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It's very important to keep in mind that Spotify and Pandora keep very little of their revenue. Based on calculations I did back in April, Spotify has about 3
by jeremymims 14y ago
It's very important to keep in mind that Spotify and Pandora keep very little of their revenue.
Based on calculations I did back in April, Spotify has about 3 million paid users and 10 million unpaid users. Spotify said they were on track to do close to $900 million in revenue this year. About $662 million was set to go to the record labels. After all of Spotify's considerable costs, they'll run a loss.
When Pandora went public last year, they did it on $75 million in revenue and $74.25 million in expenses in that quarter (a 1% margin).
The more successful Spotify and Pandora get, the more likely the record labels are to ask for more money in contract negotiations.
These are great companies that make great products. They will unfortunately be sharecropping on the music labels' land.
Just as many of us consider it unwise to build on Facebook or Twitter's platforms, we should be just as wary about building a business on top of the music or movie business (Netflix is in the same boat).
- cma 14y agoI thought the radio aspect of Pandora means they get to take advantage of compulsory licensing...
- elarkin 14y agoThey do.
- powerslave12r 14y agoIt will be awesome when Spotify (or others) starts signing up bands as a "record label" itself, similar to Netflix produced shows. (Maybe they already do this?) Maybe that will attract more bands to directly do business with them.
- w0ts0n 14y agoWhat you have to remember is the record labels ALSO own a chunk of Spotify.
- powerslave12r 14y agoI would think that should be highly irrelevant. If they have invested in Spotify, then they are just securing their place in case Spotify (or Spotify-like services) displace the old model. It doesn't mean that is going to make any difference in the change of business model when it happens. If they have too much control in Spotify, someone else will start a new service/label. OR bands will just self produce. I love the digital age.