The great hope of the music industry is that subscription services will allow record labels and publishers to tap into the music appetite of every smartphone-toting person on the planet.
Connecting to consumers through mobile phones has great potential for a number of reasons. Putting music into those phones, something people take with them everywhere, makes sense, and integrating the billing process with mobile carriers can lure customers by making payments easier. Hundreds of millions of smartphones means hundreds of millions of potential customers paying recurring fees--at least that's what music companies hope. IDC forecasts vendors will ship 919 million smartphones this year alone; that's 50.1% of total mobile phone shipments worldwide.
However, this global digital music marketplace will have to contend with one unavoidable fact: Mobile music consumers aren't all worth the same. What a person will pay in the United States--which has typically run about $10 a month for a subscription service like Spotify or Rhapsody--is going to be far more than what an average person can pay in many other countries.
An individual subscription for Rdio with mobile usage costs $9.99 per month in the United States and 14.90 Brazilian reals ($7.62). They're similar in U.S. dollars but hardly on par when the two countries' gross domestic product (GDP) are taken into account.
The U.S. per capita GDP in 2012 was $49,800, according to the CIA World Factbook. Brazil's was $12,000, which takes into account purchasing power parity. When adjusting for differences in GDP, the cost of Rdio's monthly service in Brazil would be the equivalent to $31.54 in the United States.
Here are some other examples. The monthly music subscription fee is £9.99 ($15.10) in the United Kingdom; $15.10 is also the going rate in Turkey and South Korea. Because of the difference in the latter two countries' GDPs, spending $15.10 a month for a music service in Turkey is like spending $51.13 in the United States. Meanwhile, the $15.10 price tag in South Korea would feel like $23.21 in the States. Clearly one price does not fit a global market.
Customers' value to music companies will also vary according to the cost of their mobile service. The average smartphone service costs $9.25 per month in India, according to Nielsen. That may sound low, but it accounts for 2.8% of monthly GDP per capita while the average U.S. smartphone service, at $93 per month, accounts for just 2.2%.