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Spotify re-invented the radio
(lemmy.world)
Can't even seek through songs.
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this post was submitted on 17 Oct 2023
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https://medium.com/brain-labs/why-spotify-struggles-to-make-money-from-music-streaming-ba940fc56ebd
For anyone wanting to rage at Spotify, I'd remind you that Spotify has never actually turned a profit. They lose money on every single paid user, and even more on free users. Tl;dr of the article (sorry for the account-wall) is that Spotify is contractually obligated to give around 70% of every dollar it makes to the labels, who then eat most of it and give a few crumbs to the artists. If you want to support artists, buy their merch, their physical albums, and go to their shows. If they're independent, they may actually see some non-trivial revenue from streaming as well.
Spotify may also be contractually restricted in what level of access they can offer for free - licensing can be very messy - and they also do need to create enough incentive to actually make the paid tier worth it. Given that a month of access to essentially all music ever costs about as much as a single CD did back in the day, it feels like pretty incredible value to me, personally. Yes, you can of course always pirate if you want to deal with the hassle of that, but you should at least keep it in the back of your mind that, if everyone did that, we wouldn't have any music to enjoy at all. If the cost of streaming or buying music is genuinely a burden, I wouldn't blame you that much for pirating, but if you can afford it, I do think the value really is there, if only to avoid the sheer hassle of pirating and managing a local library. And if you really think that streaming is just uniquely corrupt and terrible, CDs haven't gone anywhere.
But if you can easily afford to pay for music and you still refuse to, at least have the honesty to just admit that you want to get things for free and you don't care about anyone involved in creating it getting paid for it, without dressing it up as some kind of morally righteous anti-capitalist crusade. It's normal to be annoyed about having to pay for things; we all are, and we all want to get things for free. Just admit that instead of pretending your true motivation is anything deeper.
Holy shit, an actually reasonable take on Lemmy regarding subscription services. I genuinely couldn't believe what I was reading and was waiting for the "LOL, JK! Pirate everything, they don't deserve my money and fuck every ad and paid service ine the universe."
Thank you!
ngl, I was expecting to enjoy roasting in downvote hell, so this has been a pleasant surprise haha.
I think a lot this stuff winds up people taking the bad feeling of paying for a thing, which is course completely normal, and twisting it into them somehow being personally wronged rather than simply accepting that yeah, spending money feels bad.
That said, if there is an obvious bad guy in this story, it's pretty clearly the labels, and given how unimportant radio and traditional music marketing is becoming, I would love to see more and more artists operate independently or with small labels and see the oligopoly of the Big 3 fall apart. They may have been somewhat necessary 80 years ago, but nowadays, they simply don't provide anywhere near as much value as they suck up.
Some subscriptions make sense for the consumer, or at least justifiable.
IMO a music service like Spotify is absolutely one of them.
Turning heated seats in a subscription? Burn in hell.
For sure. Subscriptions have to have some sort of value add, and in a world where I was king they'd be illegal otherwise. Spotify: songs you don't own are being delivered to you. Value add. Dropbox: storage you don't own is being provided to you. Value add. BMW's heated seat subscription: you already own the heaters, the controls, the vehicle, and are paying for the battery that energizes those heaters and the gasoline that charges the battery. No value add. That's just rent-seeking.
And speaking of rent...
This is bunk. If people pirated the record labels out of business we would have less music sure, but there will always be people who make music for the love of the craft, rather than just to line an executive's pocket.
I'm all for directly supporting artists (and I buy albums and merch directly from the band wherever possible), but let's not pretend like the people pulling the strings aren't also responsible for the shitty situation they're in.
Fuck the recording industry and how they treat artists. And I say that as a premium streaming service customer.
The amount of it would still be dramatically reduced. Those people who are making music solely for the love of it already exist today and people are perfectly welcome to listen to them; nothing is stopping them at all.
I think it's probably safe to say that the vast majority of music that is listened to today would not exist if the artists couldn't financially support themselves from it. Do you really disagree with that?
Of course not, and I clearly called out that there would be less music if there wasn't an monetary incentive to do so. But at the same time, record industry titans falling would leave a massive vacuum that would be filled by more independent artists and labels. In the end, there would be less music overall, but there would still be some way for artists to get their cut.
Industry titans aren't music, they're merely the middlemen who craft what they think the public wants to hear and leech money from artists. Them falling would be a boon to the smaller and more niche acts who don't get the chance to explode because they don't have the weight of a major label to push them into the spotlight.
Making money through the art, not making art for the money
If you still have to work a full time job to live, that's a lot less time available to create art. You sound like you'd expect artistic friends to give you a discount on their work "to get their name out there"
It's a quote from a rap song.
Thank you for calling this out. Also, art is not about volume. What does it matter if I can listen to 10,000 tracks that sound like bunk vs 10 tracks that touch the fabric of your being.
