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There isn't a hotter music play in America right now. But crossing the Atlantic was incredibly costly for Spotify, and who knows if this company can survive its own cash-burn. The reason is simple: stateside majors not only extracted ransoms for the pleasure of licensing America, but they also
negotiated comfy ownership stakes according to our sources.
And for Spotify, that was on top of pre-2011 licensing costs of roughly $131 million, according to publicly-filed paperwork. And, cumulative losses topping $68 million since late 2007.
So, still want to play in America? Well, sources to Digital Music News have told us there wasn't really an option for Spotify: investors demanded a global play, they wanted a multi-national, dominant music service of iTunes-level stature. That's what you get for $100 million. And the US - not Europe - is where huge scale, disposable income (at least historically), and gigantic partnerships come into play.
Which is exactly why Deezer - sometimes called 'the Spotify of France' - is staying away. "The minute that I tell the major music labels that I am not interested in signing for rights to the US, the negotiations over terms become much much easier," Deezer CEO Alex Dauchez recently told Reuters.
The Deezer strategy now involves an aggressive expansion towards 100 countries - except, of course, the US (and Japan). Too expensive, too risky, too great a chance of getting buried and burned amidst the competition. And this is a movie we've seen over and over again.
Instead, the Deezer strategy is to play in far less competitive, overseas markets. But according to the American companies we've talked to, that's just dancing with another devil. "One European country is like one American state," one entrepreneur at a well-established startup relayed. "But you need to license that state, go through the headache, spend endless time there, understand each culture, setup offices there. Would you do that to win Kentucky?"
Unfortunately, there's a lot of truth to the stereotype that Americans are geographically illiterate. But even those that know their geo-political boundaries are less sensitive to something else: it's actually quite difficult to scale a region like Europe. Just ask Apple. "What a lot of Americans don't realize is that each country is totally different than the next. It's not like you can just launch across a bunch of countries like you can [in the US]."
Which sounds nothing like the borderless digital world we'd been expecting. And it makes America one bitch of a playground.
/paul. Written while listening to BT.
Comments Closed
Disposable country Thursday, October 20, 2011
Hmm not sure about the disposable income part f your article :) Seems like the USA has disposed all of its income on rubbish consumer goods quite some time ago. Europeans however (with a couple of exeptions) have no housing crisis or credit crunch to speak of. Americans ....Sigh! The only country that calls one of a US only sport "World series"
HansH Thursday, October 20, 2011
I second that! Wake up America! Face the facts. The days of your world leadership are over.
Econ Thursday, October 20, 2011
WTF? Did you just crawl out from under a rock? Spain, Britain, and Ireland all had housing bubbles. Greece, Ireland, Portugal, Italy, Spain are all in serious trouble and may cause major problems in France and Germany. The banking sector, and credit, are in worse shape in Europe than in the US.
Ignacio Thursday, October 20, 2011
Well I think the reality speaks for itself. Europeans are in far worse shape than the Americans.
Plus attempting to make a go in the EU will find it a difficult experience because of the licensing problems, culture problems, credit problems, etc. It's a worse place than the U.S.A. to launch.
Toolman11 Wednesday, December 21, 2011
We cannot compare anyone with them because they have their own importance "Truthfully pleasant and well made article. The ideas are meaningful and undoubtedly emphasized. Thanks for giving out your thoughts on this one." Regards, pls 90
David Thursday, October 20, 2011
Same holds true for Canada. The "ransom" rates that the labels are charging streaming services make it prohibitive to entertain the idea of launching in Canada or the US.
Something has to give. The labels either work with these services to invest in the (inevitable) digital eco-culture or sabatoge the whole endeavor only to protect the cannibalization of a declining physical goods market.
It's "Napster" all over again.
@future_of_music Thursday, October 20, 2011
Future of Music
The costs of doing streaming business in America = high.
musicexpat Thursday, October 20, 2011
Typically if you do a deal with the majors that includes the US, the deal will be done out of the US, hence huge advances to the labels.
If you do a deal in Canada with Canadian labels, then advances will be huge as you are on their home turf and have to deal with local rights etc.
If you do a deal for Canada out of the US, you can bypass Canadian high local rates (like Rdio did). USA labels typically see Canada as a tiny market not worth bothering about (or they'll throw it in for free).
Do a deal for ROW omitting USA, Japan but do deal out of US, chances are you'll come away with still some money in your pocket.
@estesc Thursday, October 20, 2011
Chris Estes
Good insight to the freemium / music subscription challenges in the U.S.
@jjtokyo Thursday, October 20, 2011
jjtokyo
Deezer: "the minute I tell majors I don't want to sign rights to the US, negotiation over terms becomes much easier"
@AnthonyHemond Thursday, October 20, 2011
Anthony Hémond
So not a Canadian problem.
WILL Thursday, October 20, 2011
Being an Englishman living in France you also have to take into account the different languages for each European country. That means a load of translation and employing fluent speakers to roll the product out in each of these countries. And don't forget the red tape that has to be cut through. Believe me in France it's a total nightmare even for the simplist shit!
REMatwork Thursday, October 20, 2011
"comfy ownership stakes"?
WTH?
Sorry to be a bore, but .. I am back on what the artist gets, again."
How does the artist partake in the capital gains or dividends of this ownership, please? How is this not a conflict of interest??
Musicfan Thursday, October 20, 2011
"what does the artist get"
Same old sense of entitlement. A deal is a deal. They pay for access to the content. You (the artist) gets paid if a music consumer listens to your music. No different to CD sales. If my label i am signed to sells cd's to walmart i don't make any money until a consumer buys the cd, not when the shop buys wholesale.
And to top that off, your music still has to be worth listening too. There is too much garbage music out there that artists think they should be paid for.
@CTheBrush Saturday, October 22, 2011
Claudia Labrosse
A word about my favourite music streaming website: Deezer!
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