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Apple's Deep Pockets Affecting Spotify Contract Renewals
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If Spotify can't pay artists fairly and make a profit, their business is unsustainable. Frankly I don't really care if they're not able to stay in business.
On the video side companies like Netflix initially were able to pay fairly low amounts to license the content but even when those numbers went up on renewal they were able to make money on it. Spotify needs to figure out how to do the same to stay in business.
On the video side companies like Netflix initially were able to pay fairly low amounts to license the content but even when those numbers went up on renewal they were able to make money on it. Spotify needs to figure out how to do the same to stay in business.
If Apple is colluding with the labels to inflate pricing and drive competition into bankruptcy then they should be sued.
Unions do it.
Vendors do it.
Labor is price fixed.
My Point is across the board. If you want to play a song, we get X% no matter if its apple music, pandora, youtube...any of them. Just one revenue rate. This is standard procedure with the entertainment industry, theres ASCAP...Editors Guild's, its all set.
Remind me, how well the Record companies were doing before iTunes and other entities started electronic sales?
Apple is a far bigger part of the music industry than you give them credit, and have been far longer than many of these entities have been in existence.
REALLY ... Apple's been around longer than record labels, publishing houses, and movie production companies ... let a search engine be your friend today ... maybe Apple has been around since before you were born but don't get carried away with their place in history.
The topic is online music and streaming services, but nice try with spinning it into something else.
::Edit::
To clarify by entities, I meant streaming services (the point of this topic), not the record companies themselves.
I can see where the confusion in reading my response came from.
No, they would have paid for someone to read and respond for them, then file a lawsuit against the other party.
In the end, I stand behind my original statement. The back end of the music industry is full of greed, and has been for quite some time. While I have no doubts that Apple shows signs of this as well, I do personally doubt that offering record companies 58% of revenue was their first choice, but likely was the trump card they had to play down, in order to get into the streaming market.
Do I want to see Sotify and competing services go away? Absolutely not.
The people who state this repeatedly and stridently are the Spotify astroturfers, who seem to be all over this thread.
Don´t know if these equity figurs for Spotify still hold up but it looked like this a few years ago.
Sony BMG - 6%
Universal Music - 5%
Warner Music - 4%
EMI - 2%
Merlin - 1%
If/When Spotify becomes profitable the record companies stands to gain a few bucks,
so killing Spotify and go all in on Apple Music seems kinda stupid..
Sony BMG - 6%
Universal Music - 5%
Warner Music - 4%
EMI - 2%
Merlin - 1%
If/When Spotify becomes profitable the record companies stands to gain a few bucks,
so killing Spotify and go all in on Apple Music seems kinda stupid..
The problem here is that with the free tier, Spotify is paying out more to the record companies than they are receiving in ad-revenue.
It's not exactly rocket science. If you want to earn more (or at least lose less), you either cut your losses or increase your margins or both.
So removing the free tier would help Spotify reduce its losses in the immediate to short run, because if those people are never going to sign up for the paid tier anyways, then they will forever be costing Spotify more money than they bring in.
Or the CEO of Spotify could take a pay cut from his existing salary of $250M per year...
when executives are getting overpaid I can see why they can't "AFFORD" to pay higher royalties
You woould care if Apple were the only provider who is able to lose money on the streaming side because of their income on the hardware and services side and have autonomous control of not only what they charge customers, but what they pay artists (which seems to be a concern of yours).
These protections are a there for a reason. You should respect them.
The implication is that Spotify loses money from each free-tier user, but makes money on the paid-subscriber.
In this case, Spotify would make money if they dumped the free-tier altogether, regardless of how many free-users become paid users.
EDIT - I basically just repeated what Abagizal said. Hadn't gotten to the end of the page before I replied.
well if Spotify goes away then i go back to downloading my music. Is it childish maybe, but i love Spotify i have been paying for it for over 10 years now and even after trying tidal and apple music MOG, Rapsody. nothing does it like Spotify. So Apple can run out competition but it doesn't make Apple Music any better.
its really not that cut and dry in the business world. there are a lot of variables going into cutting of services, even if those services are not profitable
at the end of the day, maintaining the losses on the free tier, might be better financially for them than cutting the free tier entirely.
The company will have do some really big budget planning. but the math would look similar to this using rounded fake numbers for clarity:
With Free Tier
Free Tier Revenues from Advertising: $50
Revenues from Normal tier: $100
Tot Rev: $150
Total costs of music: $200
Losses; $50
Without Free Tier: Assuming 10% of "free users" migrate to paid instead of going elsewhere
Revenues: $110
Total cost of music: $200
Losses: $90
So, despite losses, its not clear that killing the free tier would save / fix their financials, when in reality it could make it worse, Especially short term where there are already contracts in place by Spotify to the industry that couldn't just be walked away from.
its not such a cut and dry decision to just kill the free service. What spotify really needs to do is completely re-work their entire business model. Thats no easy feat to do when you've got a long established business.
I doubt it's collusion. Apple is just offering more money and companies are accepting more money. It isn't that hard to understand.
I think this comes from fear about Apple's behaviour with the e-book pricing scandal, and fear that they may be trying to do similar with music.
Apple is free to negotiate, 1:1 with their suppliers. But with the ebook issue, they were found to have worked in the background, communicating with, and facilitating communication with the book publishers to all band together to set prices. In most western economies, this is considered collusion and against the law.
So far though, I've seen no evidence talked about here that is similar. Spotify just sounds bitter because they can't afford to negotiate at the same fees that Apple was willing to pay. Thats free market. its unfortunate for Spotify, but they can either try an negotiate their own deals, or change their business models to accept that the rate for music rental has gone up.
If I were the music industry, Why wouldn't I want the higher rates. Products are only worth what people are willing to pay for them. If Apple, Google Music, Etc, are willing to pay X for music rights, than X is what those music rights are worth.
And the only reason Spotify can't compete is that they want the free tier. Take that out, you have a profitable company.
Again, you missed the point entirely
Spotify has contracts in place for revenue for that free tier. That revenue would go to 0. but in the short term, they have contracts for that music, while those contracts in place, they will have to pay no matter what. The costs associated with it will still be present, but now without the revenue.
you cannot just say "drop the free tier" without fully looking at their budgeting and knowing exactly how much revenues/costs are associated with the product.
Sure, sounds simple to ditch the free tier, but there's so much more to it. If Spotify went to drop the free tier, it would likely require a complete re-shuffling of their entire business model, and a complete renegotiation of their contracts.
The only way just dropping the free tier is profitable is if enough users switch to the paid service to make up for all the costs. And I doubt (likely Spotify also doubts) that enough users would do so to make up for the costs, and therefore, losses would be even higher. it is up to the management to be profitable, but it's also up to them to minimise potential losses. And right now it seems like keeping the free tier up and running is "cheaper" from the loss column tha just dropping it