6 ms·

Spotify loses $59.1 million on $244.5 million in revenue

77 points by Hates_ 14y ago

king_magic 14y ago
That's really a shame. I hope they can turn things around somehow. I've quickly become a rabid fan of Spotify; I'd happily pay more for the service if it meant it would be financially sound.
- dsk2012 14y ago
  Paying more isn't going to do much. It looks like they're losing because of insane licensing costs. Paying more means more goes to the music companies.
- mrilhan 14y ago
  I agree, but I don't think it will be necessary to pay radically more. I was actually happy to see they did $57m losses on $250m revenues; even happier when I saw that a large sum of the loss was the new staff. Worry not, because, in my opinion; Spotify is here to stay and is solving a problem that is certainly worth solving. Its the combination of several factors: A previous commenter stated that Spotify is not only competing for iTunes' money, but with piracy too. I agree; they're converting a client that was worth $0.00 over their lifetime (as well as those who 'pirated and then purchased', etc) into paying the artist per listen. That's absolutely radical. The $20m increase in staffing is a direct product of this vision. The new staff is hard at work at making Spotify available on as many platforms, as beautifully as possible, with as many artists and in as many countries as possible. The price, whether it be $9.99 or $12.45, won't be the problem, pricing can be fixed later with more data. The only danger Spotify faces is the resistance it is facing in 'the rest of the world', where there may be entrenched local media companies with distribution rights, or local music/label representatives may be weary of the payment model. That would limit their scale, and Spotify needs scale to work. ... thank god for the $100m Sean Parker found for Spotify, and for the X billions more he can sway for it as well. I'd bet on Spotify today more than ever, it may be a long bet, but we haven't seen such a successful contender in this category since iTunes. Spotify is an A+ example of what every other startup with 1/100th of the business plan or cojones is trying to do: Spotify is aiming to become a billion dollar company, and I congratulate them for that. The music industry is worth spending tens, hundreds, even thousands of millions to fix/disrupt/change/make better.
seats 14y ago
Ouch. Net revenue margins at 2%. There's more top line margin in farming. Makes me wonder if there isn't an antitrust case here somewhere. Feels highly predatory by music license holders.
- ajross 14y ago
  Farming isn't a growth bet. Spotify could break even by increasing their prices/fees by 25% or by reducing their overhead by the same amount. My guess is that either would be an easy option if their goal was short term profits. This represents a high burn rate for sure, but it's not inherently problematic. That doesn't mean that the content licenses aren't predatory, just that I don't see the relevance of that argument.
  - aes256 14y ago
    > Spotify could break even by increasing their prices/fees by 25% or by reducing their overhead by the same amount. It's not obvious this is the case. If the record companies see Spotify increasing their revenue, they may just demand higher fees. That's the crux of the problem here. Spotify need the record companies, but the record companies don't need Spotify. For now the record companies are squeezing Spotify for all their revenue, but it's no trouble to them if Spotify goes out of business. It's a tiny revenue stream for most of these companies.
    - adgar2 14y ago
      > Spotify need the record companies, but the record companies don't need Spotify. For now the record companies are squeezing Spotify for all their revenue, but it's no trouble to them if Spotify goes out of business. I suspect Spotify knows this, and is betting on getting too big to fail before the record companies push them under.
      - aes256 14y ago
        I guess that is the strategy they are playing, but I can't help thinking Spotify are going to be in a weak position no matter how large they are. Fundamentally, the service they offer is not particularly difficult to replicate. They take music and stream it to users, supported by either advertising or a monthly subscription. They act as a middle man that the big three record labels could easily cut out, and at the same time these labels can effectively pull the plug on Spotify at their convenience. Without the music library, Spotify is nothing.
joshryandavis 14y ago
They have to turn things around. I don't think I could go back to life without Spotify.
- kyouens 14y ago
  As long as Rdio isn't in the same boat, we'll be OK.
  - k-mcgrady 14y ago
    AFAIK all the streaming music services face this problem. The record companies demand so much off them that they barely break even.
    - evertonfuller 14y ago
      'So much'? You honestly think an artist/label getting $0.003 per play is 'so much'? What world do you live on. At least with iTunes if say 1000 fans your track, you'll get at least $500 from the sales. But if those same 1000 just streamed the track from Spotify, they'd each have to play the track 166 times to get the same royalties.
