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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.
If everybody in my country gave me just five cents per year, I'd be rich. What does that prove?
it sounds cheap and easy for people to pay $1 a month, but personally there is a large bump in commitment as soon as I submit my monetary information. This often keeps me from doing still fairly inexpensive things because I don't want that commitment
You mean charge everyone $5 per month, because changing a free service to a paid one could well cut the user base by a factor of 15.
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.
I would pay $1 a month to upgrade my account. The $11 is too much. I would prefer just keep Netflix streaming and listen to background music and dialog. I did the 3 month thing or 99 cents the time before last that it was offered, but they only allow you to do that once. My option was to create another account and pay the 99 cents or just continue as a free user. I choose to stay a free user, as it doesn't really bother me. To me, it just says they pushed away a potential paying member, who is not willing to pay the price they are asking, but would be willing to pay another price. If spotify gets rid of the free tier, I would leave it. Even if I were a premium paying member.
the ??? before 'Profit' in their business plan.
Any insufficiently advanced magic is indistinguishable from technology.
I'm still trying to figure out how collecting royalties on songs where everyone is dead is going to incentivize them to make more music. Maybe we should reconsider these rules giving copyright to corporations for 200 years.
How to become profitable: charge for free service. The mind boggles.
Funny I just cancelled my spotify today because it required a program to be installed to work on PC and it didn't allow me to login using their facebook login thing. Why does it require a program? Should work on any browser like..... uh, pretty much everything, everything except big games.
my karma will be here long after I'm gone
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That's not completely true. Millions of people around the world paying small amounts of money for iOS apps shows that it can be done. Additionally, I signed up for a $1.29/month charge for an extra 20G of iCloud storage, and it was extremely easy.
If Apple can figure it out, why can't spotify? Or is the 'enter your credit card' details step the part that you indirectly refer to as difficult? If so, then sure, there's no easy way of charging people a small amount of money without requiring and storing credit card details. If you can get people's credit card details, then what's the problem?
Of course, once you've launched a free service - and rightly or wrongly people really do expect free stuff - it's rather hard to convert that into a 'pay' service without losing a large percentage of your user base.
...except the problem with all of that is this is being driven by idiot savant musicians that don't understand that there's a money grubbing middle man in between them and Spotify. What the artist gets and what Spotify actually pays are two different things.
And that's not even getting into the problem of assigning a reasonable value to a single impression.
A Pirate and a Puritan look the same on a balance sheet.
Musicians never got money from album sales. A sliver get allocated to them, and taken away again to repay the advance which the label gave them to make the album.
It entirely depends on the band, their contract, and how much they sell. The Beatles made massive piles of money even though they stopped touring halfway through their career, and the Pink Floyd "The Wall" album saved the band's members from bankruptcy while the following tour lost them all money. You can read about the structure of traditional music industry royalties here.
The short version is that on a CD sale, artists might make a 10% royalty after packaging, breakage, marketing and costs of production (advance) are subtracted. The above linked article shows how quickly that 10% shrinks, as well. Digital play royalties - unless the band is savvy and has negotiated better rates - are about half of the CD rate.
However, if you wrote the song that was performed, you will see an additional cut. And the band also gets royalties each time the song is played on the radio, or used on TV or in the movies (the writer gets an even bigger cut). So ultimately, there is still a lot of money to be made in recorded music, not just concerts and merchandise... but your music has to be popular enough to appear on the radio or other media for you to cash in. For indie bands, concerts and merchandise will be the big moneymakers of course, but they never sold much recorded music anyway.
"95% of all Slashdot
So, when I die, can I still have the company I work for continue to pay my family for the work I did when I was alive?
Copyright laws that extend beyond the death of the artist are an abomination.
If "music corporations" stop pouring "millions" into a rising star, nothing of value will be lost. It doesn't cost "millions" to make and release a recording any more. Those days are long gone.
You are welcome on my lawn.
Not to "right holders", but to artists.
Limit copyrights on recorded music to 25 years and don't let them be assignable to anyone but the artist (maybe a spouse). Not children, not publishing companies, not record labels.
If I listen to Charlie Parker records, why should I be paying license fees to anyone? Every single person associated with that recording and the music therein is dead. Earlier tonight, I was listening to Dizzy Gillespie, Charlie Parker and Al Haig's recording of "Shaw 'Nuff" which was recorded 70 years ago today. Why shouldn't that entire recording be in the public domain? I'll pay a company to stream it, no problem. But why should any "rights" money change hands?
https://youtu.be/1IuZNbdwAk8
You are welcome on my lawn.
