music streaming, which would set the music business on a path toward achieving this ambition. The current strategy, Streaming 1.0, has been deeply centered on subscriber growth (the concept of “getting people to pay and then getting more people to pay”) and a single consumer value proposition: offering access to a vast music catalog at any time, anywhere. While this rather simplistic approach successfully restrained further prevalence of digital piracy and helped accelerate streaming adoption, UMG argues that the future requires a more sophisticated and complex approach. The purpose of a new music streaming model is to maximize customer value while driving both subscriber growth and an increase in average revenue per user (ARPU) growth.
“While streaming has delivered robust growth to UMG for over a decade, streaming 2.0 will represent a new age of innovation, consumer segmentation, geographic expansion, and greater value through both subscriber and ARPU growth,” Grainge stated.
Focus on segmented customer proposition
To elaborate on this new model, Grainge pinpointed a few significant shifts and developments. The first would replace the “simple compelling proposition” with a more detailed “segmented customer proposition.” This shift intends to move beyond the one-size-fits-all “scale digital monetization” approach and instead tailor experiences and pricing packages to different audience segments.
Ultimately, this strategy aims to foster deeper engagement with subscribers while unlocking broader monetization opportunities, which would positively influence the ARPU growth. Overall, while streaming 1.0 emphasized volume—the sheer amount of accessible music–the new streaming model shifts the focus to value. It seeks to deliver more engaging and appealing experiences, offering differentiated content, products, and pricing tiers that resonate more meaningfully with listeners.
Something that UMG firmly believes is that “music subscription remains significantly under monetised” and sees a “significant subscriber penetration opportunity” alongside the potential to “increase ARPU across all platforms and all markets.”
Superfan maximization with premium tiers
Speaking of creating more value and increasing the ARPU, a key element of Streaming 2.0’s approach is the introduction of specialized tiers for superfans. Grainge highlighted that “super fandom” is “a core component of music industry economics,” yet the current streaming model does not fully capitalize on the opportunities presented by superfans.
For this reason, in addition to offering a broader, more sophisticated range of subscription plans designed for various types and levels of music fans, the plan is for streaming platforms to launch ‘super premium’ subscription tiers, tailored exclusively to superfans. This tier would provide exclusive, high-value content and experiences, ultimately unlocking superfans’ spending potential and willingness to invest more into music consumption in exchange for higher value.
Targeting global opportunities and established markets
Alongside pushing subscriber revenue, Streaming 2.0 also seeks to explore and identify global opportunities for expanding streaming’s reach by targeting both emerging and established markets. A significant focus will be given to so-called highly potential markets where the popularity of streaming is rapidly growing, such as Mexico, China, or Brazil. According to UMG, these regions have an untapped potential due to advancing economic and technological infrastructures that make music streaming ultimately inevitable—a pattern that could already be observed in established markets.
Gaby Lopes, UMG’s SVP of Global Insight, reported that across 23 UMG-monitored markets, which, combined, account for 91% of the streaming landscape, there are approximately 220 million potential subscribers in the “consideration set.” These potential future subscribers or “consideration set” consumers are referred to as individuals who understand the concept of paid music streaming, are interested in the proposition, and, most importantly, are willing to pay at least the current subscription price for the service.
However, it is not only the emerging markets that are believed to have a hidden potential. “Both established and high potential markets have significant headroom for continued subscriber growth,” noted UMG CFO Boyd Muir. He highlighted that even in UMG’s most established markets, subscription penetration remains below 50%, with most markets under 30% penetration. For instance, the US currently has a paid subscriber penetration rate of just 42%. “When we look at the remainder 58% of non-subscribers, about half of them have already shifted from legacy formats,” Gaby Lopes added.
In established markets, including the USA, Japan, and Germany, the new strategy will focus on bolstering subscriber numbers and revenue by appealing to audiobook listeners, satellite radio audiences, and consumers in high-ARPU regions.
Artist-centric principles
A somewhat controversial aspect of Streaming 2.0 involves its commitment to “artist-centric principles”—something the industry has already had a chance to address. One of these principles aims to combat streaming fraud (aka artificial streaming) that infamously takes money from the collective streaming revenue pool through bots and automated plays of AI-generated tracks. In 2024, Spotify adopted a zero-tolerance policy on artificial streaming, implementing strict penalties for any suspicious activity detected on artist profiles.
Another principle seeks to reallocate revenue from “hobbyist musicians” (note from us: also small, up-and-coming artists) to established “working” artists. As a result, Deezer, Spotify, and Amazon Music have introduced a minimum streaming threshold of 1,000 for artists to earn royalties on the platforms.
Is Streaming 2.0 beneficial, and if so, for whom?
