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Spotify: We Now Have 10 Million Paying Subscribers…

spotifygrowth2

 

*Based on company announcements.  Chart updated Thursday morning so reflect a more realistic growth estimate.

Apple is buying Beats for $3.2 billion dollars.  But Spotify now has 100 times the paying subscribers that Beats has.  According to details disclosed this morning, Spotify now has 10 million paying subscribers worldwide, with 3 million in the US alone. The service is available in 56 different countries.

Additionally, Spotify now has 40 million total users, meaning 30 million are streaming for free, with advertisements.  That means one in four is paying something for the service, though Spotify has dramatically fudged its topline user numbers in the past.

Spotify says 12 billion hours of music have been streamed since they launched in 2008.

More details as they emerge.

 

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Comments (93)
  1. Jeff Robinson

    I’ll confess, I have 3 Spotify accounts. Two paid, one free.

    How many do you have?

    I wonder how many ‘unique’ users they have?


    Reply
    1. jw

      Why on earth would anyone have multiple Spotify accounts?


      Reply
      1. Nina Ulloa

        especially multiple paid.


        Reply
        1. Guile

          I have one for me and one for my son, both paid.

          I’m paying, but we’re both unique from a subscription/user standpoint.


          Reply
          1. Nina Ulloa

            well that’s different


            Reply
      2. Anonymous

        Here’s the math for the USA:
        3,000,000 x $120 (even though it’s less) = $360m Gross
        $360m Gross paying out 70% to rights holders is $252m… Annually…

        That’s $252m against a $7b annual business… meanwhile that $252m could be costing the industry more in losses of transactional sales than it’s actually getting paid in royalties – oh wait, there’s that 18% in equity…


        Reply
        1. FarePlay

          Talk about sucking revenue out of an industry to make a few people rich. Pathetic


          Reply
          1. jw

            You’re a real piece of work, anonymous.

            I mean… what are your expectations here? That these 3m users buy more than 8-10 digital downloads per month? More than 12 records per year? There’s just no way you can spin a consumer spending $120 annually on music as a bad thing. When you try, it makes you look like an idiot. (Fairplay piling on doesn’t look much better.)

            If you’re looking for lost revenue, it’s anywhere BUT premium streaming subscribers. These are consumers who oftentimes spend hundreds of dollars on TOP of their subscriptions on music annually. I know this because I’m one of those users.

            Your head is so far up your ass that you can’t see 3m consumers spending $120 annually as an insane achievement. What are your expectations here? What would make you happy? How few consumers are propping up what size U.S. recorded music industry in your head? And what kind of burden is each consumer shouldering? $200 per year? $300 per year? $500 per year?

            You’re just not wrapping your head around these concepts. Simple, basic concepts. Stuff is just flying completely over your head.


            Reply
            1. Anonymous

              “You’re a real piece of work, anonymous”

              ‘Anonymous’ is the user name you get when you can’t be bothered to sign in. And this is not, um, me… :)

              Also, you’re replying to FarePlay’s comment…


              Reply
            2. mathguy

              Hey JW – streaming doesn’t scale… If you want to impress people with math, figure this one out. It will take almost 90 million paid subscribers to generate $7b in revenue to rights holders. If “streaming is the future” that’s the only bench mark that matters. Even if Spotify could get 30 million paid subscribers that only generates $2.5b annually and would effectively replace the current $7b, for a net loss of $4.5b annually.

              Grow up. Learn Math.

              http://thetrichordist.com/2013/02/08/music-streaming-math-will-it-all-add-up/


              Reply
      3. Anonymous

        “Why on earth would anyone have multiple Spotify accounts?”

        Here’s a more relevant question:

        Why would anybody want any Spotify accounts when YouTube Music launches?

        Think about it:

        * YouTube Music will force content owners to make their entire catalogues available. So there’ll be no Spotify-style windowing — when a song is released on iTunes, it’s also released on YouTube. While you still may have to wait weeks or months to hear it on Spotify.

        * All major songs made after 1981 have video versions. On Spotify, you only have access to the sound. On YouTube Music, you get it all.

        So what do you want? Audio-only — or the full original version?

        Decisions, decisions…


        Reply
        1. GGG

          So…I don’t get your train of thought here. YouTube music will most likely have a shitload more users, which would be great, and would not bother me one bit if Spotify was destroyed by it. But YT Music will mostly likely pay much less than Spotify even, so why do you care if Spotify stays around for people who just like to listen to an audio-only platform? You can’t shit on a consumption model for shitty pay structure than champion one that will pay less.


          Reply
          1. Anonymous

            “But YT Music will mostly likely pay much less than Spotify”

            We don’t know what YT Music pays per click, but we know there’ll be significantly more people to do the clicking.

            We also know that the purpose of YT Music is to make more money, and more money for YT means more money for right holders.


            Reply
            1. GGG

              That still makes no sense. Even if Spotify paid out just .001 more than YT, any amount of people choosing Spotify over YT would be better. You truly lack basic common sense in your quest to just hate Spotify.


              Reply
              1. Anonymous

                Spotify isn’t worth hating, it’s so over.

                ColdPlay’s new Spotify-holdout is a huge success, btw…


                Reply
        2. jw

          I want the audio-only version. Personally, I don’t really care for videos. On rare occasion I’ll watch a video once & that’s it. Generally, a video is more the product of a marketing department’s vision than the artist’s vision. Very few artists spend their life trying to become a video performer. REM’s Imitation of Life & Hyuna’s Bubble Pop are the only videos I can think of that I’ve watched multiple times.

