6 ms·

15 years as a business, 200 million subscribers globally, cumulative losses in the billions, zero profit. How does the CEO keep his job?

by rchaud 4y ago

odiroot 4y ago
Possibly because major labels have invested too much into it, to just let it go.
- rchaud 4y ago
  If Spotify goes, Apple, Tidal, Amazon, Deezer and other regional services will take their markets. They are not differentiated at all except for their podcasts.
  - Daz1 4y ago
    Whoever can design the best music discovery algorithm paired with manually curated playlists will come out on top eventually. At the moment Spotify is ahead on both of those points.
Gwypaas 4y ago
How would you lower the 70% to increase Spotify's profits? > It distributes approximately 70% of its total revenue to rights holders (often record labels), who then pay artists based on individual agreements.[12] https://en.wikipedia.org/wiki/Spotify https://en.wikipedia.org/wiki/Spotify
- rom-antics 4y ago
  This is probably why they're shoving podcasts down everyone's throats. I don't expect the plan will succeed, because if it does the labels will just squeeze them for more money. But at least they're trying.
  - makestuff 4y ago
    The main executive in charge of bringing on podcast left during the layoffs earlier this month. So I would be willing to bet they are not seeing the ROI they expected.
  - dantheman 4y ago
    They're trying to destroy the podcast environment by building a walled garden and not competing by building a good player. It's horrible, I hope they fail.
- nickthegreek 4y ago
  I would stop giving tens of millions of dollars to podcast personalities to start.
  - josefresco 4y ago
    They lost $250 million this quarter. Those podcast deals are minor in the grand scheme of losing money.
  - nebula8804 4y ago
    Then whats the value add? There is nothing unique to Spotify.
    - nickthegreek 4y ago
      To me, its the opposite of value-add. I've seen this play out with Amazon.They keep adding all these services that I do not value and I have to use Prime. Then they keep raising the rate of prime. How about you provide me a base service (item delivery) and keep your music streaming, video streaming, etc as something else.
      - nebula8804 4y ago
        In that case, seems like their only other option is to raise rates slower but they are still required to raise the rates because they are not making money and not growing. Raising rates and not adding new features will likely reverse their growth. How would you feel if there were price hikes yet nothing has changed or improved? Again there is no real value add in your scenario so the customers can jump to a competing service and suffer no real loss. The podcasts are clearly helping to solve growing problem and thats at least a little bit better than not making money AND not growing.
        nickthegreek 4y ago
        The value they have is music recommendation and spotify wrapped. Apple recently added their karaoke mode.Tidal has great quality. There are plenty of new music related features that they can add. I, as a consumer, sign up for music streaming to stream music. I don't value a podcast moat, so I use a competing service that is more inline with my needs. Plenty of services are rising their prices and lowering their offerings (HBO, I am looking at you). Which is also trash, and I am allowed to make value judgements on those as well. If you love podcasts, and need your Joe Rogan, then spotify is for you.
- HDThoreaun 4y ago
  That still gives them $3 billion to run the business and turn a profit. Seems like that should be doable.
- spamizbad 4y ago
  That's because the major labels recognized they had Spotify over a barrel. The bulk of that revenue isn't going to the artists. Indie artists are probably the worst off, making something like $0.003 per stream. So a modestly successful independent artist with 100,000 monthly listeners is making $300/month or $3600 a year. So why do they bother? Well, you get mixed in with more notable acts so maybe someone googles you and finds your bandcamp, where you can capture 80% of the revenue. I know artists who made more money selling cassettes on bandcamp in one month than they did on Spotify the whole year.
  - wyre 4y ago
    Benn Jordan (makes music as The Flashbulb) on YouTube just made a video about this. One of his recent albums made more money in its first weekend on bandcamp than a promoted album did on Spotify in a month.
- rchaud 4y ago
  I have no idea. Perhaps use its enormous market share to negotiate lower fees? Or pay more podcasters and turn it into satellite radio 2.0, which is what appears to be happening. Either way it shouldn't take a decade fo figure out, they are not curing disease or developing spacecraft. How did Tower Records and HMV do it? They didnt have Spotify's monopoly position and had to compete against Walmart and Best Buy.
  - nebula8804 4y ago
    >How did Tower Records and HMV do it? They didnt have Spotify's monopoly position and had to compete against Walmart and Best Buy. Probably forcing people to buy 15-20$ cds when all people wanted was that one 99 cent song.
  - epistemer 4y ago
    The old music business thrived on vinyl then 8 track then cassettes then CDs. $15 in 1985 is about $40 adjusted for inflation and they convinced people to buy the same music multiple times. To even find that music you liked enough to buy multiple times too you probably bought 5 albums that you thought sucked. I can remember as a kid in the 80s too that my father and all his friends easily had 500+ vinyl albums on display in their homes. Then those started collecting dust as they bought hundreds of cds. It is just so different now. Imagine spending $40 bucks for 10 songs and have no idea if you will even like them. That is a totally different racket.
- MuffinFlavored 4y ago
  What would happen overnight if Spotify and record labels broke up? Spotify would lose a huge portion of its userbase (nearly all) surely but more interestingly, record labels lose that revenue (which I'm guessing has to be one of their main sources of income for their finished product: the artist's music) How is Spotify not able to negotiate a deal better than 70% given that leverage?
  - lotsofpulp 4y ago
    It would take a couple minutes for those Spotify users to change to apple/google/Amazon/tidal/whatever for their music wants/needs. The computers and software that delivers the music is the commodity with no moat, the music is copyrighted and the record label is the only place to get it from.
super256 4y ago
By investors listening to what the two goals are: - 1b subscribers - after THAT: 10% profit margin Look, spotify is still growing fast. They aim for 20% MAU growth YoY, and they are actually achieving it: they added 23M new MAU between Q2 and Q3 last year, around 40% of those new users were premium subscribers. New numbers for Q4 will be released today. They are still trying to capture the whole market. After doing that they will flick the lever to profitability over growth. The current goals are set for 2030. Only if Ek deviates from the growth trajectory too much he will be dropped as CEO.
- josefresco 4y ago
  > After doing that they will flick the lever to profitability over growth. I can't tell is this is sarcasm ... it's sarcasm right? There is no "lever to profitability".
  - blairbeckwith 4y ago
    I can’t tell if this is sarcasm … it’s sarcasm right? Based on the entire history of startups, you truly don’t believe that companies can focus on user growth or profitability, and those directions have different levers?
    - aeyes 4y ago
      Why do you call Spotify a startup? It was founded over 15 years ago. Hundreds of thousands of companies have come and gone during this time. Is it because they aren't profitable just yet? How many more years are you willing to wait?
  - hamandcheese 4y ago
    How could there not be? Fire all the people who were working on growth.
  - oneoff786 4y ago
    Why not? You don’t think they could eek out an additional 70 cents per month per customer if they wanted to focus on that right now?
dopeboy 4y ago
That's on $12B in revenue, 4% churn, and having reformed one of the oldest, entrenched industries ever. I know nothing about the guy, but can you agree that's a remarkable achievement? He keeps his job because he's promising that once an inflection point is reached, you become more aggressive about turning a profit. It's both your and mine guess on what that could be, but I think starting that procedure with a 200M paid subscriber base isn't the worst idea.
deleted 4y ago
[deleted]