Agreed, I have Spotify premium for the convenience, but I have no illusions about where that money goes, which is why I go to concerts and buy vinyl records when possible.
we have a family subscription (12€/mo.?) in our household, and i would probably not go back to pirating music anytime soon. they offer genuinely great features and from your post, they don't seem to be the bad guy here. anyway, if it's not shutting down in the next couple of months, i'll keep using it. but they do neet to get some FLACs onto there soon.
if there existed something like spotify for video streaming, i probably wouldn't even pirate movies right now.
I personally would never pay for music it it weren't for Spotify.
Yeah, Spotify has supposedly been working on a lossless option, but it's been in the works for years now. Don't have a clue what the hold-up is, especially given that other services have it already. Tidal and Apple Music have it already if it's something particularly important to you.
Supposedly they have a hifi service on the way that will offer lossless streaming, potentially pretty expensive though - https://www.techhive.com/article/790882/spotify-hifi-release-date-when-is-spotifys-lossless-tier-coming.html
These aren't the only options. I've gotten into Bandcamp and it's great because I can listen to an album multiple times before deciding if I want to buy it. Then when I do, I get a DRM-free FLAC copy to keep forever, and a much larger portion of money goes to the artist.
Sure it doesn't have the extreme catalog of Spotify or things like social playlists. It's very album-based (which I like personally) and takes a little more effort to choose what you listen to. But I've had no difficulty discovering new artists and great tunes.
Of course the company has problems too. The new buyer just laid off half the staff and says they won't recognize the union, so we'll see how it fares. But even if it goes under, I keep the music I bought.
You'll hate to hear what is currently happening with Bandcamp.
"This one time at band camp..."
I seriously do not believe that companies running major online services continuously for over a decade have not made a profit. This must be Hollywood accounting.
It's not at all a coincidence that this happened at the same time interest rates were rock bottom. Lyft has never had a profitable quarter, nor has Spotify. I think Uber has had a few, but they've also heavily struggled. Netflix does well, but no other video streaming service has been profitable. Disney+ has already started to dial back on production as a way to cut costs. Reddit has been around for a long time and isn't profitable.
Capitalism isn't actually as easy as a lot of people think it is. To make sense of this, you have to realize that in extremely low interest environment like we had, the primary business objective is not profit, but rather, growth. Especially in the tech world, you're trying to sell a story to investors that you're creating an entirely new market that you're poised to absolutely dominate, and that if they simply give you money now, rather than getting some profit in the short-term, they're going to wind up owning a lot of extremely valuable shares in the next Microsoft, or Netflix, or whatever. Debt is very cheap, and so tapping into that stream of investor money doesn't cost you much at all, and you can build some cool new thing that people like a lot. The problem comes when the chickens finally come home to roost, and the investors expect to get something for their money. That is currently happening, now that debt is much more expensive and investors are much less willing to take big risks, which means that those services that were living off of investment money now need to either establish that they can actually make the numbers work or perish.
Spotify, for instance, is sitting on nearly two billion dollars of debt. Now, they're not in the worst position, because for better or for worse, the labels need some streaming services because that's simply how people consume music today, so the labels will have to keep it alive on way or another. But it doesn't change the fact that the numbers need to add up eventually. Reviewing Spotify's sheets, they're not in a terrible position though. They lost $453 million in 2022, but they also spent $1.48 billion on research and development. They've been doing a lot of development on podcasts and ML-based recommendations, which is probably where a lot of that went, and the kinds of engineers that work at Spotify don't come very cheap at all.
Now, you'd probably say that they could simply not do that and content themselves with being a perfectly adequate music streaming service, but if they announce that they're doing that, it opens a huge opportunity for a competitor to go guns a' blazing to try to develop a bunch of flashy new features to steal customers. Additionally, the labels, and indeed musicians as well, don't want music to be cheap. They want it to be valuable and so desirable that people are willing to pay a decent amount for it. Musicians aren't exactly selfless saints either; no one really is. Plenty of artists, of all genres, could easily make their music completely free to access, play free concerts, and personally cover all associated costs with doing that. But they don't, because at the end of the day, everyone wants a slice of the pie.
So they would rather take in more debt at an unfavorable time than to maintain a profitable leading business or even to limit research investment to a sustainable level? That really makes it sound like being unprofitable is a choice rather than an inevitable reckoning with a fundamental unsustainability of the business.
Yet ultimately they make up for those excesses by squeezing the customers more.
If investors, knowing all that you do for this long, continue to approve this approach, then it seems like it's itself a mechanism to try to extract more out of a market that could have been stable. In which case referring to it as an inevitability to be blamed on customers who aren't really paying its worth doesn't seem quite accurate. After all, if they were, the investors would be seeking to expand in some manner, right? Which means these businesses aren't allowed to simply be profitable, and customers will always be on the hook for that.