          If you’re only interested in singles, no one’s keeping singles off of Spotify. They generally go up when they go up everywhere else. Even the two singles off of the last Beyonce record are on Spotify. As a general rule, any song with a noteworthy companion video can be found on Spotify. And not everything on Spotify is on YouTube. For instance, right now I’m listening to the Questlove remix of Cody Chesnutt’s What Kind of Cool. On Spotify, not on YouTube. And any holes that are on Spotify, I can fill with $.99 mp3s from amazon.com or bandcamp. Not the case with YouTube.

          I’m sure YouTube will make a great product, & there are consumers for whom it will be ideal. But Spotify is better in many ways, & it’s ideal for a consumer like me.


          Reply
          1. Anonymous

            “I want the audio-only version”

            Spotify is perfect for you, then. :)

            I prefer full versions though so I’ll use YouTube Music. To each his own…

            As for missing songs: YouTube Music signed deals with Warner, Universal and Sony. Expect to see their full catalogues on the site — no windowing allowed.

            And show me an indie that can afford to stay away from the world’s biggest music site…


            Reply
            1. jw

              The versions on Spotify are the full versions.

              Musicians don’t spend thousands of hours training to be music video stars, or learning how to write music videos. Music videos, for songs that actually have a companion video, rarely if ever offer anything that substantiates the artistic statement, & oftentimes it detracts from the artistic statement. I mean, let’s face it… most music videos are terrible, & 9 times out of 10 I’d just rather not be subjected to them.

              I understand the need for a video when there’s a sexual component to the music, but if that’s all you listen to, you’re probably not a very bright individual.

              Also, there are all sorts of artists on bandcamp whose music is not on youtube or Spotify. But with Spotify, I can buy the songs I want for $.99ea, & import them.


              Reply
              1. Anonymous

                “The versions on Spotify are the full versions”

                No, they’re soundtracks without movies.

                The world is changing and videos are half the attraction today — at least!


                Reply
    2. Wayne

      Mind that Spotify is talking about 40 million active users. So they are unique I guess.


      Reply
      1. Nina Ulloa

        They probably aren’t counting multiple accounts as one person


        Reply
        1. FarePlay

          I know I have one dormant green blob in amongst my Apps.


          Reply
  2. Casey

    I have a free account. Probably going to make it a Premium account once Rhapsody’s beta software player becomes official and the old player is discontinued.


    Reply
  3. Nissl

    It’s not quite as big of a jump as it looks since it was 6 months since the last announcement; the x-axis isn’t scaled by date. Still, there’s no doubt there was a big jump. Based on what I see around the web, Spotify is clearly winning the mindshare war now. For better or worse. It’ll be interesting to see if Amazon, Apple, or Youtube can change that.


    Reply
    1. jw

      >> the x-axis isn’t scaled by date

      I think this is an important point. The folks at Fox News would be proud of this chart.


      Reply
    2. FarePlay

      Before the applause dies down; let’s get real:

      “The worst-case scenario for Spotify isn’t losing to Apple. It’s discovering that its prize is insolvency. According to a report published by Generator Research last November, the current business model for streaming music is “inherently unprofitable.” Andrew Sheehy, the main author of the report, concluded: “Our analysis is that no current music subscription service—including marquee brands like Pandora, Spotify, and Rhapsody—can ever be profitable, even if they execute perfectly.”

      Bloomberg BusinessWeek


      Reply
    3. Paul Resnikoff

      It was a crappy graph, you’re right. So I made a new one.


      Reply
      1. jw

        This is appreciated, Paul.


        Reply
  4. john

    exciting. the royalties lately have been exciting as well. keep scaling like this and anti-spotify artists will look like the people who professed that the earth was flat.


    Reply
    1. agraham999

      The problem is that the royalties are paid with a great deal of borrowed money.

      When you first look at these numbers it does seem impressive. A 25% conversion rate of free to paid seems massive compared to companies like Dropbox who sit somewhere around 4%. But if you look over time that needle isn’t moving. It is going to require that Spotify doesn’t just keep adding more and more users at a rate of 75% free and 25% paid. They can’t reach profitability.

      For example, Dropbox, have only around a 4% conversion rate, but they also have lower costs (storage is cheap and getting cheaper). Spotify on the other hand not only has the same costs of running an online service like Dropbox, but add to that the cost of royalties and their massive expansion costs and there is plenty to be concerned about. This isn’t an economy of scale where the more premium customers listen to music the less if costs Spotify…but the opposite. Plus the free side is reliant on an ad market that is directly tied to a marketplace that has seen ad rates drop in the past years…and one dip in the economy and that revenue could drastically drop.

      Imagine what their burn rate is…

      They need to move that needle of free to paid or they aren’t going to make it.

      Now take Apple…that war chest of theirs…they could offer a completely free solution and run it in the red for years. We need more than these models…we need sustainability and that only comes from users paying their fair share.


      Reply
      1. john

        great points, nice to converse about this with you…

        If it all comes down to apple streaming we will def all starve a terrible death i think. their iTunes match royalties suck.

        while it sucks that the spotify royalties are indeed paid with borrowed money, they are important and always improving.

        they have advertised poorly, many people would be down to pay $10 a month for all you can do on there.


        Reply
        1. Wayne

          Spotify royalties are not paid with borrowed money. They are paid from subscription and advertising revenues.


