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Music streaming has relatively low gross margins compared to other tech businesses (though as they scale up they'll have more leverage with the rights holders)
by IBM 9y ago
Music streaming has relatively low gross margins compared to other tech businesses (though as they scale up they'll have more leverage with the rights holders) but a large addressable market to tap. Spotify could be a great investment if they continue to penetrate that market.
The same is true for Apple but at least for Apple it also has a strategic purpose in being the connective tissue for a number of hardware products that are almost certainly a better business (Apple Watch Series 3, HomePod, AirPods, iPhone, etc).
- Stanleyc23 9y agoAt what point does Spotify hit a breaking point with leverage against the major labels? Even their current scale, the surviving music industry oligopoly could probably still crush Spotify if it tried to do jumpstart a private label. In this current ecosystem, they seem to be in this awkward codependent relationship. Maybe the only way to gain real leverage is to develop an ecosystem without any labels at all.
- IBM 9y agoSpotify and the music publishers are mutually dependent. They could crush them but they'd be torpedoing their own revenue. >Even their current scale, the surviving music industry oligopoly could probably still crush Spotify if it tried to do jumpstart a private label. Rather than pulling their catalogs from Spotify, it'd be smarter for them to cut better deals with Spotify's competitors so they can undercut Spotify. If the publishers have multiple, more or less equally sized number of buyers, that'd be the ideal scenario for them.
- jamesshamenski 9y agoThe labels have ownership in Spotify [1]. If any disruption comes from the aggregation of their own content, the labels will profit. The labels will not pull the plug on Spotify as it represents too great a portion of future industry revenues. You are correct about dealing with Spotify's competitors. Tidal and other streaming services are the labels best shot at reducing the leverage of any one player (Spotify or Apple). [1] http://www.swedishwire.com/jobs/680-record-labels-part-owner-of-spotify http://www.swedishwire.com/jobs/680-record-labels-part-owner...
- IBM 9y agoI don't think having minority stakes in Spotify makes up for the alternative scenario where Spotify becomes the dominant music streamer and devalues their current music assets.
- Stanleyc23 9y agoI was originally commenting on your statement from spotify's POV > as they scale up they'll have more leverage with the rights holders My comment was making the point that simply scaling Spotify does not solve their publisher/supplier costs because the publisher scales with Spotify. Your response basically switched to the publisher's POV in talking about how publishers are incentivized to commoditize spotify's position in the market. (which is true, but not relevant here.) I was just casually trying to imagine a scenario from Spotify's POV regarding how would they might gain leverage against publishers. IMO anything that involves labels seems like a fail. Spotify's only path to success might be to offer some direct to consumer mechanism that eliminates the need of a label, even their own.
- rhizome 9y agoI can't think of anything the music industry would want to do less than start their own streaming services. The industry is built to let other people do that stuff, preferring to sit back and collect royalties.
- kejaed 9y agoThere was a recent article and HN discussion on just this for Spotify: https://stratechery.com/2018/lessons-from-spotify/ https://stratechery.com/2018/lessons-from-spotify/ https://news.ycombinator.com/item?id=16534482 https://news.ycombinator.com/item?id=16534482