15 years as a business, 200 million subscribers globally, cumulative losses in the billions, zero profit. How does the CEO keep his job?

by rchaud 4y ago

15 years as a business, 200 million subscribers globally, cumulative losses in the billions, zero profit. How does the CEO keep his job?

odiroot 4y ago

Possibly because major labels have invested too much into it, to just let it go.

rchaud 4y ago
If Spotify goes, Apple, Tidal, Amazon, Deezer and other regional services will take their markets. They are not differentiated at all except for their podcasts.
- Daz1 4y ago
  Whoever can design the best music discovery algorithm paired with manually curated playlists will come out on top eventually. At the moment Spotify is ahead on both of those points.

Gwypaas 4y ago

How would you lower the 70% to increase Spotify's profits? > It distributes approximately 70% of its total revenue to rights holders (often record labels), who then pay artists based on individual agreements.[12] https://en.wikipedia.org/wiki/Spotify https://en.wikipedia.org/wiki/Spotify

rom-antics 4y ago
This is probably why they're shoving podcasts down everyone's throats. I don't expect the plan will succeed, because if it does the labels will just squeeze them for more money. But at least they're trying.
- makestuff 4y ago
  The main executive in charge of bringing on podcast left during the layoffs earlier this month. So I would be willing to bet they are not seeing the ROI they expected.
- dantheman 4y ago
  They're trying to destroy the podcast environment by building a walled garden and not competing by building a good player. It's horrible, I hope they fail.
nickthegreek 4y ago
I would stop giving tens of millions of dollars to podcast personalities to start.
- josefresco 4y ago
  They lost $250 million this quarter. Those podcast deals are minor in the grand scheme of losing money.
- nebula8804 4y ago
  Then whats the value add? There is nothing unique to Spotify.
  - nickthegreek 4y ago
    To me, its the opposite of value-add. I've seen this play out with Amazon.They keep adding all these services that I do not value and I have to use Prime. Then they keep raising the rate of prime. How about you provide me a base service (item delivery) and keep your music streaming, video streaming, etc as something else.
    - nebula8804 4y ago
      In that case, seems like their only other option is to raise rates slower but they are still required to raise the rates because they are not making money and not growing. Raising rates and not adding new features will likely reverse their growth. How would you feel if there were price hikes yet nothing has changed or improved? Again there is no real value add in your scenario so the customers can jump to a competing service and suffer no real loss. The podcasts are clearly helping to solve growing problem and thats at least a little bit better than not making money AND not growing.
      - nickthegreek 4y ago
        The value they have is music recommendation and spotify wrapped. Apple recently added their karaoke mode.Tidal has great quality. There are plenty of new music related features that they can add. I, as a consumer, sign up for music streaming to stream music. I don't value a podcast moat, so I use a competing service that is more inline with my needs. Plenty of services are rising their prices and lowering their offerings (HBO, I am looking at you). Which is also trash, and I am allowed to make value judgements on those as well. If you love podcasts, and need your Joe Rogan, then spotify is for you.
HDThoreaun 4y ago
That still gives them $3 billion to run the business and turn a profit. Seems like that should be doable.
spamizbad 4y ago
That's because the major labels recognized they had Spotify over a barrel. The bulk of that revenue isn't going to the artists. Indie artists are probably the worst off, making something like $0.003 per stream. So a modestly successful independent artist with 100,000 monthly listeners is making $300/month or $3600 a year. So why do they bother? Well, you get mixed in with more notable acts so maybe someone googles you and finds your bandcamp, where you can capture 80% of the revenue. I know artists who made more money selling cassettes on bandcamp in one month than they did on Spotify the whole year.
- wyre 4y ago