          Reply
          1. agraham999

            Without splitting too many hairs here…

            The massive outlay of cash for their expansion and their need to grow at all costs combined with the fact that they have in many cases cut prices in certain segments (students now pay 50% less – which means that other cash has to cover those losses)…that’s all covered by subscriptions and ad rev and none of that bleeds into their VC cash reserves and credit line? Because all the numbers I see are that they can’t sustain themselves on their revenue and that even before their expansion they weren’t able to stand on their own two feet.

            “Spotify sees the $1bn that it has paid out to rightsholders since 2008 as a positive thing: a sign that it’s adding value to the music industry. But that also means the company remains heavily loss making: €45.4m of net losses in 2011, €58.7m in 2012 and possibly more in 2013″

            “Thus far, the company has been fueled by massive venture capital funding rounds – $537.8m so far”

            http://www.theguardian.com/technology/2014/may/21/spotify-five-big-challenges-streaming-music

            70% of their revenue goes towards royalties. Spotify just cut the cost for subscriptions for students by 50%. Who covers that margin? Investors…and if not investors, then technically I guess you could say it comes out of the 30% they bank after royalties. It’s also been reported that they actually lose money on the ad side…but we don’t know for sure. Remember, Spotify doesn’t necessarily make more money per new user…in fact each new user costs them money.

            I love streaming…I just don’t know that it can sustain itself or the music industry.


            Reply
            1. Anonymous

              “I just don’t know that it can sustain itself or the music industry”

              …and that is why artists are leaving Spotify now.

              It’s extremely expensive to produce music in the quality consumers expect. And you have to find every single cent somewhere.

              Taylor Swift, Coldplay, Adele, Black Keys and Beyoncé showed us how to do it:

              By boycotting — or leaving — Spotify.

              That took a lot of courage. Remember what Spotify told us? Kids would steal their favorite songs if they couldn’t find them on Spotify.

              But today we know it wasn’t true.

              Beyoncé recently proved that kids buy their favorite songs from iTunes if they can’t stream them for free.

              That’s the most valuable lesson the industry has learned in more than a decade.

              And that’s why Time magazine selected her as the cover star for the magazine’s special 100 Most Influental People issue, crediting her for shattering music-industry rules — and sales records.


              Reply
              1. GGG

                I’ll never understand how you can keep repeating this with a straight face. All those artists have plenty of music on Spotify. None of them boycotted or left. In fact, with the exception of two BK albums and CP’s new one, they’ve all added all their music. Beyonce windowed because 1) she’s fucking Beyonce 2) it was a music video album. So yes, Beyonce did prove that kids will buy Beyonce songs when they can’t get them for free. So yes, in 2014, window however you want to earn as much as possible, but you think that’s going to matter in 5 years? 10 years?


                Reply
                1. Anonymous

                  “Beyonce did prove that kids will buy Beyonce songs when they can’t get them for free”

                  And Taylor Swift proved that kids will buy Taylor Swift songs when they can’t get them for free. Coldplay proved that kids will buy Coldplay songs when they can’t get them for free. Adele proved that kids will buy Adele songs when they can’t get them for free.

                  See a pattern emerging here?


                  Reply
                  1. GGG

                    Yes, the pattern for the very short foreseeable future is that if you are a megastar you can still sell a decent amount of records by leaving it off Spotify. I’ve never argued that. The fact you think that pattern applies to anyone below that level is ridiculous. Also, again, all those artists have the vast majority, if not all, of their music on Spotify.


                    Reply
                    1. Anonymous

                      “if you are a megastar you can still sell a decent amount of records by leaving it off Spotify”

                      No, it is basic psychology and it applies to all fans:

                      Nobody pays for songs they can stream for free on Spotify!

                      “those artists have the vast majority, if not all, of their music on Spotify”

                      Certainly — the trend is to boycott Spotify during release, not permanently.

                      That’s how Spotify became the museum it is today.


                    2. GGG

                      Yes, you’re right. They steal them instead. Or stream them on youtube and earn artists even less than Spotify.

                      Also, not sure why you keep using that museum argument. Are you saying people shouldn’t care about music unless it’s brand new? We should forget about the myriad artists that have shaped what music is today and in many cases are just as meaningful to the human condition now as they were when they were new? What a shitty, joke of a so-called music fan you are.


                    3. Anonymous

                      “They steal them instead”

                      But that’s just Spotify’s old extortion argument, GGG. We all know it turned out to be a lie.

                      Beyoncé proved that fans go directly to iTunes if their favorite music is unavailable on Spotify.

                      “Are you saying people shouldn’t care about music unless it’s brand new?”

                      By all means no — much of the old stuff you can find on Spotify is awesome.

                      I just personally love new music, so I can’t use Spotify.


                    4. GGG

                      You’re right. I guess nobody stole music over the last 15 years. My bad.


                    5. Anonymous

                      “My bad”

                      No, you’re right — Spotify didn’t prevent piracy.

                      It just prevents music sales.


                    6. GGG

                      Again, forgetting about that whole decade Spotify didn’t exist….


            2. jw

              I think this is an oversimplified take on things.

              We can’t assume that costs are going to scale in a straight line. It’s reasonable to assume that early adopters are going to be heavier listeners, which carry lower margins for Spotify. As casual listeners enter the subscription fold, you can expect Spotify’s subscription margins to grow. Also, I have a hard time believing that Spotify has maximized the value of it’s free users. We can’t assume that ad revenue is going to grow in a straight line. The young, early adopter crowd entices specific advertisers, & as streaming breaks into the mainstream, more advertisers are going to take an interest in the service, driving prices up.