      - nicholassmith 14y ago
        Can you support the $0.003 figure? I've seen widely different figures in a few faces.
        k-mcgrady 14y ago
        I've seen financial reports from an independent artist (distributing through CDBaby). Here's the figures: Spotify: $0.0022 Deezer: $0.0022 LastFM: $0.0005 iTunesMatch: $0.003 These vary very slightly from time to time but iTunes Match has regularly been the highest.
        evertonfuller 14y ago
        It varies by month, by country, and by record label. So it's hard to give an exact figure for every artist. $0.003 is on the top end of the scale though.
fourstar 14y ago
Wanted to try them out, but they restrict their signups to Facebook only... What the heck?
- k-mcgrady 14y ago
  It used to be just email but when Facebook promoted their open graph integration heavily they made it Facebook signups. Probably some deal they made with Facebook.
- _ikke_ 14y ago
  Since recently you can register again without a facebook account. You just have to scroll down. (https://www.spotify.com/nl/signup/open/ https://www.spotify.com/nl/signup/open/)
  - daleharvey 14y ago
    I would suggest people not in the netherlands not click that link as it sets your language preference and you need to go searching for the language switcher :P
- calinet6 14y ago
  Every single time Spotify is mentioned in the tech community, this happens....
- jmatt 14y ago
  https://www.spotify.com/us/signup/plain/ https://www.spotify.com/us/signup/plain/
staunch 14y ago
Pretty sure music license "negotiations" involve asking "How much?" and receiving the reply "How much ya'got?"
- calinet6 14y ago
  Yep, sounds like that's exactly it. “Virtually every new dollar of revenue went directly to music companies as royalty payments, evidencing the fact that the more members Spotify adds, the more money the company loses. In almost a one-for-one scenario, every dollar Spotify is generating immediately exits the company due to licensing fees.” This predatory relationship has to stop if the record companies want to exist at all in the future. I don't think they realize that they're pointing the gun at their own foot.
  - agpen 14y ago
    That's been the case for almost 15 years now and any sign of a clue materializing has yet to be demonstrated. Just look at Netflix's slow death spiral as its content library keeps shrinking in favor of overpriced walled gardens. Valve is virtually the only major media company to understand that the only way to win back dollars from pirates is by offering a compelling service at fair prices.
  - macspoofing 14y ago
    >This predatory relationship has to stop if the record companies want to exist at all in the future. There is a lot demand for their product. It's not like people are switching to something else. People still want Lady Gaga and the Beatles.
  - dasil003 14y ago
    Their goal is to stripmine music startups as a revenue strategy. They'd rather have the companies there as an alternative to piracy, but they don't want them to have any power at all, so they string them along and siphon as much investment as they can.
  - jbigelow76 14y ago
    > This predatory relationship has to stop if the record companies want to exist at all in the future. If I had to gamble on who would be around in 10 years, Spotify or the labels, sad to say but my money would be on the labels.
nlh 14y ago
I'm a huge Spotify fan. In fact, I love it so much that I haven't purchased a song from iTunes in months. That alone should speak volumes about their position in the industry - I can't be alone here, and that means that for some significant portion of people, money has stopped going to Apple for music and now goes to Spotify. But here's the thing -- Spotify is too cheap. Their service is amazing and far, far too inexpensive relative to what they provide. They provide a bulk of their service for free, and people like me who want a bit more pay $10 a month. To get access to 5,000 songs via iTunes would cost me (roughly) $5000 -- and people are willing to pay it. That's 500 months of Spotify (42 years!) subscription to generate the same amount of revenue. So while I agree that music licensing costs, particular for radio-like services like Pandora, need to go down to be more in line with broadcast rates, I don't think that's what's hurting Spotify here. I think they're providing far too much value for what they get paid.
- daleharvey 14y ago
  As mentioned elsewhere in this thread, I think spotify have positioned themselves exactly to be in this situation. If they earn more money, the music labels still have all the negotiating power and will just take it, and if they raise their prices, less subscribers. At a guess, I think spotify are trying to squeeze themselves into a position where the labels need spotify because otherwise artists just will not have the same reach otherwise, I know I dont listen to a band until they put their stuff on spotify. I have seen labels + bands be more reactive to making sure their stuff hits spotify quickly which seems to show a shift in power, hopefully the trend continues.
