27 ms·

Even though Spotify is a "piracy killer" (at least in Sweden, if not elsewhere), I think the labels will be more than happy to bleed it dry and leave its lifele

Even though Spotify is a "piracy killer" (at least in Sweden, if not elsewhere), I think the labels will be more than happy to bleed it dry and leave its lifeless corpse on the side of the road as they search for the next Big Thing to strangle, bleed dry and leave behind. Two reasons: 1. The major labels, like most of the big content producers, are extremely interested in short term gains, even if it means losses down the road. As long as something is still "down the road," it won't affect this year s/quarter's/month's profitability. Take a look at Hulu. It's a shadow of its former self. It used to be a solid site with great content, but those controlling the content have decided it's not making enough money fast enough. The fix? Remove content. Move it around. Chop it up. Stagger releases randomly. Put X season on Hulu but have Y season exist only as a selection of clips or have it go missing entirely. See also: Netflix. Because the major studios are unwilling to trade DVD dollars for digital dimes, they've gone about pricing themselves out of the market. Netflix is also a "piracy killer," but the studios are too concerned with getting the money up front to pay attention to how much content is being leaked out the back. The studios also seem to think that people will follow them to their own sites or digital offerings, but the content they offer is generally crippled by DRM or requires the installation of proprietary software or another set of logins and passwords and people in general just do not have an interest in setting up yet another account just to watch a couple of Lost episodes. 2. Even though everything mentioned is a "piracy killer," the simple fact is that, for many people, the service (Spotify, Netflix, etc.) becomes the end product. The services don't lead towards more sales of other physical or digital goods. This doesn't fit into the major labels'/studios' plans at all. They want to sell more of their stuff, not necessarily collect royalties from someone else's service. So, if they manage to drain Spotify completely or at least force it to give up its US operations, it won't hurt them much. By that point, another service will come along and they can pile on and bleed it dry as well. The plan, I suppose, is to keep riding these little income spikes until it's 1994 again, or something. They must still harbor the belief that, once the other options dry up, people will head back to the brick-and-mortar and purchase content in physical forms that carry much higher profit margins.

Codayus 15y ago
Yes... But don't disregard the nasty collective action problem they have. Let's say one of the big labels suddenly gets religion, and rewrites their contracts with Spotify and others to be fair and generous. Great! What happens now? Well, Spotify is going to make a lot more money...or they would, right up until the other big labels step up their demands. If, say, Warner decides to cut the share of Spotify's revenue they demand in half, that just means Sony BMG and Universal can up their demands. And both of them will be convinced that if they don't, the other one will, so both will...which means Spotify would be no better off. The entire process would just be Warner giving money to Sony BMG and Universal, which is hardly helpful to anyone other than Sony BMG and Universal shareholders. And even if - through some miracle - you got the big three to agree to give Spotify an even break, there's the constant risk that one of them could come back and demand every dime Spotify is making at any time. And since everyone knows that any one of them could do that, they will feel compelled to get their share. And even trying to come to an agreement would probably be illegal collusion and price fixing. The government created this problem via the very specific details of how copyright law is implemented; only the government can solve it - probably through some mix of mandatory licensing regimes and major curtailment of copyright duration. And good luck getting anything like that through Congress, ever.
yuhong 15y ago
Makes me wonder if taking them private will help.
arctangent 15y ago
> I think the labels will be more than happy to bleed it dry and leave its lifeless corpse on the side of the road as they search for the next Big Thing to strangle, bleed dry and leave behind. Absolutely correct. The intermediaries in the music distribution network (i.e. "the labels") already know that they have lost in the long term. They know that their best move now is to extract what revenue they can from the current examples of the types of service that will eventually replace them. Maybe this is "evil" or maybe the execs think of it as their job to try to earn as much as possible, perhaps for their shareholders' sake. Ironically, those services which seek to replace the labels in a way compatible with the law (i.e. startups rather than torrent sites) are the ones who will end up paying (perhaps too much) for it, and will risk going bust as a result. Meanwhile, sharing via torrents etc. is gradually killing off the labels. It may be in the interest of everyone to just let this occur without starting up a business which tries to find a middle ground. But there will always be companies springing up to take a gamble on being the first to exploit a new opportunity. If Spotify (or whoever) fails, perhaps the next music streaming service will be the one to meet a much weakened music distribution industry in the courts. Once the labels are gone, services which offer subscription models for music will thrive without the threat of legal action. And the quality and variety of music available to the masses will thrive. This is a waiting game, and I think we all know exactly how this will eventually play out. Meanwhile we're still in the wild west, waiting for the shootout at the O.K. Corral.

Codayus 15y ago

Yes... But don't disregard the nasty collective action problem they have. Let's say one of the big labels suddenly gets religion, and rewrites their contracts with Spotify and others to be fair and generous. Great! What happens now? Well, Spotify is going to make a lot more money...or they would, right up until the other big labels step up their demands. If, say, Warner decides to cut the share of Spotify's revenue they demand in half, that just means Sony BMG and Universal can up their demands. And both of them will be convinced that if they don't, the other one will, so both will...which means Spotify would be no better off. The entire process would just be Warner giving money to Sony BMG and Universal, which is hardly helpful to anyone other than Sony BMG and Universal shareholders. And even if - through some miracle - you got the big three to agree to give Spotify an even break, there's the constant risk that one of them could come back and demand every dime Spotify is making at any time. And since everyone knows that any one of them could do that, they will feel compelled to get their share. And even trying to come to an agreement would probably be illegal collusion and price fixing. The government created this problem via the very specific details of how copyright law is implemented; only the government can solve it - probably through some mix of mandatory licensing regimes and major curtailment of copyright duration. And good luck getting anything like that through Congress, ever.

yuhong 15y ago

Makes me wonder if taking them private will help.

arctangent 15y ago

> I think the labels will be more than happy to bleed it dry and leave its lifeless corpse on the side of the road as they search for the next Big Thing to strangle, bleed dry and leave behind. Absolutely correct. The intermediaries in the music distribution network (i.e. "the labels") already know that they have lost in the long term. They know that their best move now is to extract what revenue they can from the current examples of the types of service that will eventually replace them. Maybe this is "evil" or maybe the execs think of it as their job to try to earn as much as possible, perhaps for their shareholders' sake. Ironically, those services which seek to replace the labels in a way compatible with the law (i.e. startups rather than torrent sites) are the ones who will end up paying (perhaps too much) for it, and will risk going bust as a result. Meanwhile, sharing via torrents etc. is gradually killing off the labels. It may be in the interest of everyone to just let this occur without starting up a business which tries to find a middle ground. But there will always be companies springing up to take a gamble on being the first to exploit a new opportunity. If Spotify (or whoever) fails, perhaps the next music streaming service will be the one to meet a much weakened music distribution industry in the courts. Once the labels are gone, services which offer subscription models for music will thrive without the threat of legal action. And the quality and variety of music available to the masses will thrive. This is a waiting game, and I think we all know exactly how this will eventually play out. Meanwhile we're still in the wild west, waiting for the shootout at the O.K. Corral.