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Spotify Was a Terrible Business. Then the Record Labels Stepped In.

Thu Mar 01, 2018 12:26 pm

Interesting article at: https://www.bloomberg.com/gadfly/articl ... ord-labels

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.

Key section:

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.
Wake up to find out that you are the eyes of the world
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Wake now, discover that you are the song that the morning brings
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anshabhi
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Joined: Thu Oct 20, 2016 10:40 am

Re: Spotify Was a Terrible Business. Then the Record Labels Stepped In.

Sat Mar 03, 2018 3:40 am

Typical way of doing business. Now labels need Spotify more than Spotify needs them, and contracts would be re-negotitated for the benefit of Spotify. (Because of Spotify's large user base).

Think of it as how any normal company works. You get a lot of new customer discounts in the beginning, and later on settle for something little more expensive than that.

In pure business terms, this concept is known as "Customer Lifetime Value", where you charge the customer based on what future income from them is going to be like ...
 
treetreeseven
Posts: 267
Joined: Wed Aug 10, 2016 5:18 am

Re: Spotify Was a Terrible Business. Then the Record Labels Stepped In.

Mon Mar 05, 2018 6:42 am

Spotify's god-awful interface is still in large part due to record industry deals, not mere software design incompetence. They didn't want it to be *too* useful.

People keep suggesting I get a Spotify account. Lol. I can and do carry 88GB of music on my phone, plenty of it unavailable on Spotify, and believe me, I can organize it in better and more useful ways by far. And I don't need a data connection for it either. Every time I see somebody trying to do anything off the garden path in that app, they're frustrated. No thanks.
 
jubguy3
Posts: 504
Joined: Sat Jul 29, 2017 6:18 am

Re: Spotify Was a Terrible Business. Then the Record Labels Stepped In.

Fri Mar 09, 2018 6:59 am

treetreeseven wrote:
Spotify's god-awful interface is still in large part due to record industry deals, not mere software design incompetence. They didn't want it to be *too* useful.

People keep suggesting I get a Spotify account. Lol. I can and do carry 88GB of music on my phone, plenty of it unavailable on Spotify, and believe me, I can organize it in better and more useful ways by far. And I don't need a data connection for it either. Every time I see somebody trying to do anything off the garden path in that app, they're frustrated. No thanks.


Spotify isn't really a good music library, but it's amazing for discovering new music. I've found small artists I never would have discovered otherwise through stuff like the discover weekly playlist (which is by far my most favorite feature of Spotify) - the fact that it is a library of hundreds of millions of songs and it can intelligently discover new stuff from what you like already means that, at the very least, it's a good tool for discovering new music.

I get Spotify Premium for free through my employer (state university) which makes it a lot more useful. I don't know if you use Spotify Premium, but it does remove ads, allow for total song selection, and let you store music offline with no internet connection needed. It definitely blends the best of a traditional music system with the availability and machine learning of the large song library. Unless you've purchased almost all of the music you'll ever listen to, it's reasonably cheap (I believe it is $10/mo, an edu email will knock it down to 5 and lots of companies and organizations will offer it for free)

The gripes about the UI are reasonable - it needs a lot of work, but as far as Spotify not having the music on your phone: unless it's something obscure or grassroots they likely have it and I believe you can submit or import music into the library just the same way.
 
PixelPilot
Posts: 74
Joined: Tue Jan 16, 2018 1:19 am

Re: Spotify Was a Terrible Business. Then the Record Labels Stepped In.

Fri Mar 09, 2018 3:13 pm

I love spotify over any other music service.
 
CCGPV
Posts: 1292
Joined: Tue Jan 16, 2018 5:18 pm

Re: Spotify Was a Terrible Business. Then the Record Labels Stepped In.

Fri Mar 09, 2018 4:20 pm

Youtube is so much better for music. Free, no ads, insanely massive library. Way better for finding new or lesser known music.

You can pay for RED and listen offline if you wish.

The only thing youtube lacks is the ultra hi-fi tracks which only matter on nice in-home systems.
Stay curious

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