  - ChuckMcM 14y ago
    The challenge then is to make money but appear to lose it, this appeases the music labels who think they are taking all the value off the table. It seems we need a tech company that can do 'hollywood accounting' where they give the labels 40% of the 'net' and sadly there is no net.
- ohashi 14y ago
  Conversely, I hardly listen to music and bought maybe 10 CDs in my entire life. Spotify changed my behavior dramatically. I consume a lot more music now, that I wouldn't have otherwise. Spotify has got more money out of me than the sum of all my other music related spending. It's very possible I am an outlier though.
willholloway 14y ago
The easy answer to this is to raise prices. We need to raise the price of digital goods if we want to move forward as a post-industrial society. I pay $36 a year for Pandora, I would pay $72. $3 a month is an insanely good deal. Before Napster I would easily spend $30 a month on music. Society needs more money in artists hands, because the robots are coming to take away more jobs, and we can offset some of that by reducing the labor supply by allowing more people to earn a living creating digital goods. Many of you will say that most aren't good enough to be pro artists. I say that so many more would become good enough through deliberate practice if financial viability wasn't nigh impossible. Capitalism as we know it will not survive zero-priced digital goods, robotics and other forms of automation. Deflation is a specter over all our heads. Wise nations will look for ways to reduce the supply of labor, instead of an insane push for ever higher employment levels.
- cdh 14y ago
  Without going near your comments on Capitalism, I don't think Spotify's situation is as clear-cut as you do. Why would I pay $20, $15, or even $11, when I can get the exact same service from at least a dozen other companies for $10/month or less? (Rhapsody, Zune, Slacker, Rdio, etc.) If they raise prices at all, they're likely to lose a significant number of subscribers. If they raise prices and somehow keep those subscribers, the record companies may very well just milk them for the difference in increased licensing costs.
  - willholloway 14y ago
    All of the other companies need to pay licensing costs as well, and I believe the current licensing costs are unsustainably low. In the early years of the internet everyone got very excited about free. Free music, movies, and information. I think that right now society is collectively learning the same lesson so many developers have learned and posted about here. Free customers are the worst customers. Charge more. Inflation is virtuous. Deflation is a downward spiral into the abyss.
evertonfuller 14y ago
The sooner Spotify shuts down, the better.
- nicholassmith 14y ago
  Not a fan of the service or something else?
- randomchars 14y ago
  No seeders on your favorite torrent site? Edit: Just realized that you're the anti-streaming guy from above. Here's the deal: $10 a moth is reasonable for me considering the amount of music that I listen too. If I had to purchase the music to listen to it I would go back to torrents. I can't afford to spend $100-200+ a month on music. And that's what it would cost with digital downloads or CDs ordered online. If I were to buy it in my country I would have to shell out up to $25 for a CD. That would mean that I had spend $500 so I can keep my music habits. That is about the median household income here.
mtgx 14y ago
Spotify should make it so they can make deals directly with artists and then promote them in their store, kind of like how Amazon is doing with its self-publishing platform. They are big enough now for this to work. The problem is they most likely got forced into signing a non-compete clause with the labels, and they took that deal. So now they can't do that anymore, which makes them completely dependent on the labels in the foreseeable future, and the labels can keep asking for 98% of their revenue. And next time the labels brag about supporting innovations like Spotify (like when they did when they wanted to pass SOPA), remind them that they are what's killing innovations like Spotify, and these services usually achieve success despite them.
- AndrewDucker 14y ago
  No artist signed to a major label can do deals outside of that deal. The whole point of their signing is that they have an exclusive deal with the label. So while Spotify could go direct to some artists, none of the big ones can make that kind of deal.
  - mtgx 14y ago
    They don't have to take all the big ones immediately. Just start a trend, and some of the big ones might join later once their contracts with the labels expire. They probably wouldn't be able to put their old songs there, but they could the new ones.
    - AndrewDucker 14y ago
      Well, they can do that. See the first answer here: http://www.spotify.com/uk/work-with-us/labels-and-artists/artist-page/ http://www.spotify.com/uk/work-with-us/labels-and-artists/ar...