              Additionally, as streaming begins to heavily shape the way that revenue is generated for the industry, they’ll have the negotiating power to get a more sustainable rate, if need be, based on arguments for volume. They also have the option of reducing free access over time to drive up conversions to paid subscriptions.

              The good news for Spotify (and also Pandora) is that they’re trending towards “too big to fail,” & I’m optimistic about revenue growth, & I also think that there is plenty of room to adjust costs as their user base grows. I have a feeling that we’re going to start hearing “too big to fail” re: Spotify a lot over the next few years as the bottom inevitably begins to drop out of digital downloads.

              Sure, the current setup isn’t sustainable, but any reasonable person understands that this is a business of scale, & that they’re going to have a high burn rate until they reach a certain listenership. That’s to be expected if you have even the most basic understanding of the streaming economy. The “unsustainable” headlines are sensational, & they attract readers… especially readers who are not sympathetic to the streaming industry & want to believe that Spotify & it’s investors are simply looking for a lucrative exit. But any worthwhile analysis should read, “Of course Spotify is unsustainable right now, but let’s look at what the variables are going forward, & try to predict how those variables are going to behave as Spotify scales.”


              Reply
              1. agraham999

                ” The young, early adopter crowd entices specific advertisers, & as streaming breaks into the mainstream, more advertisers are going to take an interest in the service, driving prices up.”

                I disagree and I’ll tell you why. I’ve worked in cutting edge tech and covered it for over 20 years. I’ve seen a lot of companies and platforms come and go…and I’ve seen a lot of eggs put into baskets that no one imagined would fail. The only true thing I know is there is always a disrupter for the disrupters.

                We’ve built a society where everything trends and tends to be free, the “freemium” model. This model is driven by and supported almost entirely by ad dollars. Google is 1/3 of that marketplace with Facebook coming up quickly from behind with its mobile play…and we’re not even factoring Asian companies into this. We’ve seen ad rates dropping on all the major suppliers over the past couple of years, while revenues and profits increase. Why is that? Because they’ve simply increased volume. But we’re reaching a point of saturation where the increase of volume only further drops the price of the ads and we now have more and more places where advertisers can place ads so again…it becomes a buyers market, driving rates down further. Plus, ad dollars are finite dollars and ad markets fluctuate based on the economy. If the economic conditions around the world take a dip, ad rates take a dip. This is the discussion no one is having and no one is talking about.

                So imagine you have this “too big to fail” platform that generates a great deal of revenue from ads and the music industry gets a great deal of its revenue from them…let’s face it, a tremendous amount of the rev the industry is seeing is coming in some form from either venture capital funded startups or ad revenue. And also don’t forget there are many other markets who are also supported by these same ad dollars. It’s a perfect storm waiting to happen. This is why Google is divesting itself and expanding into other markets.

                Now on top of that factor in growth, competition from other services, churn, and service creep (whereby other services we pay for eat away at the edges of each other). Not to mention we have companies like Apple and Google who will want to control parts of this space and have the war chests to do so, and in fact Apple could run iTunes/streaming once against as a loss leader for their hardware business. Combine all of these factors with the fact that we’re seeing a consolidation of power at the top leaving only a few sources you’ll be able to get music, which means that it isn’t likely royalty rates will drop unless you also solve the issue of the splits on the back end of who gets paid what.

                “Sure, the current setup isn’t sustainable, but any reasonable person understands that this is a business of scale, & that they’re going to have a high burn rate until they reach a certain listenership.”

                Except that more users don’t just make them more money, it costs them more money (infrastructure, expansion, etc). They not only have to attract more users but at some point that growth becomes flat and if they can’t move the needle of free to paid, it puts a lot of strain on the ad side of the business. Another issue is that Spotify can find other revenue services to charge for, but those won’t necessarily translate to royalties.

                I wrote articles praising streaming as far back as 2007…as a technology…but I’m simply concerned whether this can actually support a thriving creative industry as it is currently structured, no matter how many users you put in place. There is very little room here for error.


                Reply
                1. jw

                  I was working for an ad-supported dot com in 2008, & when the market crashed & our revenue dropped almost 3/4 overnight. I’ve seen it happen, & felt it, too. Of course, as a small dot com with few direct ad sales, we were hit especially hard. But I know what you’re saying about the vulnerability of ad-supported companies. However, the 2008 Christmas season wasn’t great for the retail industry, either. Consumers’ entertainment budgets & corporations’ marketing budgets are, in a lot of ways, two sides of the same coin.

                  I also agree that inventory is a huge problem, & that dot coms are shooting themselves in the foot by diluting the impact of the ads they’re serving. (I actually have a truckload of thoughts on that, but that’s for another thread.) But I’m not sure you can necessarily compare audio ads on Spotify to display ads. Because you can’t overlook or ignore an audio ad, you can only upgrade to a premium account. Audio ads inherently retain their value better than display ads because, while you can show 5 display ads on the same page at the same time, each fighting for attention against the actual page content, only 1 piece of audio can play at a time (in practical terms), & without dramatically altering the end user experience, you can’t increase inventory per user. So Spotify ads seem to me to be a little economy unto itself, more stable and more akin to radio, or at least that’s how I would sell it. And I don’t think that radio advertising is in the best shape of it’s existence, but it’s certainly a different monster than online display advertising. Directly sold national audio ad campaigns should outperform the greater advertising market… if they don’t, that’s a problem with Spotify’s ad sales guys (and gals), not the model itself, in my opinion.