But still they can't be quite so unprofitable to be unsustainable or they would just fall apart. If hollow hype was enough to keep investors in, we wouldn't see tech fads come and go so quickly. Seems to me that most tech companies don't get to survive their "unprofitability" for so long.
It's still not a good justification for making the free version completely useless. Those limitations are just ridiculous; I miss the days where paying for a product only meant getting rid of ads and gaining some exclusive features. Maybe they should also reduce the label share instead of always making the customers pay more. I refuse to pay a subscription for non-trivial things like music; they can still make money off me with ads when I use the free version. They can increase their profits with other features like they are already doing by allowing people to buy merch from Spotify.
Those days were built on the backs of venture capital. They were never sustainable. Now you're on the other end, and it's either deal with more ads and more restrictions, or pay up and get rid of all of that (or use something else).
I pay for albums i can afford by buying them and pirate the rest
I assure you, Spotify would love nothing more than to reduce the label share - it's not as if they love giving away almost all the money they make - but they also have next to no real leverage, since the labels have all the power here.
Again, Spotify loses money with every single free user. There may exist some balance point where they can actually reach financial stability by converting a large chunk of them into paying users, and I don't think can really blame them for doing what they can to achieve that.
That doesn't mean it doesn't suck to lose features you liked, but an individual not liking something doesn't make in immoral.
I doubt major labels can live without Spotify as much as Spotify need major labels. They can push users to pay for Spotify by adding more cool features for payed users instead of removing fundamental features of the free version. Forcing people to pay is never the right solution
The labels could murder Spotify in a day if they decided to simply stop offering them licenses and went exclusive with Apple, Amazon, Tidal, or anyone else.
The labels of course do get quite a lot of money from Spotify so they don't have much of a reason to do that, but again, they really are the ones that hold the cards.
This is business. The only right solution is the one that gets them closer to financial stability. They have been developing features for the paid tier and have been exploring other revenue streams (hence the deep dive into podcasts), but ultimately, they have absolutely zero obligation to give away content for free.
I definitely did NOT post a comment, read this comment, then delete my comment for feeling foolish.
Jk i did.
Great take 12/10
I used to not mind paying for Netflix because it was better than trying to pirate things. That has changed 😅. It's still easier to pay for spotify premium than try to pirate music. However, I would be cautious as they may try to make additional changes to the premium tier (price hikes without actual useful additional features) that would make it not worth it. Looking at the year in review that spotify does every year, and I listen to a TON of spotify between work and personal use I probably listen to 12+ hours a day so it would take a lot for me to ditch it but not impossible.
This is ridiculous. Spotify has been effectively doing dumping as an economic policy, and now that they have a sizeable portion of the market share, they're turning to enshittification to make a profit. I see nothing defensible in that. The fact that they can't turn a profit means that they're trying to drive out competitors with less VC money.
We as consumers are not obligated to ensure healthy profit margins for random megacorps, and especially not ones engaged in anti-competitive behaviour, and it's embarrassing to defend that. I've never used Spotify and I never will, but the idea that they lose money on every user tempts me. I second the other guy in the comments: If it isn't economically viable, it shouldn't exist. It's just wannabe monopolism otherwise
Fundamentally, no industry can survive on VC money forever, so there simply has to be some kind of crunch eventually, either by reducing the product, increasing the price, or both.
I mean, this is a nice sentiment in the abstract, but in actuality, we kind of are if we want the product to continue to exist. Spotify is not going to be able to operate at a loss forever, and while there is a discussion to be had about what level of profit is warranted, I don't think it's a particularly wild thing to say that the answer is at least non-negative profit.
What I genuinely don't understand is how you can simultaneously say that Spotify shouldn't exist if it's not economically viable, and at the same time, you'll also criticize them for any attempt to make it economically viable. If Spotify shouldn't offer the free tier because it's not viable, and you'll also attack them if they stopped offering it, what do you actually want them to do?
If you're claiming this as an axiom, I disagree. Public transit isn't economically viable. Homeless shelters and soup kitchens aren't economically viable. Increasingly in the modern world unbiased news isn't economically viable. If you're handicapped in some way you're probably not economically viable. Honestly the human race isn't really economically viable. Some things are objectively good and should exist at any price.
Now, I'm not under any delusion that Spotify is one of those things. Lol nope. But the statement on its own isn't really a defensible one, and I think only the most strident Randian libertarians would try.
If you're not claiming this as an axiom, and just saying that if Spotify in particular isn't economically viable it shouldn't exist, then I can probably get on board with that. But for my family's mental health, I think a service like Spotify should. Or the return of a plurality of online mp3 storefronts.
Who would have thought that good old dumping at a large scale and inadequate economic regulation would lead to companies basically "starving" themselves in a Mexican standoff?
And it's not just Spotify it's a major chunk of the tech companies, because no one learned anything from the dotcom crash.
As a pirate, I approve of this take.