nhangen 14y ago
This explains why they've suddenly started spamming me with playlist updates from my FB friends...trying to crank up the virality factor in order to increase revenue. I paid for Spotify for a few months, and thought it was nice, but I much prefer buying iTunes/Amazon music and syncing it to all of my devices via iTunes Match. Until Spotify gets a better recommendation engine, I think they'll suffer to get revenue where they want it to be.
cocoflunchy 14y ago
It would be interesting to know if they earn more money on subscriptions or on ads. If it is the former, then why not cut all free plans and leave only the subscriptions? If I understood correctly, they pay a fee to the records company each time someone plays a song. Even if they're making half their revenue on the free plan, cutting royalties by something like 95% (just guessing) and losing 50% of the revenue doesn't seem like a bad idea... Of course they lose on advertising, but is there something else I'm missing?
- alexmuller 14y ago
  I must be missing something here with regards to revenue. Spotify has 15 million users, 4 million of whom are paid subscribers. So 11 million free users. They have two paid plans: $60/year and $120/year. If we assume the following structure: 11000000 free users @ $0.50 ad revenue per year = $ 5,500,000 4000000 mid users @ $60/year = $240,000,000 0 top users @ $120/year = $ 0 For a total of $245.5 million in revenue, already more than reported here. And those proportions for their two paid plans are clearly ridiculous. But even if their free users provide $0 in revenue _total_, they still only have 2% of paid users on their top plan.
  - reitzensteinm 14y ago
    You're not taking growth into account - they're still more than doubling each year. You'd have to use the average user count to do math properly, not today's user count.
    - alexmuller 14y ago
      Ah, dead on! Those user figures are from August this year but the revenue is listed as 2011. Thanks.
mwg66 14y ago
I wasn't expecting to be a fan of Spotify but I have had a subscription on my iPhone this past year and it has been excellent. I no longer keep iPod (iTunes-synced) music on my devices.
bjansn 14y ago
I'm a premium user for more than a year and I love it! It is indeed cheap, but making it more expensive won't get them the same number of paying people paying some amount of money. So from that I'd say that they aim to get more people to pay for music again. As nlh mentioned, he is not buying music anymore on iTunes. You could swap iTunes for downloading as well. Spotify might as easily help artist to release their own music in a seperate section of the application. I would love to see something like this.
encoderer 14y ago
A good friend of mine is a software engineer in their NYC office. Some observations: 1) They have really cool concerts in their office regularly, and often have B-list musicians in their office . 2) They fly all new NYC employees to Sweden for a couple weeks for training and culture immersion. 3) Being in NYC allows them (it seems) to pay less than comparable jobs here in San Francisco. Probably because there are far fewer cool startups in NYC to compete for talent with. 4) The name "Spotify" was a total fluke and accident, one co-founder mis-heard another, bought the domain, and the rest is history.
- tricolon 14y ago
  > Probably because there are far fewer cool startups in NYC to compete for talent with. I know this is a silly argument, but unless you have some evidence, I would advise you to take that back. http://nytm.org/made-in-nyc/ http://nytm.org/made-in-nyc/
  - encoderer 14y ago
    I don't really get your point. One Twitter or Facebook can hire as many engineers as 1/2 that list. To say nothing of other interesting, top-tier tech companies from which there's nearly a limitless need for more engineers. I have good friends who are good engineers in NYC, and I live here in SF. They had a ton of choices from digital agencies, finance companies, and myriad other places building line-of-business software. Here? Every experienced engineer I know with a LinkedIn gets several cold-inmails a month for startup & tech company opportunities. It's about density. The financial district in San Francisco can fit in about 1 block of lower Manhattan. And the startup community in NYC compares similarly to the startup community here -- which stretches 50 miles from San Jose to San Francisco and beyond.
Tycho 14y ago
I would pay up to £50 for that service. And if they charged £100 or even £1000 (per month) for that service, I wouldn't consider it unreasonable I'd just curse my luck fir being too poor.
paigalhaes 14y ago
Recently I've hear Daniel Ek talk about the Spotify birth and business model, it gives you a better ideia of the path Spotify has taken, and answering questions about the differences about music and video services http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2964 http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2964