                  Beyond that, I think that, as streaming breaks into the mainstream, the casual user is going to be more lucrative, because they pay the same subscription fee but listen less and therefore rack up less royalties. Ultimately this is going to subsidize the free streaming, rather than venture capital/credit, & these subscriptions are going to be spurred by automobile integration, full featured mobile streaming, & so on (access features), rather than simply the removal of ads. Spotify has barely begun to creep into demographics with more disposable income, which has been my primary problem with the service’s marketing over the past couple of years. Additionally, whenever the timing is right, a cd-quality or HD streaming tier will help to offset some of the power users who are racking up copious royalties.

                  Also, re: royalty rates, David Hyman has stated that the labels were eager to come down substantially on the MOG subscription price if he could reach a bundling deal with a service provider like Comcast, so the labels understand & want scale, & they need a service to exist… and not only exist, but to have momentum, as the bottom starts to fall out of the digital download market. So there’s a human element here, rather than just economic forces of competition, that are going to keep royalties from running Spotify into the ground. Let’s not forget that the major labels who control the rates all have equity interest in Spotify, but not Apple or Google.

                  I’ll admit, I’m very optimistic, & I go out of my way to find ways for streaming to survive because the alternatives are all so bleak. But precisely because the alternatives are so bleak, I think that there will be give and take between streaming services and the record labels, & that they have more wiggle room than it appears, in terms of weaning their way off of venture capital/credit & finding a sustainable balance of revenue vs royalties.


                  Reply
                  1. hippydog

                    interesting posts!
                    thanks!


                    Reply
          2. Paul Resnikoff

            False.

            Royalties from the ongoing usage of the service are paid from actual money: subscriptions, ad payouts etc. Upfront licensing costs and equity shares (all of which equals value and money) are paid out from borrowed funds.


            Reply
  5. Alex

    But Paul, you kept telling us their growth had slowed dramatically!?


    Reply
    1. Paul Resnikoff

      Well we didn’t know if it was or not, mainly because milestones were not being announced as frequently.


      Reply
      1. SpottySub

        But a the time, you said that it HAD slowed dramatically.

        Now, after it is revealed to have grown immensely, you’re saying you “didn’t know.”

        If you didn’t know, why would did you say the growth had slowed?


        Reply
        1. Anonymous

          Because this site is highly slanted, ill-informed opinion masquerading as legitimate news reporting?


          Reply
          1. Wayne

            I guess the answer is yes ;)


            Reply
            1. FarePlay

              More will be revealed about these numbers. Hasn’t Spotify been expanding internationally quite rapidly?


              Reply
        2. DRMHunter

          Maybe it is whisfull writing?


          Reply
  6. PiratesWinLOL

    With this growth, the 30 percent of the subscription fee that they don’t pay in royalties, should soon be enough to make them very profitable.


    Reply
  7. Anonymous

    Some prefer museums — others like the new stuff you can find on iTunes.


    Reply
    1. GGG

      I listen to plenty of new music on Spotify. Not sure which version you’re using. Must be the “I don’t actually listen to new music” version.


      Reply
      1. Anonymous

        “Not sure which version you’re using”

        The video version. You know, the one kids use today. They call it YouTube.


        Reply
        1. GGG

          Oh, right, the streaming service that somehow doesn’t lead to any piracy. The one that causes everyone to go buy music because they saw a preview on there. No wonder album sales are in the millions again! Industry saved!


          Reply
          1. Anonymous

            “The one that causes everyone to go buy music because they saw a preview on there”

            Short trailers are actually a very good strategy — just ask the movie industry!

            And Beyoncé proved how well they work for the music industry, too.

            But it really doesn’t come as a surprise. Who would go to iTunes and buy a song they can stream for free on Spotify…


            Reply
            1. GGG

              Sure, they are a good strategy to reach people who were probably going to buy your music anyway and would be searching for stuff like that.

              Who the hell searches for music previews on youtube unless you’re already a fan of the artist?

              And how many people that come across a preview on youtube do you think actually give a shit enough to search out the rest of their music, let alone go straight to youtube a buy it?


              Reply
              1. Anonymous

                “Who the hell searches for music previews on youtube unless you’re already a fan of the artist?”

                I didn’t say YouTube trailers build an audience. You need to give away a few samples to do that.

                And full length YouTube videos are better for that purpose than any other media because they’re so easy to share and because they have video.

                Short trailers, on the other hand, are the perfect way to reach existing fans and make them buy your music.

                “how many people that come across a preview on youtube do you think actually give a shit enough to search out the rest of their music”

                Depends on the preview. If it blows your mind, you have to know more — and you have to share it.


                Reply
                1. hippydog

                  Quote “Short trailers, on the other hand, are the perfect way to reach existing fans and make them buy your music.”

                  based on what evidence?

                  for movies, sure..
                  but music? i have never heard of a band that broke thru because they were releasing mini youtube songs..
                  Acoustic full length versions? sure!, but 30 second previews? nope..
                  correct me if i’m wrong..


                  Reply
    2. FarePlay

      I hope there will still be museums in the future.


      Reply
      1. Anonymous

        I love museums — when it comes to art and history! But I prefer new stuff when it comes to music.

        And Spotify just doesn’t have the new music people want.


        Reply
        1. PiratesWinLOL

          Like for example the current US top 20? What exactly is missing from that?


