The article says Spotify and others were key to turning around the record industry's slump and now the record industry is making money again. Yet it also says the record industry gave Spotify a big, desperately needed break by renegotiating their contracts with Spotify.
It was clear the revamped contracts gave Spotify Technology S.A. a break, but it wasn't entirely clear how much until Spotify's disclosures on Wednesday. The filing shows that in 2015 the company paid about 88 cents of every dollar in revenue in fees to the record labels and a grab bag of other expenses. In 2017, those costs shrunk to 79 cents.
That still doesn't leave Spotify much wiggle room to post a profit. For comparison, Netflix's cost of revenue -- which includes the spread-out expenses for its streaming TV shows and movies, similar to Spotify's music royalty fees -- was 66 cents on each dollar of 2017 revenue. The bite from the music royalty fees was one big reason Spotify's operating loss was 378 million euros ($461 million) last year.
This suggests that Spotify serves at the pleasure of the record industry, which was always true.
It seems Spotify signed some terrible initial contracts to get started, and now has shown after sweating things out that the business model benefits them and the industry, but only is viable after the record industry made some big changes (concession of 9%, keeping 79% instead of 88%) to those initial contracts.
Now, the 'not-IPO' lets others buy in to Spotify. Bet the record industry is a buyer and in the long run Spotify just becomes a subsidiary of Records, Inc.