77 points by Hates_ 14y ago

That's really a shame. I hope they can turn things around somehow. I've quickly become a rabid fan of Spotify; I'd happily pay more for the service if it meant it would be financially sound.

dsk2012 14y ago
Paying more isn't going to do much. It looks like they're losing because of insane licensing costs. Paying more means more goes to the music companies.
mrilhan 14y ago
I agree, but I don't think it will be necessary to pay radically more. I was actually happy to see they did $57m losses on $250m revenues; even happier when I saw that a large sum of the loss was the new staff. Worry not, because, in my opinion; Spotify is here to stay and is solving a problem that is certainly worth solving. Its the combination of several factors: A previous commenter stated that Spotify is not only competing for iTunes' money, but with piracy too. I agree; they're converting a client that was worth $0.00 over their lifetime (as well as those who 'pirated and then purchased', etc) into paying the artist per listen. That's absolutely radical. The $20m increase in staffing is a direct product of this vision. The new staff is hard at work at making Spotify available on as many platforms, as beautifully as possible, with as many artists and in as many countries as possible. The price, whether it be $9.99 or $12.45, won't be the problem, pricing can be fixed later with more data. The only danger Spotify faces is the resistance it is facing in 'the rest of the world', where there may be entrenched local media companies with distribution rights, or local music/label representatives may be weary of the payment model. That would limit their scale, and Spotify needs scale to work. ... thank god for the $100m Sean Parker found for Spotify, and for the X billions more he can sway for it as well. I'd bet on Spotify today more than ever, it may be a long bet, but we haven't seen such a successful contender in this category since iTunes. Spotify is an A+ example of what every other startup with 1/100th of the business plan or cojones is trying to do: Spotify is aiming to become a billion dollar company, and I congratulate them for that. The music industry is worth spending tens, hundreds, even thousands of millions to fix/disrupt/change/make better.

seats 14y ago

Ouch. Net revenue margins at 2%. There's more top line margin in farming. Makes me wonder if there isn't an antitrust case here somewhere. Feels highly predatory by music license holders.

ajross 14y ago
Farming isn't a growth bet. Spotify could break even by increasing their prices/fees by 25% or by reducing their overhead by the same amount. My guess is that either would be an easy option if their goal was short term profits. This represents a high burn rate for sure, but it's not inherently problematic. That doesn't mean that the content licenses aren't predatory, just that I don't see the relevance of that argument.
- aes256 14y ago
  > Spotify could break even by increasing their prices/fees by 25% or by reducing their overhead by the same amount. It's not obvious this is the case. If the record companies see Spotify increasing their revenue, they may just demand higher fees. That's the crux of the problem here. Spotify need the record companies, but the record companies don't need Spotify. For now the record companies are squeezing Spotify for all their revenue, but it's no trouble to them if Spotify goes out of business. It's a tiny revenue stream for most of these companies.
  - adgar2 14y ago
    > Spotify need the record companies, but the record companies don't need Spotify. For now the record companies are squeezing Spotify for all their revenue, but it's no trouble to them if Spotify goes out of business. I suspect Spotify knows this, and is betting on getting too big to fail before the record companies push them under.
    - aes256 14y ago
      I guess that is the strategy they are playing, but I can't help thinking Spotify are going to be in a weak position no matter how large they are. Fundamentally, the service they offer is not particularly difficult to replicate. They take music and stream it to users, supported by either advertising or a monthly subscription. They act as a middle man that the big three record labels could easily cut out, and at the same time these labels can effectively pull the plug on Spotify at their convenience. Without the music library, Spotify is nothing.

joshryandavis 14y ago

They have to turn things around. I don't think I could go back to life without Spotify.

