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I'd say they were in a position of being strategic investors. There are only a handful of major labels and Spotify is slowly killing legal downloads which itsel

by patd 8y ago

I'd say they were in a position of being strategic investors. There are only a handful of major labels and Spotify is slowly killing legal downloads which itself killed physical copies. They owned a piece of the future of music distribution. And as shareholders and content providers they could squeeze every bit of profit their way. They've redistributed the profit of the sale so they're not going to reinvest it. My guess is that they plan on squeezing Spotify even more and know that this will kill the valuation. As there are more strong competitors now (Apple Music is said to soon overtake Spotify in the US), killing Spotify doesn't matter much.

jamespo 8y ago
Globally Apple Music and everyone else is significantly behind Spotify
- scarface74 8y ago
  Apple is growing faster than Spotify (https://bgr.com/2018/07/06/apple-music-vs-spotify-subscribers-apple-wins/ https://bgr.com/2018/07/06/apple-music-vs-spotify-subscriber...) and Apple doesn’t live or die by Apple Music like Spotify does. You should always be afraid when your entire reason for living is a feature of a larger company.
  - drchickensalad 8y ago
    > You should always be afraid when your entire reason for living is a feature of a larger company. Isn't this true for a majority of companies?
    - scarface74 8y ago
      Not really. Google, Facebook, and Apple aren’t focusing on everything. But music is definitely something that Apple has been focused on since 2001.
      - drchickensalad 8y ago
        I was going for this applying to every industry. There's almost always a giant competitor that does almost exactly what you do. I personally feel the software industry is a bit easier to escape this problem, since it's quite low overhead to pivot in comparison, and it pushes so many solutions to problems people didn't know they have/want, instead of being more commoditized.
  - ameister14 8y ago
    I'm not sure about 'always.' Google's search was just one feature of AOL's homepage. In fact, a lot of startups have grown specifically because they focus on one thing and their competitors have varied goals.
    - scarface74 8y ago
      It also doesn’t help when you have high marginal costs. Spotify has to pay the record labels for each new user. The marginal cost of each new Google user was basically zero - of course costs go up as a step function, but the marginal cost is less than a rounding error. I don’t know what the numbers are today, but back in the day, the guy in charge of Zune music said they were paying $8 per user for thier subscription music service. Spotify is completely beholden to its suppliers - the record labels. They can and will squeeze every ounce they can get out of Spotify. Apple can afford to operate Apple Music at break even or a slight loss because it is just a feature to sell high profit margin hardware. That’s all Spotify has, it has to make a sustainable profit from streaming.
      - ameister14 8y ago
        Spotify is beholden to the record labels for now, but as music sales continue to weaken, much like DVD sales did, Spotify will be grow as one of the main outlets to reach customers for the record labels. If they can swing it they could become a major label themselves, like Netflix has with films and television.
        scarface74 8y ago
        And Netflix also will have the same problem. Streaming will just be a feature for a company like Disney. By the time a Marvel movie for instance gets to streaming, its already made hundreds of millions of dollars from theatrical releases, dvd sales, VOD, etc. The streaming service doesn’t have to be self sustaining. Netflix is also struggling under a heavy debt load and is still not consistently profitable. If any of the major record labels leave Spotify - they are toast. Especially if all four labels stay on a competing service. People are okay with getting thier movies - that they will probably only watch once from different places. No one wants to have multiple playlists from different services. The music industry already tried that. Before the days of iTunes there were two subscription streaming services - MusicNet and PressPlay. Each had two of the major labels. That failed miserably. If an artist is exclusively on Spotify, they’ve lost exposure to much of the more affluent users who have iPhones and are more invested in the Apple ecosystem.
