Spotify, Apple Music, Amazon, Pandora Could Face Billions In ‘Fast Lane’ Surcharges

Net Neutrality Dead: Say Hello to the Paid Fast Lane!

photo: S Lowe (CC 2.0)

What’s the real cost of ditching net neutrality?  Potentially billions in ‘fast lane’ tolls and ‘paid prioritization’ charges over the next decade for major music platforms, according to sources.

This isn’t exactly what the geeky academics who started the internet had in mind.  But it’s exactly what mega-ISPs like Comcast were hoping would happen.

Now, Comcast and other access giants are poised to make billions by charging companies for prioritized access to their subscribers.  Previously, net neutrality prohibited the prioritization of paying content providers, though all of those rules are changing in Trumpland.

Comcast Deletes Its Long-Standing Net Neutrality Pledge from Its Website

According to a pair of sources speaking to Digital Music News, the FCC’s expected rollback of net neutrality guidelines will likely cost music platforms billions over the next decade.

Both stressed that the costs and structure of ‘fast lanes’ is difficult to predict at this stage, especially before a formal FCC vote on December 14th.  Most see the rollbacks rolling through, though FCC chairman Nishad Pai is already recoiling from death threats and people camping outside of his home (with his kids’ names on billboards).

Frankly, both sources said the FCC regards all of that as ‘noise’ that will be overruled as such.  Not exactly a government by the people, for the people — but hey.

But sources are intricately linked to net neutrality discussions, and certain that major ISPs are considering a range of ‘programs’ to effectively maximize access to their restricted lanes.  So it looks like a ‘green light’ (so to speak).

All of which changes the competitive dynamic in the streaming music world.

Look no further than Spotify, which is currently struggling to concoct a winning story for Wall Street.  Or, anything close to sustained profitability.  Currently, the streaming platform is wildly over-leveraged, with an IPO (or direct listing) suspected as the exit goal itself (instead of actual long-term profitability).

Indeed, Wall Street has been burned by these tech-bubbly startups before — but not if they get the timing right.  Sounds like a high-stakes plan, albeit a risky one.  Toss an extra billion into the long-term cost structure, and Wall Street’s enthusiasm could be appropriately curbed.

According to the latest rumors, Spotify is plotting a direct listing during the second quarter of 2018.

Separately, Pandora remains a struggling concern, and a company potentially unable to pony up hundreds of millions to reach their end users.  That said, one source pointed to a revenue percentage charge for prioritization, as well as different levels of prioritization access.   All part of an entirely new internet that could dramatically change the fate of the music industry’s online heavyweights.

Elsewhere, struggling streaming platforms like Deezer may survive.

That’s because of healthy backing from Len Blavatnik’s Access Industries, now a controlling investor.  Over the past five years, the billionaire has sunk more than $200 million in Deezer, with lackluster results.  But maybe a thinning of the herd will play to Deezer’s advantage.

And who gets thinned?

Making the brutal shortlist are the aforementioned Pandora and under-the-radar streaming services like Rhapsody.  Tidal is now partially owned by Sprint, though it’s unclear whether the mobile giant wants to pay heavy dues to entrenched ISPs — just to prop a struggling streaming play.

Separately, Comcast and other ISPs could be restrained by anti-competitive oversight.  Earlier, Comcast survived scrutiny of its acquisition of NBCUniversal.  But that tie-up came with stipulations, and Comcast is uninterested in poking the Department of Justice bear.

Actually, it’s unclear whether Trump’s DOJ will care, though we’re not close to that part of the picture.

But wait: massive toll charges could give Apple Music and Amazon Music Unlimited the decisive advantage.  Here’s why.

Just recently, Apple Music chief Jimmy Iovine blasted Spotify’s flimsy business model.  Without a big backer, Iovine proclaimed, Spotify can never turn a profit and will always be underwater.

“The streaming services have a bad situation, there’s no margins, they’re not making any money,” Iovine blared to Billboard. “Amazon sells Prime; Apple sells telephones and iPads; Spotify, they’re going to have to figure out a way to get that audience to buy something else.”

Maybe a hefty ‘fast lane’ tax is exactly what it takes to give Apple and Amazon the advantage.  If for no other reason than it puts players like Spotify deeper underwater.

More as this develops.

 


 

5 Responses

  1. Esquire

    Key point: TMobile doesn’t charge for most music data streamed, which is not neutral, so it is clear this cuts both ways: Losing net neutrality can also save fans billions in data charges and grow music services dramatically.

    • JB

      music streaming will always be a battle, as well as other things. You don’t sacrifice the freedom of net neutrality for one or two things that can be remedied. The restriction cable and 4g 5g systems can impose are ridiculous in the grand scheme of things caveat emptor

  2. Joe Vangieri - DigiTrax

    Net Neutrality is essential to everything we need in our society and democracy — from educational and economic opportunities to political organizing and dissent. Millions of people fought for over a decade to secure lasting Net Neutrality protections. Now Trump is introducing “Neutered Net”

    • Esquire

      The intention sounds nice, but who is truly neutral about their networking? Don’t we want TMobile to waive charges for music users? Would a rational person treat medical monitoring data the same as watching a video or playing a game? Why not prioritize voice traffic — it keeps phone calls functional! Do you feel neutral about viruses and malware, or do you prefer to discourage them?

      Let’s face it, running a network requires lots of decision-making related to prioritization and functionality. Are you neutral about who passes your receptionist? Of course not! Neutral about which phone calls get through to you — or do you prefer to stop junk calls?

      Net neutrality is a nice thought, but it ignores reality. People will favor networks with good performance. The most important criteria is user satisfaction, not an artificial measure as ill-defined as neutrality.

  3. TheDude

    We’ve only had Net-Neutrality for 2 years, people. When this law is rolled back the internet will look just like it did in 2015 – which is pretty much how it looks now.

    In the free market, when one ISP decides to charge a fast lane for Netflix or Spotify, consumers will change ISPs. Wireless providers already provide fast lane pricing as an INCENTIVE for people to pay more. The regular tier is just fine.

    In the AOL days you were charged per minute or per hour of usage. Gov’t didn’t end that. consumers did by signing up for an unlimited account the second another company offered it.

    This is a lot of fear-mongering.

    Whenever you advocate for government intervention, replace the word government with the name of your least favorite politician.

    So when you say – I want the FCC to keep the internet affordable, you’re really saying, “I want Trump to set the price for internet access”.

    The government created the problem in the first place by granting access monopolies. So to fix their mistake (instead of killing the monopolies) you want the very entity that creates problems to apply a band-aid to their problem.