kyouens 14y ago
As long as Rdio isn't in the same boat, we'll be OK.
- k-mcgrady 14y ago
  AFAIK all the streaming music services face this problem. The record companies demand so much off them that they barely break even.
  - evertonfuller 14y ago
    'So much'? You honestly think an artist/label getting $0.003 per play is 'so much'? What world do you live on. At least with iTunes if say 1000 fans your track, you'll get at least $500 from the sales. But if those same 1000 just streamed the track from Spotify, they'd each have to play the track 166 times to get the same royalties.
    - nicholassmith 14y ago
      Can you support the $0.003 figure? I've seen widely different figures in a few faces.
      - k-mcgrady 14y ago
        I've seen financial reports from an independent artist (distributing through CDBaby). Here's the figures: Spotify: $0.0022 Deezer: $0.0022 LastFM: $0.0005 iTunesMatch: $0.003 These vary very slightly from time to time but iTunes Match has regularly been the highest.
      - evertonfuller 14y ago
        It varies by month, by country, and by record label. So it's hard to give an exact figure for every artist. $0.003 is on the top end of the scale though.

fourstar 14y ago

Wanted to try them out, but they restrict their signups to Facebook only... What the heck?

k-mcgrady 14y ago
It used to be just email but when Facebook promoted their open graph integration heavily they made it Facebook signups. Probably some deal they made with Facebook.
_ikke_ 14y ago
Since recently you can register again without a facebook account. You just have to scroll down. (https://www.spotify.com/nl/signup/open/ https://www.spotify.com/nl/signup/open/)
- daleharvey 14y ago
  I would suggest people not in the netherlands not click that link as it sets your language preference and you need to go searching for the language switcher :P
calinet6 14y ago
Every single time Spotify is mentioned in the tech community, this happens....
jmatt 14y ago
https://www.spotify.com/us/signup/plain/ https://www.spotify.com/us/signup/plain/

staunch 14y ago

Pretty sure music license "negotiations" involve asking "How much?" and receiving the reply "How much ya'got?"

calinet6 14y ago
Yep, sounds like that's exactly it. “Virtually every new dollar of revenue went directly to music companies as royalty payments, evidencing the fact that the more members Spotify adds, the more money the company loses. In almost a one-for-one scenario, every dollar Spotify is generating immediately exits the company due to licensing fees.” This predatory relationship has to stop if the record companies want to exist at all in the future. I don't think they realize that they're pointing the gun at their own foot.
- agpen 14y ago
  That's been the case for almost 15 years now and any sign of a clue materializing has yet to be demonstrated. Just look at Netflix's slow death spiral as its content library keeps shrinking in favor of overpriced walled gardens. Valve is virtually the only major media company to understand that the only way to win back dollars from pirates is by offering a compelling service at fair prices.
- macspoofing 14y ago
  >This predatory relationship has to stop if the record companies want to exist at all in the future. There is a lot demand for their product. It's not like people are switching to something else. People still want Lady Gaga and the Beatles.
- dasil003 14y ago
  Their goal is to stripmine music startups as a revenue strategy. They'd rather have the companies there as an alternative to piracy, but they don't want them to have any power at all, so they string them along and siphon as much investment as they can.
- jbigelow76 14y ago
  > This predatory relationship has to stop if the record companies want to exist at all in the future. If I had to gamble on who would be around in 10 years, Spotify or the labels, sad to say but my money would be on the labels.

nlh 14y ago

I'm a huge Spotify fan. In fact, I love it so much that I haven't purchased a song from iTunes in months. That alone should speak volumes about their position in the industry - I can't be alone here, and that means that for some significant portion of people, money has stopped going to Apple for music and now goes to Spotify. But here's the thing -- Spotify is too cheap. Their service is amazing and far, far too inexpensive relative to what they provide. They provide a bulk of their service for free, and people like me who want a bit more pay $10 a month. To get access to 5,000 songs via iTunes would cost me (roughly) $5000 -- and people are willing to pay it. That's 500 months of Spotify (42 years!) subscription to generate the same amount of revenue. So while I agree that music licensing costs, particular for radio-like services like Pandora, need to go down to be more in line with broadcast rates, I don't think that's what's hurting Spotify here. I think they're providing far too much value for what they get paid.