          Reply
          1. Anonymous

            You said somewhere that you could wait till ‘hell froze over’ to listen to new songs.

            Well, I can’t.

            I just love new stuff and I need to hear it right away when deadmau5, Taylor Swift, Coldplay, Adele, Beyoncé and Black Keys release new music.

            So Spotify is useless to me.


            Reply
            1. PiratesWinLOL

              So your definition of “the new music people want” is a very short list of artists that only has around 90 percent of their records available on Spotify? That is not entirely convincing. A better definition would definately be for example the current world singles top 100. What exactly is missing from that?

              http://top40-charts.com/chart.php?cid=35


              Reply
              1. Anonymous

                “So your definition of “the new music people want” is a very short list of artists that only has around 90 percent of their records available on Spotify”

                I listed a number of extremely popular artists. About 0% of their recent music have been available on Spotify during release week.

                Unfortunately, pop is like news — we want it now, not next week. Sales numbers prove it: The vast majority of records are sold the first week.

                And Spotify can’t deliver anymore.


                Reply
        2. GGG

          You do realize you’re allowed to listen to both, right? And plenty of people enjoy older music, whether it’s 400 years old, 40 years old, or 4 years old. Using that as an attack and argument just shows how worthless your opinion on all things music related is.


          Reply
          1. Anonymous

            “plenty of people enjoy older music, whether it’s 400 years old, 40 years old, or 4 years old”

            Sure, you can still use Spotify for old stuff.


            Reply
          2. Anonymous

            If it is older then 1 week old, it ain’t worth listening to..


            Reply
            1. Anonymous

              Sure it is. :)

              But pop music — the music most of us like — is most appealing to us during release week.

              Don’t trust me on this, just look at the sales numbers.

              That’s why you can’t use Spotify if you love pop.


              Reply
              1. GGG

                Funny how you champion a level of music that you admittedly only give a shit about for a week. You are the problem. People don’t value music because people like you have conditioned a huge chunk of the population to gorge themselves on mostly garbage, and shit it out without a second thought, knowing more garbage is on the way. They don’t value music because the music who love so much has no real value, most of the time.


                Reply
                1. Anonymous

                  A new pop hit is an event. It’s a short, thrilling glimpse of something you haven’t experienced before.

                  And that’s what people love. New thrills. There’s nothing wrong about that.

                  I can see why it’s a threat to Spotify, though.


                  Reply
                  1. GGG

                    “It’s a short, thrilling glimpse of something you haven’t experienced before.”

                    Bahahahahah. Not that I didn’t already know what a shill you are, as I say in some other post somewhere, but the last part of that statement says all anyone has to know about you. For every one pop song that’s something new and unexperienced, there’s about 20 more that are the same old shit. Again, you are the problem. You perpetuate music as a product first and foremost, piece of art second if we’re lucky. The sad part is I’m not sure what’s worse. If you know all this and just put on this pro-arts act to hide the fact you cash in on all this bullshit, or if you truly believe all these Top 40 songs are the pinnacle of what humans can achieve musically.


                    Reply
                    1. Anonymous

                      “For every one pop song that’s something new and unexperienced, there’s about 20 more that are the same old shit”

                      Sure. But I’m talking about pop hits!

                      Pop hits tap into something we all want to be a part of for a moment.

                      And we want it now — not next week, or whenever it’s available on Spotify.


                    2. GGG

                      Plenty of hits are bad songs, too.


  8. FarePlay

    The worst-case scenario for Spotify isn’t losing to Apple. It’s discovering that its prize is insolvency. According to a report published by Generator Research last November, the current business model for streaming music is “inherently unprofitable.” Andrew Sheehy, the main author of the report, concluded: “Our analysis is that no current music subscription service—including marquee brands like Pandora, Spotify, and Rhapsody—can ever be profitable, even if they execute perfectly.”

    http://www.businessweek.com/articles/2014-05-21/why-spotify-and-the-streaming-music-industry-cant-make-money#r=read


    Reply
    1. agraham999

      The importance of this study, regardless of how controversial it is, can’t be understated. They cited two main factors that are problems for streaming with one being royalties and the other being the problems inherent of converting free users to paid users.

      Now I’ll add to that with something even more powerful. Institutional Venture Partners is a large VC firm that has invested in dozens of “freemium services,” and they did a deep study of all the companies they’ve invested in who offer freemium to find out what makes a successful company…and they found two key things that are necessary:

      1) Low marginal costs
      2) Minimal sales and marketing costs

      Does this sound like Spotify? In order for Spotify to succeed it has to do two thing…increase it’s margins and convert free to paid. Now it isn’t likely they will see a significant royalty drop as far as costs. So that leaves them with only converting more free to paid. How do you do that? Well you can do three things:

      1) decrease the value of the freemium offering
      2) decrease the entry cost of paid
      3) create new services people will pay for

      With number one, this tends to actually drive users away to the first alternative service they find that will offer them what Spotify use to offer them. These are the users who will never pay for anything, and they tend to skew as a very high user base. Dropbox, for example has 200,000,000 users…8,000,000 pay. But for Dropbox, they have low marginal costs and low sales/marketing costs.