  Benn Jordan (makes music as The Flashbulb) on YouTube just made a video about this. One of his recent albums made more money in its first weekend on bandcamp than a promoted album did on Spotify in a month.
rchaud 4y ago
I have no idea. Perhaps use its enormous market share to negotiate lower fees? Or pay more podcasters and turn it into satellite radio 2.0, which is what appears to be happening. Either way it shouldn't take a decade fo figure out, they are not curing disease or developing spacecraft. How did Tower Records and HMV do it? They didnt have Spotify's monopoly position and had to compete against Walmart and Best Buy.
- nebula8804 4y ago
  >How did Tower Records and HMV do it? They didnt have Spotify's monopoly position and had to compete against Walmart and Best Buy. Probably forcing people to buy 15-20$ cds when all people wanted was that one 99 cent song.
- epistemer 4y ago
  The old music business thrived on vinyl then 8 track then cassettes then CDs. $15 in 1985 is about $40 adjusted for inflation and they convinced people to buy the same music multiple times. To even find that music you liked enough to buy multiple times too you probably bought 5 albums that you thought sucked. I can remember as a kid in the 80s too that my father and all his friends easily had 500+ vinyl albums on display in their homes. Then those started collecting dust as they bought hundreds of cds. It is just so different now. Imagine spending $40 bucks for 10 songs and have no idea if you will even like them. That is a totally different racket.
MuffinFlavored 4y ago
What would happen overnight if Spotify and record labels broke up? Spotify would lose a huge portion of its userbase (nearly all) surely but more interestingly, record labels lose that revenue (which I'm guessing has to be one of their main sources of income for their finished product: the artist's music) How is Spotify not able to negotiate a deal better than 70% given that leverage?
- lotsofpulp 4y ago
  It would take a couple minutes for those Spotify users to change to apple/google/Amazon/tidal/whatever for their music wants/needs. The computers and software that delivers the music is the commodity with no moat, the music is copyrighted and the record label is the only place to get it from.

super256 4y ago

By investors listening to what the two goals are: - 1b subscribers - after THAT: 10% profit margin Look, spotify is still growing fast. They aim for 20% MAU growth YoY, and they are actually achieving it: they added 23M new MAU between Q2 and Q3 last year, around 40% of those new users were premium subscribers. New numbers for Q4 will be released today. They are still trying to capture the whole market. After doing that they will flick the lever to profitability over growth. The current goals are set for 2030. Only if Ek deviates from the growth trajectory too much he will be dropped as CEO.

josefresco 4y ago
> After doing that they will flick the lever to profitability over growth. I can't tell is this is sarcasm ... it's sarcasm right? There is no "lever to profitability".
- blairbeckwith 4y ago
  I can’t tell if this is sarcasm … it’s sarcasm right? Based on the entire history of startups, you truly don’t believe that companies can focus on user growth or profitability, and those directions have different levers?
  - aeyes 4y ago
    Why do you call Spotify a startup? It was founded over 15 years ago. Hundreds of thousands of companies have come and gone during this time. Is it because they aren't profitable just yet? How many more years are you willing to wait?
- hamandcheese 4y ago
  How could there not be? Fire all the people who were working on growth.
- oneoff786 4y ago
  Why not? You don’t think they could eek out an additional 70 cents per month per customer if they wanted to focus on that right now?

dopeboy 4y ago

That's on $12B in revenue, 4% churn, and having reformed one of the oldest, entrenched industries ever. I know nothing about the guy, but can you agree that's a remarkable achievement? He keeps his job because he's promising that once an inflection point is reached, you become more aggressive about turning a profit. It's both your and mine guess on what that could be, but I think starting that procedure with a 200M paid subscriber base isn't the worst idea.

deleted 4y ago

[deleted]