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There are other examples (however imperfect) where this dynamic exists without it having a continuously negative effect on margins. Apple/iTunes doesn't seem to

There are other examples (however imperfect) where this dynamic exists without it having a continuously negative effect on margins. Apple/iTunes doesn't seem to be called out as having a ton of risk in this area despite similar dynamics. Cable companies/satellite TV/radio for other industry examples. Not saying it isn't a risk, just that there are accepted strategies for protecting profits as a distribution channel.

w0m 9y ago
Those companies are all markedly larger and pull revenue from other places also. what % of iTunes profit today comes from Music vs (movies/books/app/etc)? Spotify is uniquely vulnerable on that front.
- 2aa07e2 9y ago
  Indeed. I read a great comment somehow related to this on Quora [1]. How can possibly Spotify diversify its income though? [1] https://www.quora.com/Why-do-people-buy-merchandise-of-YouTubers/answer/Matthew-Joseph-Andrews https://www.quora.com/Why-do-people-buy-merchandise-of-YouTu...
  - philipodonnell 9y ago
    Video? I feel like they have a reputation for being good about paying artists, there's a need for a Youtube replacement that lets video creators act more like record labels for their own content instead of being passive participants in the Youtube ecosystem and subject to their whims.
wmeredith 9y ago
iTunes is an awful example, if not an outright counterexample. It's famously been run at nearly break-even for most of its life–its sole purpose was to sell Apple hardware for over a decade.
- joshjkim 9y ago
  even worse for spotify: Tim Cook said that Apple isn't particularly interested in on Apple Music turning a profit - when asked the question directly, he responded: "you're right, we're not in it for the money. I think it’s important for artists. If we’re going to continue to have a great creative community, [artists] have to be funded."[1] I'd say his stated rationale for not caring about money (artists getting funded) is at best a low priority and at worst total fluff - they don't care because they make money on phones/hardware, and it also long-term allows them to price competitors (like spotify) out of the business (I don't think it's a coincidence that he gave this interview in the days before spotify's F-1 went public). to apple, streaming is an ongoing marketing campaign for their hardware and hey, if it breaks even great, but even at a loss they can make it up in hardware profits. I would not be surprised if apple is planning to waiting to announce a significant price or other change to Apple Music right before spotify's first or second quarterly earnings report - not very nice, but it would be a pretty smart thing to do. [1] https://www.fastcompany.com/40525409/why-apple-is-the-worlds-most-innovative-company?utm_source=feedly&utm_medium=webfeeds https://www.fastcompany.com/40525409/why-apple-is-the-worlds...

w0m 9y ago

Those companies are all markedly larger and pull revenue from other places also. what % of iTunes profit today comes from Music vs (movies/books/app/etc)? Spotify is uniquely vulnerable on that front.

2aa07e2 9y ago
Indeed. I read a great comment somehow related to this on Quora [1]. How can possibly Spotify diversify its income though? [1] https://www.quora.com/Why-do-people-buy-merchandise-of-YouTubers/answer/Matthew-Joseph-Andrews https://www.quora.com/Why-do-people-buy-merchandise-of-YouTu...
- philipodonnell 9y ago
  Video? I feel like they have a reputation for being good about paying artists, there's a need for a Youtube replacement that lets video creators act more like record labels for their own content instead of being passive participants in the Youtube ecosystem and subject to their whims.

wmeredith 9y ago

iTunes is an awful example, if not an outright counterexample. It's famously been run at nearly break-even for most of its life–its sole purpose was to sell Apple hardware for over a decade.

joshjkim 9y ago
even worse for spotify: Tim Cook said that Apple isn't particularly interested in on Apple Music turning a profit - when asked the question directly, he responded: "you're right, we're not in it for the money. I think it’s important for artists. If we’re going to continue to have a great creative community, [artists] have to be funded."[1] I'd say his stated rationale for not caring about money (artists getting funded) is at best a low priority and at worst total fluff - they don't care because they make money on phones/hardware, and it also long-term allows them to price competitors (like spotify) out of the business (I don't think it's a coincidence that he gave this interview in the days before spotify's F-1 went public). to apple, streaming is an ongoing marketing campaign for their hardware and hey, if it breaks even great, but even at a loss they can make it up in hardware profits. I would not be surprised if apple is planning to waiting to announce a significant price or other change to Apple Music right before spotify's first or second quarterly earnings report - not very nice, but it would be a pretty smart thing to do. [1] https://www.fastcompany.com/40525409/why-apple-is-the-worlds-most-innovative-company?utm_source=feedly&utm_medium=webfeeds https://www.fastcompany.com/40525409/why-apple-is-the-worlds...