      With number two, this only hurts Spotify, as any paid account automatically has to pay higher royalty rates. Keep in mind that Spotify has already dropped the price to students in half, and these are the all important demographic for growth they want the most. Now students tend to be students a very long time…let’s say 13-25ys old or at maximum you have to keep them from churning out for 12 years…12 years at the high end before they become full paying customers. Even if we’re just talking college age, you have to keep them as users for 4-6 years and then get them to pay full price. That’s a very very long time in tech. All this time all the other paid users and ad based users have to cover the costs of these users. This could become a huge anchor around their neck. I don’t see this lasting, and could in fact become like AT&Ts nightmare of unlimited data for iPhone they had to try and backstep.

      With the third option, Spotify simply needs to make new services that entice people to not only pay but pay more because of the convenience or whatever. These increases don’t directly translate to royalties…so they could help Spotify but won’t necessarily do a single thing for the music industry.

      Now let’s look at the other elephants in the room. Apple/Google/Amazon/Facebook…all have their own massive data centers. All of them can afford to run music as a loss leader. They all (but one) have their own devices to deliver media. All of them have ways to entice users that cost them very little. Even if Spotify can find a way to compete with all these services/companies, we have now created a music industry where all power is consolidated at the very top. Now this can be good for the services, because they could demand lower royalty payments…and who gets the short end of that stick? Rights holders and users. Not to mention, it is going to be very hard for smaller music startups to get a foot hold against Spotify, because of course we have the complexity of the four majors all owning a bit of Spotify…it simply cannot afford to fail and that’s a very bad place to be for any company.

      Lastly…right now we all can see that there is no “in the black” in Spotify’s immediate future. So they have to survive on all their credit lines until they can do an IPO. But there are a lot of factors that could derail that. What if the market decides we’re in a bubble? What if we start seeing a softening in the IPO market again? A lot of companies are getting ridiculous valuations and some of these IPOs remind me of the last bubble I was in. They can’t simply run at a loss forever.

      I can tell you from my discussions behind the scenes, there are a lot of people who are privately scared that Spotify could fail, especially because they are getting a lot of their online revenue from streaming. So this isn’t just a simple issue of Spotify has to scale up…there is a bigger issue here where we have a giant ship that has to suddenly turn away from the iceberg and it takes a long time to move such a big vessel.


      Reply
      1. jw

        >> With the third option, Spotify simply needs to make new services
        >> that entice people to not only pay but pay more because of the
        >> convenience or whatever. These increases don’t directly
        >> translate to royalties…so they could help Spotify but won’t
        >> necessarily do a single thing for the music industry.

        I would argue that Spotify’s continued existence, especially at scale, does something for the music industry. You’re suggesting that Spotify must increase it’s margins, but then you’re suggesting that they can’t generate revenue not tied to royalties, & that royalties aren’t going to relax, even in spite of scale. I would say that royalties can & will relax, & access- or convenience-related features that command a premium subscription rate are great for everyone… Spotify, the consumer, & the recorded music industry.

        Also, EMI is no longer a major label, there are only 3. I believe that Universal absorbed their shares of Spotify, but I don’t know that for a fact.


        Reply
        1. agraham999

          Let’s look at your statements, and again, I’m very pro streaming…I love it and use it daily.

          “I would argue that Spotify’s continued existence, especially at scale, does something for the music industry.”

          What scale is that? Sure, money going into the industry is good, however Spotify has to be able to eek out a living and must also survive until they find a scalable size that sustains them. That’s a lot of “ifs” in a short time. Again, the demographic that Spotify primarily wants just had its monthly costs cut in half, meaning the other parts of Spotify’s business has to absorb that. How many of their paying customers are students and how many are full $10 a month subscribers?

          “You’re suggesting that Spotify must increase it’s margins, but then you’re suggesting that they can’t generate revenue not tied to royalties,”

          No, what I’m suggesting is that Spotify MUST increase margins by generating revenue outside of royalty based media. Those revenues, likely not being tied to royalties, can be good for Spotify, but they aren’t necessarily good for rights holders. Which is fine, as there is nothing at all wrong with this for Spotify and in fact Spotify should be doing this. From experience I can tell you this is a lot easier to say than to do.

          ” & that royalties aren’t going to relax, even in spite of scale. I would say that royalties can & will relax,”

          What’s your evidence for that? Let’s say rights holders agreed to scale back royalties. Have you ever worked in the music industry with all the different parties? I do it every day. Getting them all to agree to something (globally) is nearly impossible. Especially when you look at royalty splits and who get’s paid what. Royalties being cut primarily hurts songwriters/publishers who currently tend to get a smaller piece of the pie already. You’ll have to literally move mountains to get royalties cut back because you have to solve other massive issues as well. This takes a vast amount of time and as I said…Spotify doesn’t have that much time. They have a finite amount of credit so they have to get to IPO or fix the other issues rapidly.

          “Also, EMI is no longer a major label, there are only 3. I believe that Universal absorbed their shares of Spotify, but I don’t know that for a fact.”

          Merlin is the 4th.

          So let me just borrow a bit from the IVP report/study I mentioned earlier:

          “Freemium ROI:
          In addition to going after a large market, it’s also important that the return you get from converting users to paying customers exceeds the costs of servicing all users. As mentioned above, freemium only works when you have a product with low marginal costs, meaning that it’s relatively cheap to service the next incremental user (which is why software businesses are ideal for freemium). Products with high marginal costs, such as hardware devices or where significant customer service or customer acquisition costs are involved, typically don’t work as freemium businesses.”

          Spotify: High costs due to royalties, huge costs associated with rapid global expansion, massive marketing costs, data storage, bandwidth, R&D, enormous legal costs, etc.