daleharvey 14y ago
As mentioned elsewhere in this thread, I think spotify have positioned themselves exactly to be in this situation. If they earn more money, the music labels still have all the negotiating power and will just take it, and if they raise their prices, less subscribers. At a guess, I think spotify are trying to squeeze themselves into a position where the labels need spotify because otherwise artists just will not have the same reach otherwise, I know I dont listen to a band until they put their stuff on spotify. I have seen labels + bands be more reactive to making sure their stuff hits spotify quickly which seems to show a shift in power, hopefully the trend continues.
- ChuckMcM 14y ago
  The challenge then is to make money but appear to lose it, this appeases the music labels who think they are taking all the value off the table. It seems we need a tech company that can do 'hollywood accounting' where they give the labels 40% of the 'net' and sadly there is no net.
ohashi 14y ago
Conversely, I hardly listen to music and bought maybe 10 CDs in my entire life. Spotify changed my behavior dramatically. I consume a lot more music now, that I wouldn't have otherwise. Spotify has got more money out of me than the sum of all my other music related spending. It's very possible I am an outlier though.

willholloway 14y ago

The easy answer to this is to raise prices. We need to raise the price of digital goods if we want to move forward as a post-industrial society. I pay $36 a year for Pandora, I would pay $72. $3 a month is an insanely good deal. Before Napster I would easily spend $30 a month on music. Society needs more money in artists hands, because the robots are coming to take away more jobs, and we can offset some of that by reducing the labor supply by allowing more people to earn a living creating digital goods. Many of you will say that most aren't good enough to be pro artists. I say that so many more would become good enough through deliberate practice if financial viability wasn't nigh impossible. Capitalism as we know it will not survive zero-priced digital goods, robotics and other forms of automation. Deflation is a specter over all our heads. Wise nations will look for ways to reduce the supply of labor, instead of an insane push for ever higher employment levels.

cdh 14y ago
Without going near your comments on Capitalism, I don't think Spotify's situation is as clear-cut as you do. Why would I pay $20, $15, or even $11, when I can get the exact same service from at least a dozen other companies for $10/month or less? (Rhapsody, Zune, Slacker, Rdio, etc.) If they raise prices at all, they're likely to lose a significant number of subscribers. If they raise prices and somehow keep those subscribers, the record companies may very well just milk them for the difference in increased licensing costs.
- willholloway 14y ago
  All of the other companies need to pay licensing costs as well, and I believe the current licensing costs are unsustainably low. In the early years of the internet everyone got very excited about free. Free music, movies, and information. I think that right now society is collectively learning the same lesson so many developers have learned and posted about here. Free customers are the worst customers. Charge more. Inflation is virtuous. Deflation is a downward spiral into the abyss.

evertonfuller 14y ago

The sooner Spotify shuts down, the better.

nicholassmith 14y ago
Not a fan of the service or something else?
randomchars 14y ago
No seeders on your favorite torrent site? Edit: Just realized that you're the anti-streaming guy from above. Here's the deal: $10 a moth is reasonable for me considering the amount of music that I listen too. If I had to purchase the music to listen to it I would go back to torrents. I can't afford to spend $100-200+ a month on music. And that's what it would cost with digital downloads or CDs ordered online. If I were to buy it in my country I would have to shell out up to $25 for a CD. That would mean that I had spend $500 so I can keep my music habits. That is about the median household income here.

mtgx 14y ago

Spotify should make it so they can make deals directly with artists and then promote them in their store, kind of like how Amazon is doing with its self-publishing platform. They are big enough now for this to work. The problem is they most likely got forced into signing a non-compete clause with the labels, and they took that deal. So now they can't do that anymore, which makes them completely dependent on the labels in the foreseeable future, and the labels can keep asking for 98% of their revenue. And next time the labels brag about supporting innovations like Spotify (like when they did when they wanted to pass SOPA), remind them that they are what's killing innovations like Spotify, and these services usually achieve success despite them.

AndrewDucker 14y ago
No artist signed to a major label can do deals outside of that deal. The whole point of their signing is that they have an exclusive deal with the label. So while Spotify could go direct to some artists, none of the big ones can make that kind of deal.
- mtgx 14y ago
  They don't have to take all the big ones immediately. Just start a trend, and some of the big ones might join later once their contracts with the labels expire. They probably wouldn't be able to put their old songs there, but they could the new ones.
  - AndrewDucker 14y ago
    Well, they can do that. See the first answer here: http://www.spotify.com/uk/work-with-us/labels-and-artists/artist-page/ http://www.spotify.com/uk/work-with-us/labels-and-artists/ar...

