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How Spotify Can Become Profitable
journovampire writes: Spotify just posted another big net loss, but it can become profitable with some specific changes according to one analyst. He suggests the following three options: Cut royalty costs to the music industry, freeze expenditure year-on-year, and what seems like the least likely option, somehow make free users pay $1 every three months. He points out: "if Spotify’s current free user base just paid €1/£1/$1 every three months, it would be a profitable company."
If investors have been dumb enough to prop up the company for this long without seeing any sort of profit (and instead, big fat losses) why should I be worried about whether or not it can turn the tables? The worst that can happen is the service gradually winding down before the name is sold off to some other schlubs who will either:
A - repeat the mistake and run their own version of it at a loss
B - change some shit and run their own, slightly worse (for users) version of it at a mild profit
C - change a lot of shit and kill it in the same way Napster was killed
D - sit on it and do nothing
In A and B, users win.
In C and D, users lose until a new copycat (or 5) come along and get the same idiot investors to buy in and keep it running for free (to users) and at a loss (to investors) for years to come.
you know, you're right, but I think it's for the best. Spotify's current approach is unsustainable, not only for themselves but also for musicians, labels, and the music industry. we all shake our fists at music labels, but I for one want a thriving industry where musicians and labels make money so they're incentivized to make more music.
$1 every 3 months. You have commitment issues over $4?
There is something about recurring expenses... that people don't like... :)
Now if they decided only to sell it as $50 and then you get spotify for 10 years... with no binding or recurring expenses people might bite
Note, I pay for spotify, but I bought it in Denmark even though it's $20/mo, because the European selection is much better than the US selection (I live in US).
Add a nice new feature.
Charge $1 per month to use it (or $0.33, if that's all they need).
Profit.
How do you collect $1 a month from each user? The problem isn't so much that people don't want to pay. Most people wouldn't mind paying $1 a month, but will not pay $12 once a year. Yes, that makes no sense, since it's the same amount of money, but that's how people are.
So how do you charge people $1 a month? The real problem is that there is no easy, simple way to charge people a small amount of money.
Cut royalty costs to the music industry
Given the constant bad press that Spotify gets about how little money artists get from their work being streamed on Spotify, how does the analyst expect them to be able to get away with paying the source of their content less?
The endless list of horror stories of subscription cancellation woes has built up a very real online resistance to signing up for anything with a credit card. Even free as they often are a hidden free trial.
Having had the honor of first hand dealing with online ordering without just as easy online cancellation, has firmly entrenched the once burned twice shy response.
I can name names to be specific.
AOL, Comcast, Viatalk...
Until the industry fixes the locked in reoccuring billing subscription, all sign up proceedures no matter how small are potential fights in the future to cancell, and customers are burnt out dealing with it.
Guilt by association appplies to any service without a contract expiration date.
For spotify to leave the reputation, they should offer term subscriptions. 1 month, 3 month, & 1 year. No questions termination at end of contract. Then provide excellent service so I'll renew because they are great.
The truth shall set you free!