          And then we have to ask ourselves…after they IPO and everyone has been vested and cashes out…will they stick around?


          Reply
          1. jw

            >> What scale is that?

            Any scale, honestly, but the bigger, the better. That’s my point.

            >> How many of their paying customers are students and how many are full $10 a month subscribers?

            This remains to be seen. However, the numbers that the student move is generating could be used as leverage to relax royalties. I don’t know what the ultimate goal is, but I’m sure they’ve crunched the numbers, & that there was an upside. Ultimately, I don’t think that AT&T lost money on their unlimited data plans. Sprint still manages to offer it.

            >> Those revenues, likely not being tied to royalties, can be good for Spotify, but they aren’t necessarily good for rights holders.

            I’m saying what’s good for Spotify is ultimately good for rights holders. I disagree with the idea that for something to be good for the rights holders, it has to pay out directly. You’re making it sound like Spotify’s profitability is coming at the rights holders’ expense, after stating that Spotify’s profitability is a necessity. Because Spotify’s existence is, right now, a necessity. Maybe I’m misreading, but that’s how it comes across to me.

            >> What’s your evidence for that? (re: royalties relaxing)

            David Hyman’s comments on MOG royalty negotiations.

            >> Have you ever worked in the music industry with all the different parties? I do it every day. Getting them all to agree to something (globally) is nearly impossible.

            Sure, but it becomes a lot easier as the bottom falls out of digital downloads. Also, I’m not sure that the split is as big an issue as you’re making it seem, I get the impression that the Big 3 are holding all the cards.

            You mention all of these “ifs,” but IMO a Google or Amazon entry to the space is a “when,” if not an “if,” & it remains to be seen if Beats will be seriously competitive, even with Apple’s backing. We all know that Rdio, Deezer, etc, are a long way from being competitive in the U.S., & likely will never be. This leaves Spotify in an enviable position, as far as negotiating royalties goes, because, as it stands, Spotify can’t be allowed to fail. And something really big would have to happen to change that. I think that is the overriding fact.


            Reply
  9. mike

    One day the investors want their money back and then it’s probably over


    Reply
    1. agraham999

      Exactly…but also imagine what this looks like after an IPO when you have more investors breathing down your neck for profitability. Spotify is not going to get cut the same slack as Apple, Google, or Amazon. Pandora’s stock is almost halved in just the past 2 months.

      In order for Spotify to have a successful IPO they will have to continue a massive expansion globally which cannot at any time flatten out and requires that no other major platform gains market share away from them. That likely means a tremendous amount of capital expenditures to fuel growth and once they file for an IPO we’re going to have a much closer look at their numbers. We have no idea of churn rate or what actual costs behind the scenes are.


      Reply
  10. TuneHunter

    Beats purchase makes the good for $30 BILLION DOLLAR IPO! WOW! Better than Twitter.

    As is they still have less than ONE BILLION in global revenues.

    SPOTIFY with PANDORA and YouTube makes half of the music traffic!

    In 2013 all three contributed less than $3 BILLION DOLLARS to music industry and in reality have ERASED double that amount from iTunes, Amazon MP3 and conventional Radio.

    The same traffic generated by those avant-garde services with little common sense should bring $30 billion dollars.


    Reply
  11. FarePlay

    Far more intriguing is the Beats Music deal. Even Jimmy Iovine, who was an early music industry adopter of iTunes, has stated that Jobs had reservations about streaming, but if Jobs were alive today, running things at Apple, would they purchase Beats Music? Maybe.

    For the first time since Apple introduced the iTunes store, digital download sales of music were down in 2013, a trend many predict will continue as interactive streaming services gain traction in the marketplace.

    As investors continue to pour money into competing online music services, Apple needs to hedge their bet by purchasing Beats Music.

    Some scoff at Beats Music with just over 100,000 subscribers, but Apple and AT&T bring serious marketing power to the table, hundreds of millions of established customers and their credit/debit card information and they have the uber connected Jimmy Iovine to forge exclusive artist deals.

    Now the question is, how does Apple protect its’ highly profitable itunes business while building a franchise in music streaming? It would be foolish to simply let their profitable iTunes business fade away, especially in exchange for a business that has shown no earnings upside.

    The question now becomes, how does Apple protect its’ profitable itunes business while building a franchise in music streaming? How do they migrate their music streaming subscribers over to itunes to purchase downloads? What is the added value proposition for purchasing music?


    Reply
    1. Anonymous

      I’m not big on streaming but I like to see AT&T, Apple and Iovine in the same sentence.

      Everybody in the industry likes Iovine. Most people respect Apple. And nobody works harder on new anti-piracy technology than AT&T.

      I would like it even more if we could add a fourth element.

      Something like Netflix. Or another video/movie related service that provides and/or creates original content. Perhaps one that might be interested in music production as well…


      Reply
      1. FarePlay

        Well AT&T is in the process of acquiring Direct TV. Can content creation be far behind?


        Reply
        1. jw

          AT&T is going to expand U-Verse through buying subscribers & through technology, not content. And Netflix will never get involved in music. There is no business case for that whatsoever.

          Those are terrible ideas.


          Reply
          1. Anonymous

            “AT&T is going to expand U-Verse through buying subscribers & through technology, not content”

            We’ll see about that, won’t we? :)

            And a package that provides internet, communication, movies plus direct access to the world’s largest music catalogue seems like a good idea to me.

            Especially when the internet part, AT&T, is well known for investing a lot of time and money in new anti-piracy technology.


            Reply

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