I've been thinking a great deal about the recent policy change by AT&T to cap their monthly bandwidth usage to 2 gigabytes instead of offering unlimited usage like they do currently. After reading a recent post by Bob Lefsetz, I decided to dive into the issue a bit further for some real world perspective and I came up with the following:
Two of the hottest music streaming sites Spotify & Mog each provide music streams at 320kbps for premium users (Spotify Source / Mog Source). I believe Pandora peaks @ 128kbps for their streams.
At 320kbps, the bandwidth usage is 150 megabytes per hour. If AT&T's recently announced cap is 2 gigabytes a month, this means - without doing anything else on your mobile device - you could only listen to 13 hours of music a month on your mobile device using either Spotify or Mog (13 hours = 1.95 gigabytes) assuming their mobile apps offer the same streaming quality. That's roughly 15 albums a month.
That's horrible.
Not only is the music industry completely screwed by current streaming revenue models; there's no possible way to make up ground if newly acquired streaming consumers are forced to cap their listening for fear of being charged overage fees. If all of this is true and the music industry is banking on the mobile marketplace to survive, they had better bank elsewhere.
Even though Pandora's streams are 128kbps, that still only leaves a customer the ability to stream a total of 40 hours of music a month. That equals 5 days of streaming music for 8 hours a day. Again, this is also assuming you don't engage in any additional usage on your mobile phone. Throw a few YouTube video streams and a few text messages with pictures in the mix and streaming music consumption damn near disappears.
This leaves a number of unanswered questions for me. Namely, if Apple bought Lala and then shut it down, do they really have a motivation to create a streaming service allowing users to store their music in the "cloud" given such limited mobile bandwidth? Might Apple work out a deal w/ AT&T so streaming music consumption won't count against your bandwidth usage? Labels had better start begging Apple to engage in such a deal.
Additionally, it's no stretch to say that Verizon and other mobile companies will cap bandwidth eventually given the ongoing strains on their respective systems. If you keep following the breadcrumbs, might the mobile service providers start their own streaming services and allow users to stream all the music they want without limiting bandwidth if you have a contract with them? It doesn't seem like much of a stretch if you think about it. It's also fairly easy to see that the user interface from a mobile service provider will undoubtedly suck.
So with consumption caps on their users and mobile service providers presumably on their heels with their own services, there are going to be many more shake-ups before there is stability when it comes to streaming music on your phone.