Now, while UMG seems excited about their newly developed model for the future of music streaming, many industry professionals remain skeptical and approach the topic with notable caution. “Is Streaming 2.0 just a new way to exploit dedicated music fans?” they ask. We must acknowledge that, to some extent, it does seem this way.
Of course, there is a clear rationale behind the vision. Although music streaming has been steadily, and in some regions even rapidly, growing and enjoying widespread popularity, insider numbers have revealed that subscription streaming remains under-monetized. Allegedly, the current per capita music spending—the amount of money spent on music per head–is only 50% of what it was at the peak of the physical record era in 1999. For that reason, it’s not surprising that music executives are seeking opportunities to increase global music subscription penetration. And while they’re at it, they might as well try to enhance the value they get from each subscribed user. Streaming 2.0 aims to address these ambitions by focusing on segmented consumer offerings, tapping into superfans and premium subscriptions, and exploring opportunities that arise in both high-potential and developed markets.
Yet, concerns remain regarding the actual value to consumers. In terms of super-premium subscriptions for die-hard fans, many wonder what people will actually pay for as part of such a paid service. Can streaming platforms make their super-premium packages enticing enough to justify higher subscription costs?
As we recently reported, major streaming platforms, including Spotify, Apple Music, Amazon Music, and Live Nation, the world’s largest ticketing company, have been toying with early ticket access. This could potentially be an extra perk for fans to enjoy with super-premium subscriptions. However, will this be enough? Paid plans for all streaming services are already steadily increasing in price. What will entice users to pay $20, $30, or even $40 per month for a music streaming subscription?
It’s also important to highlight the shift in celebrity culture in recent years. Many believe that the value and significance of celebrity culture have been steadily declining, driven by numerous factors, including economic hardship, distrust of elites, disconnection from celebrities’ lifestyles and values, and their out-of-touch presence. People no longer idolize celebrities, including music stars, as they once did in the past, which is something that streaming platforms may need to consider for their future premium subscription potential.
How does or will Streaming 2.0 affect independent artists?
Meanwhile, there’s also speculation about what implementing the new model means for the artists, particularly the independent ones. Will the increase in subscriptions and revenue growth be reflected in artists’ royalties, allowing them to finally receive fair compensation for their hard work? Many have notable doubts—and one might say, rightfully so. Even when considering the artist-centric principles, it raises the question of whether these propositions truly focus on artists’ needs, desires, and craft.
While combating artificial streaming is crucial, we can debate whether Spotify’s zero-tolerance policy is the right solution. This is especially true as a great deal of streaming fraud occurs without artists’ awareness—such as when their tracks are included on fake playlists without their knowledge. For example, musician and content creator Benn Jordan, a prominent figure in the industry, has surveyed several hundred musicians and discovered that those who paid for fake stream services (regardless of whether they believed them to be legitimate) were slightly less likely to have their music removed from Spotify for fake streaming.
This suggests that, at least in this small study, there is no correlation between intentional artificial streaming and artists being accused of or punished for it. Jordan further implies that even when artists pay to have their music submitted to playlists and curators (using trusted platforms like Playlist Push or DailyPlaylists), they increase their chances of being accused of fake streaming or, in the worst-case scenario, face fines or suspension from streaming platforms.
Then, there’s also the minimum streaming threshold for generating royalties—a policy recently introduced by platforms like Deezer, Spotify, and Amazon Music. Notably, Spotify has defended this method, arguing that it improves artist payouts by directing royalties to professional, aspiring, and “working” musicians, while also helping combat streaming fraud.
However, industry insiders and independents have heavily criticized these policies, claiming they disproportionately impact independent artists. For reference, a 2023 NME article reported that, according to Spotify’s data, only about 37.5 million out of a total of 100 million songs on the platform meet the new requirements to earn ‘any’ revenue. Consequently, around 60% of tracks on Spotify fail to meet the threshold. Among these, there may be thousands, if not millions, of small and independent artists (reportedly, indie artists comprise 26% of an estimated total of 11 million artists releasing on Spotify), whose music has been demonetized overnight and who continually fail to reach the threshold needed to generate royalties.
Critics argue that the policies harm independent artists and risk sidelining emerging ones while directing more funds toward high-streaming releases usually associated with major labels. IMPALA, the European organization for independent music companies and national associations, has taken a firm stance on the “artist-centric” payout model: it is less about supporting artists and more about reinforcing the dominance, wealth, and power of major labels like UMG.
And maybe that’s the conclusion we can now draw about Streaming 2.0—while it’s not entirely clear how the approach will benefit artists and fans, it’s safe to say the major industry players, including major labels and streaming platforms, may gain significantly from it. But is that enough? And is this really what the future of streaming will look like? Let’s hope not…
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