  - rodiger 8y ago
    Developing countries grow faster than the U.S, but that doesn't mean much in terms of long-term potential
  - icebraining 8y ago
    Then again, that's what was said about Dropbox - Google was about to eat their lunch any day now. Yet they're still around and still growing quite a lot.
    - scarface74 8y ago
      Not a great example.... https://qz.com/1214822/dropbox-is-filing-for-a-500-million-ipo-while-warning-it-may-never-be-profitable/ https://qz.com/1214822/dropbox-is-filing-for-a-500-million-i... The company’s prospectus warns it has “a history of net losses”; anticipates increasing expenses and slowing revenue growth; and notes that it “may not be able to achieve or maintain profitability.”
      - icebraining 8y ago
        Eh, that's just the typical IPO prospectus, all doom and gloom. They're at billion-dollar revenue, still grew 30% in a year, and are cashflow-positive.
        scarface74 8y ago
        MoviePass also saw increasing revenues when they dropped the price from $50 to $10.... As far as being “cash flow positive”.... https://www.cnbc.com/2018/03/21/dropbox-may-have-intentionally-overstated-its-free-cash-flow.html https://www.cnbc.com/2018/03/21/dropbox-may-have-intentional... A closer look at its financial statement shows the online storage company's free cash flow would have remained negative that year had it followed a more conservative accounting method shared by some of its main competitors. That's because Dropbox didn't include principal payments for its capital leases in its free cash flow statement. If Dropbox had accounted for the $139.5 million in capital and financing lease payments in 2016, it would have recorded negative $2.1 million in free cash flow that year — instead of the $137.4 million positive free cash flow it disclosed. Its free cash flow for 2017 would have been $169.7 million under this method, almost half of the $305 million it disclosed in its filing. These are real expenses, that would be like me telling my wife that we would be cash flow positive with our current income if we moved to Seattle - as long as we don’t include rent.
- drb91 8y ago
  Yea, but they’re mostly interchangeable. Not a good thing for spotify.
sshine 8y ago
Yes, they were.
GreenToad5 8y ago
>Apple Music is said to soon overtake Spotify in the US I don't see how. Apple users use Apple Music or Spotify. Android users use Spotify. Android has 80% of market share globally (though only 55% in the US) and their market share is increasing.
- pc86 8y ago
  "Android has 80% of market share globally" is not an adequate rebuttal to "Apple Music is said to soon overtake Spotify in the US." While I happen to agree that Spotify is going to remaing the dominant player in the US for a long time, global Android market share is pretty irrelevant.
- protomyth 8y ago
  People really need to understand that a chunk of that 80% market share are people who bought their phone at places like Walmart for around $35 who are pay-as-you-go. They are not using the phone for anything but text and calling. This can be seen in the number of phones sold with older OS versions.
- jhayward 8y ago
  Apple's market strategy is to take all the money off the top end of the market, and leave everyone everyone else fighting for the remnants. Unit sales don't count when there is a big mismatch in net profit per sub. I don't know what the current market figure is for handsets, but a couple of years ago the rough stat was that Android had 80% of the unit sales and Apple had 80% of the profits.
zeroego 8y ago
>Apple Music is said to soon overtake Spotify in the US Do you by any chance have a source for that claim?
- pwinnski 8y ago
  Probably thinking of this: https://www.digitalmusicnews.com/2018/07/05/apple-music-spotify-us-subscribers-2/ https://www.digitalmusicnews.com/2018/07/05/apple-music-spot...
- earenndil 8y ago
  (Not the gp, but) [n]ope. Recently there was a headline that apple music was gaining subscribers faster than spotify -- that's because apple music is smaller. I highly doubt it surpasses spotify.
drb91 8y ago
When music isn’t on spotify, how do you sync it to all your devices?
- dmart 8y ago
  You can sync playlists of local files from a desktop to a mobile device, I believe. It's definitely a little clunkier than the direct uploads that some other streaming services provide, though.