nhangen 14y ago

This explains why they've suddenly started spamming me with playlist updates from my FB friends...trying to crank up the virality factor in order to increase revenue. I paid for Spotify for a few months, and thought it was nice, but I much prefer buying iTunes/Amazon music and syncing it to all of my devices via iTunes Match. Until Spotify gets a better recommendation engine, I think they'll suffer to get revenue where they want it to be.

cocoflunchy 14y ago

It would be interesting to know if they earn more money on subscriptions or on ads. If it is the former, then why not cut all free plans and leave only the subscriptions? If I understood correctly, they pay a fee to the records company each time someone plays a song. Even if they're making half their revenue on the free plan, cutting royalties by something like 95% (just guessing) and losing 50% of the revenue doesn't seem like a bad idea... Of course they lose on advertising, but is there something else I'm missing?

alexmuller 14y ago
I must be missing something here with regards to revenue. Spotify has 15 million users, 4 million of whom are paid subscribers. So 11 million free users. They have two paid plans: $60/year and $120/year. If we assume the following structure: 11000000 free users @ $0.50 ad revenue per year = $ 5,500,000 4000000 mid users @ $60/year = $240,000,000 0 top users @ $120/year = $ 0 For a total of $245.5 million in revenue, already more than reported here. And those proportions for their two paid plans are clearly ridiculous. But even if their free users provide $0 in revenue _total_, they still only have 2% of paid users on their top plan.
- reitzensteinm 14y ago
  You're not taking growth into account - they're still more than doubling each year. You'd have to use the average user count to do math properly, not today's user count.
  - alexmuller 14y ago
    Ah, dead on! Those user figures are from August this year but the revenue is listed as 2011. Thanks.

mwg66 14y ago

I wasn't expecting to be a fan of Spotify but I have had a subscription on my iPhone this past year and it has been excellent. I no longer keep iPod (iTunes-synced) music on my devices.

bjansn 14y ago

I'm a premium user for more than a year and I love it! It is indeed cheap, but making it more expensive won't get them the same number of paying people paying some amount of money. So from that I'd say that they aim to get more people to pay for music again. As nlh mentioned, he is not buying music anymore on iTunes. You could swap iTunes for downloading as well. Spotify might as easily help artist to release their own music in a seperate section of the application. I would love to see something like this.

encoderer 14y ago

A good friend of mine is a software engineer in their NYC office. Some observations: 1) They have really cool concerts in their office regularly, and often have B-list musicians in their office . 2) They fly all new NYC employees to Sweden for a couple weeks for training and culture immersion. 3) Being in NYC allows them (it seems) to pay less than comparable jobs here in San Francisco. Probably because there are far fewer cool startups in NYC to compete for talent with. 4) The name "Spotify" was a total fluke and accident, one co-founder mis-heard another, bought the domain, and the rest is history.

tricolon 14y ago
> Probably because there are far fewer cool startups in NYC to compete for talent with. I know this is a silly argument, but unless you have some evidence, I would advise you to take that back. http://nytm.org/made-in-nyc/ http://nytm.org/made-in-nyc/
- encoderer 14y ago
  I don't really get your point. One Twitter or Facebook can hire as many engineers as 1/2 that list. To say nothing of other interesting, top-tier tech companies from which there's nearly a limitless need for more engineers. I have good friends who are good engineers in NYC, and I live here in SF. They had a ton of choices from digital agencies, finance companies, and myriad other places building line-of-business software. Here? Every experienced engineer I know with a LinkedIn gets several cold-inmails a month for startup & tech company opportunities. It's about density. The financial district in San Francisco can fit in about 1 block of lower Manhattan. And the startup community in NYC compares similarly to the startup community here -- which stretches 50 miles from San Jose to San Francisco and beyond.

Tycho 14y ago

I would pay up to £50 for that service. And if they charged £100 or even £1000 (per month) for that service, I wouldn't consider it unreasonable I'd just curse my luck fir being too poor.

paigalhaes 14y ago

Recently I've hear Daniel Ek talk about the Spotify birth and business model, it gives you a better ideia of the path Spotify has taken, and answering questions about the differences about music and video services http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2964 http://ecorner.stanford.edu/authorMaterialInfo.html?mid=2964