Is Spotify Saving The Music Industry?
Short answer yes! But you aren't reading this for the short answer, you want a long drawn out reason as to why Spotify has saved or is saving the music business.
Clearly Spotify is a giant of the music business and through its freemium model has all but eliminated music piracy, come on admit it we all had Limewire back in the day. But Spotify changed all that, you can now have the music you want at a moments notice without paying for it all you have to do is deal with those thirty second adverts.
It's great, however Spotify is not without its problems for instance a recent leaked financial report shows Spotify is losing money despite an increase in revenue to $2.9 billion for 2016 up by a billion dollars from 2015. Despite this revenue Spotify is expecting to loose between $300 to $400 million this year.
Why? I hear you ask, well there are a number of different factors at play here, one is subscriber numbers and by that I mean the people like me who pay for Spotify, Spotify has more than doubled it's subscriber count over the last year alone. So if it's not the subscriber count what could it be?
We know from artists like Taylor Swift Spotify doesn't really pay out to artists that much money, and whilst Swift has put her music back on Spotify recently for some unbeknown reason (Katy Perry) she has a valid point Spotify don't pay artists and song writers that much money. Unfortunately for Swift if she wants more money for her music then she'd need simply to turn to her record label.
The thought that Spotify has no deal in place with three major record labels, Sony, UMG and Warner is scary prospect but let me reassure you that music from those labels won't get pulled from Spotify just because there's no long term deal in place. Instead Spotify operates on a month to month basis with all of them, but that costs them a eye watering 70% of their revenue. It's one of the main reasons we now see Spotify diversifying their business with podcasts and video content because it costs Spotify nothing.
Now many are saying that the power balance is shifting towards Spotify as it becomes a case of you need us (Spotify) more than we need you (The Record Labels). Also with Spotify playlists such as discover weekly, highlighting independent artists and record labels will also help out Spotify in the long run if they promote those artists signed to those labels both sides benefit, these labels grow because of Spotify and ideally Spotify wouldn't be paying these smaller labels as much money as the giants.
I suppose one way or another record labels will have to adapt or die, but they've been there before with Vinyl, Cassettes, CD and downloads, but this is the first time in history where the labels themselves don't own the means of production. This scenario that the music industry finds themselves in is almost parallel to the situation they fund themselves in with regards to Apple's Itunes.
So that 70% is all about maintaining control just as much as it's about profit.
Will the industry titans survive or can Spotify turn the tide and save itself? Let us know what you think in the comments below.