by patd 8y ago

jamespo 8y ago

Globally Apple Music and everyone else is significantly behind Spotify

scarface74 8y ago
Apple is growing faster than Spotify (https://bgr.com/2018/07/06/apple-music-vs-spotify-subscribers-apple-wins/ https://bgr.com/2018/07/06/apple-music-vs-spotify-subscriber...) and Apple doesn’t live or die by Apple Music like Spotify does. You should always be afraid when your entire reason for living is a feature of a larger company.
- drchickensalad 8y ago
  > You should always be afraid when your entire reason for living is a feature of a larger company. Isn't this true for a majority of companies?
  - scarface74 8y ago
    Not really. Google, Facebook, and Apple aren’t focusing on everything. But music is definitely something that Apple has been focused on since 2001.
    - drchickensalad 8y ago
      I was going for this applying to every industry. There's almost always a giant competitor that does almost exactly what you do. I personally feel the software industry is a bit easier to escape this problem, since it's quite low overhead to pivot in comparison, and it pushes so many solutions to problems people didn't know they have/want, instead of being more commoditized.
- ameister14 8y ago
  I'm not sure about 'always.' Google's search was just one feature of AOL's homepage. In fact, a lot of startups have grown specifically because they focus on one thing and their competitors have varied goals.
  - scarface74 8y ago
    It also doesn’t help when you have high marginal costs. Spotify has to pay the record labels for each new user. The marginal cost of each new Google user was basically zero - of course costs go up as a step function, but the marginal cost is less than a rounding error. I don’t know what the numbers are today, but back in the day, the guy in charge of Zune music said they were paying $8 per user for thier subscription music service. Spotify is completely beholden to its suppliers - the record labels. They can and will squeeze every ounce they can get out of Spotify. Apple can afford to operate Apple Music at break even or a slight loss because it is just a feature to sell high profit margin hardware. That’s all Spotify has, it has to make a sustainable profit from streaming.
    - ameister14 8y ago
      Spotify is beholden to the record labels for now, but as music sales continue to weaken, much like DVD sales did, Spotify will be grow as one of the main outlets to reach customers for the record labels. If they can swing it they could become a major label themselves, like Netflix has with films and television.
      - scarface74 8y ago
        And Netflix also will have the same problem. Streaming will just be a feature for a company like Disney. By the time a Marvel movie for instance gets to streaming, its already made hundreds of millions of dollars from theatrical releases, dvd sales, VOD, etc. The streaming service doesn’t have to be self sustaining. Netflix is also struggling under a heavy debt load and is still not consistently profitable. If any of the major record labels leave Spotify - they are toast. Especially if all four labels stay on a competing service. People are okay with getting thier movies - that they will probably only watch once from different places. No one wants to have multiple playlists from different services. The music industry already tried that. Before the days of iTunes there were two subscription streaming services - MusicNet and PressPlay. Each had two of the major labels. That failed miserably. If an artist is exclusively on Spotify, they’ve lost exposure to much of the more affluent users who have iPhones and are more invested in the Apple ecosystem.
- rodiger 8y ago
  Developing countries grow faster than the U.S, but that doesn't mean much in terms of long-term potential
- icebraining 8y ago
  Then again, that's what was said about Dropbox - Google was about to eat their lunch any day now. Yet they're still around and still growing quite a lot.
  - scarface74 8y ago
    Not a great example.... https://qz.com/1214822/dropbox-is-filing-for-a-500-million-ipo-while-warning-it-may-never-be-profitable/ https://qz.com/1214822/dropbox-is-filing-for-a-500-million-i... The company’s prospectus warns it has “a history of net losses”; anticipates increasing expenses and slowing revenue growth; and notes that it “may not be able to achieve or maintain profitability.”
    - icebraining 8y ago
      Eh, that's just the typical IPO prospectus, all doom and gloom. They're at billion-dollar revenue, still grew 30% in a year, and are cashflow-positive.
      - scarface74 8y ago
        MoviePass also saw increasing revenues when they dropped the price from $50 to $10.... As far as being “cash flow positive”.... https://www.cnbc.com/2018/03/21/dropbox-may-have-intentionally-overstated-its-free-cash-flow.html https://www.cnbc.com/2018/03/21/dropbox-may-have-intentional... A closer look at its financial statement shows the online storage company's free cash flow would have remained negative that year had it followed a more conservative accounting method shared by some of its main competitors. That's because Dropbox didn't include principal payments for its capital leases in its free cash flow statement. If Dropbox had accounted for the $139.5 million in capital and financing lease payments in 2016, it would have recorded negative $2.1 million in free cash flow that year — instead of the $137.4 million positive free cash flow it disclosed. Its free cash flow for 2017 would have been $169.7 million under this method, almost half of the $305 million it disclosed in its filing. These are real expenses, that would be like me telling my wife that we would be cash flow positive with our current income if we moved to Seattle - as long as we don’t include rent.
drb91 8y ago
Yea, but they’re mostly interchangeable. Not a good thing for spotify.

sshine 8y ago

Yes, they were.

GreenToad5 8y ago

>Apple Music is said to soon overtake Spotify in the US I don't see how. Apple users use Apple Music or Spotify. Android users use Spotify. Android has 80% of market share globally (though only 55% in the US) and their market share is increasing.

pc86 8y ago
"Android has 80% of market share globally" is not an adequate rebuttal to "Apple Music is said to soon overtake Spotify in the US." While I happen to agree that Spotify is going to remaing the dominant player in the US for a long time, global Android market share is pretty irrelevant.
protomyth 8y ago
People really need to understand that a chunk of that 80% market share are people who bought their phone at places like Walmart for around $35 who are pay-as-you-go. They are not using the phone for anything but text and calling. This can be seen in the number of phones sold with older OS versions.
jhayward 8y ago
Apple's market strategy is to take all the money off the top end of the market, and leave everyone everyone else fighting for the remnants. Unit sales don't count when there is a big mismatch in net profit per sub. I don't know what the current market figure is for handsets, but a couple of years ago the rough stat was that Android had 80% of the unit sales and Apple had 80% of the profits.

zeroego 8y ago

>Apple Music is said to soon overtake Spotify in the US Do you by any chance have a source for that claim?

pwinnski 8y ago
Probably thinking of this: https://www.digitalmusicnews.com/2018/07/05/apple-music-spotify-us-subscribers-2/ https://www.digitalmusicnews.com/2018/07/05/apple-music-spot...
earenndil 8y ago
(Not the gp, but) [n]ope. Recently there was a headline that apple music was gaining subscribers faster than spotify -- that's because apple music is smaller. I highly doubt it surpasses spotify.

drb91 8y ago

When music isn’t on spotify, how do you sync it to all your devices?

dmart 8y ago
You can sync playlists of local files from a desktop to a mobile device, I believe. It's definitely a little clunkier than the direct uploads that some other streaming services provide, though.