Figure 1: Elasticities of demand for premium digital audio subscription services, UK, 2022
| Elasticity Measure | Value |
|---|---|
| Price elasticity of demand | −0.7 |
| Income elasticity of demand | 1.4 |
Figure 2: Market shares of premium digital audio subscription service providers in Europe, 2022
| Provider | Market share (%) |
|---|---|
| HearIt | 42% |
| SonicPlay | 26% |
| AudioVibe | 11% |
| ReadAloud | 8% |
| PodStream | 4% |
| EchoBook | 2% |
| Others | 7% |
HearIt currently has 8 million UK subscribers, who typically pay £11.99 a month to the US-based private sector firm. At this price, up to two devices can stream high-definition audiobook and podcast content simultaneously. The demand for premium digital audio subscription platforms experienced rapid growth when commuters and gym-goers sought mobile entertainment, and has only recently begun to moderate as competitive rivalries intensify, for example with the expansion of SonicPlay.
The launch of AudioVibe at the end of 2021, featuring highly publicized exclusive audio dramas such as the £45 million production Chronicles of the Deep, allowed the service to gain more UK subscribers in its first year than any previous platform.
However, the costs of producing and maintaining high-quality premium audio content have surged. Consumers increasingly expect star-studded narrator casts and investigative journalism series; for instance, high-profile exclusive weekly podcasts now cost upwards of £3 million per series to produce. Furthermore, promotional campaigns in an increasingly crowded market have become highly expensive.
In 2022, HearIt increased the monthly price of its standard subscription by £1.50 to £11.99. Fortunately for HearIt, subscriber demand has proven to be highly price inelastic. Just 4% of users polled in a market survey indicated they would definitely close their accounts following this price rise.
Discuss likely reasons why the market price of premium digital audio subscription services is increasing. Draw a supply and demand diagram to support your answer.