Music with the occasional advertisement. Isn't that exactly what traditional radio has been doing for the past decades? Playing music for people to enjoy (broadcast for free), usually with some talk in between by a dj announcing the songs, telling funny things, doing interviews, etc. And most of those radio stations managed to make a decent profit out of it.
Here we have Spotify, doing effectively the same but broadcasting on the Internet rather than the airwaves. Playing music interspersed with advertisements, broadcast for free for anyone who wants to tune in to.
Radio stations have an expensive, power hungry transmitter to pay for. Spotify just needs an Internet connection (I suspect this to be cheaper).
Radio stations are hiring DJs, the more popular ones demanding high salaries. Spotify doesn't have DJs.
Radio stations have to maintain a studio building for the DJs and other staff to do their work. Spotify just an office and a rack in a data centre.
Radio stations are usually limited to a relatively small geographic reach due to the physics of radio waves. The Internet has no boundaries. Larger reach means more potential value for advertisers.
From the face of it, Spotify has many advantages compared to traditional radio stations. Lower overhead, larger potential audience so more advertising revenues. So how is it that Spotify can't keep up? Is the competition of traditional radio really so strong?
Well, I might be alone with this opinion, but I really do like Spotify, and if they'd raise their yearly subscription fees with a few (I do mean a few) bucks, I wouldn't mind very much. I generally don't mind paying for stuff I like.
I am putting myself to the fullest possible use, which is all I can think that any conscious entity can ever hope to do.
I listen to the free version of Spotify once in a while, but it's fundamentally irritating. They have commercials, and that would be fine (since it's free), but the only commercials they have are 2-3 Spotify commercials that they repeat over-and-over-and-over, telling me I need to upgrade to get rid of the commercials.
In other words, they can't sell their advertising, at least not in Switzerland. But they don't want the non-paying user to have an uninterrupted experience, so they put in their own interruptions. The result is just irritating, and that's why I don't listen to Spotify very often.
Lastly, I find their prices kind of high. As someone who listens to music maybe once a week, I just don't see paying $15/month for the privilege. If they have a problem with too many people not buying their premium service, maybe that's because it's overpriced for the typical user.
Enjoy life! This is not a dress rehearsal.
Maybe it's a UK thing, but I can sign up a new account without a facebook account.
Tell that to the record labels and the agencies that collect royalties in different countries. THEY are the ones requiring the geo-fencing and different pricing for different countries.
If you try to negotiate rights to sell or play any music, you will soon start wondering if the record label wants your money or not, because it will seem like they don't. It does not even matter if you are part of the same company group as a the record label you are negotiating with. Been there, done that.
The Beatles and Pink Floyd are extreme examples from the top 1% of the music industry, and neither are even active in today's music industry.
It's like arguing that the lotto is a good way to become rich because Mr. X won the lotto in 1981, and Ms. Y won it in 1994.
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At this point in history, I don't have much sympathy for musicians who complain about their lack of wealth.
Musicians who have risen to any kind of popularity in the last 10 years ought to be well aware of the greedy "recording industry" and its money grubbing ways. I'm pretty sure it's been common knowledge for the last 30 years.
I don't know why popular artists don't try to structure their income around self-production and distribution and making money off touring and reduce their exposure to the record labels.
Big complainers like Taylor Swift are a product of this industry -- would she have "made it" at all if not for the industry?
For an argument that's valid today - a band that does its own marketing can completely rid themselves of their label now. They can sell physical CD's on-demand via Amazon CreateSpace, digital MP3 via iTunes/Amazon, streaming via Spotify/Pandora. They can book their own live gigs. And none of that requires a record label. And more and more independent artists are doing just that and making a decent living with far less success than is required with a label taking a cut. And fans are more empowered than ever to fund the art they want with things like Kickstarter.
Farms and other businesses have great upkeep costs which must be exceeded by their useful output in order to turn a profit. All investments collapse; hard assets do not draw upon the economy to divert wealth, but rather maintain or decay in wealth. All of these things either bring no cost to society or provide a continuing useful output; by contrast, music, movies, and books exist, and can be copied--the service of copying creates a good, while the fact of existing creates nothing.
A farmer who holds but does not work the land will make no profit; a copyright holder who holds ownership of a piece of music may make profit, for when another entity invests its own resources to produce a copy of that work, the copyright holder claims he must be paid for... nothing, just for the fact of being who he is. It is as if the farmer, content with who he is and lazy in his way, farmed no tomatoes, but instead charged every other farmer on the planet for growing and selling tomatoes.
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