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Spotify CEO Reacts to Apple Music - "Oh ok."
- Thread starter Vanillalite
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Indeed. Google All Play Access is basically the same thing, has a similar advantage of being "native" on it's host platform and hasn't exactly set the world on fire either.
-- EDIT --
Actually, Xbox Music is also the same thing as well: same price and you can listen to music from OneDrive. In this regard, Apple is sorta playing catch up with Google and MS.
HIGH DEF JEFF
Banned
I'm glad Spotify has been pitted against Apple Music as it's arch rival.
I'm happy over here using my Rdio account.
I'm happy over here using my Rdio account.
That doesn't change anything discussed in this thread. They added 5 million paying customers and 30 million free users. That means they won't make a profit yet again(it will be a larger loss), and still haven't figured out how to convert free users to paid in large enough numbers.
Also, I haven't said they are going out of business. I said they are ripe for a sale to a larger player, which is still true.
The free tier is both a curse and a blessing. It's the sole reason they got as many users as they do (a lot of people who would never even entertain the idea of signing up for a paid streaming service use it) but so far they have failed to properly monetize them.
But their current ad strategy is terrible. They could certainly increase ad revenue a lot if they got that fixed. Most of the ads I got before getting the 3 month deal are either for new albums in genres I have zero interest in (and would just listen on Spotify itself if I were interested) or ads for getting a premium subscription.
If I was managing Spotify, I would suck as much blood out from the free users as possible: require Facebook login with access to the users' likes and use that to target the ads like crazy, have interstitial video ads when moving around the UI and stuff like that.
LiquidMetal14
hide your water-based mammals
As I stream music on Spotify this morning, I chuckle.
Did you miss the part where they said losses widened to 162 million last year from a loss of 56 million in 2013?
That's actually a pretty worrying trend. They've only increased their paying subscriber count by 5 (not 10) and they increased their free user base by
That's actually pretty bad and means that they need to drain even more noney from the VC's who fund the company.
Nah it's okay they're just expanding!
They better hurry up in finding a way to monetise those free users soon.
If it's true that Apple has been pressuring labels in an effort to kill free Spotify, then this. Hope Apple Music fails in that case.
No Beatles. No Bob Seger. No Tay Tay.
People keep mentioning the Beatles, but I don't get it. It's not like they aren't releasing new albums: once you've bought all their songs you'll have them forever and I imagine someone who actually cares about the Beatles already has quite a few of their tracks in some format or another.
Also, it hasn't been confirmed if they'll be on Apple Music yet.
AyaisMUsikWhore
Member
What was their lost due to and I would love for you to say Free users when they in fact never said it was because of that. So find a link that says Spotify lost widens due to non paying users.
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Deleted member 12837
Unconfirmed Member
Really, dude? It's not a leap in logic at all. They lose money on every free user from both royalties and infrastructure costs. They aren't converting these free users to paid users (the only reason to even have a free tier) quickly or effectively. So they're going to continue to bleed money until they find some way to boost revenue from the other 25% of their userbase to balance out the free tier. Are you really suggesting that the revenue they bring in from their paid users actually covers the costs for the other 75%, and that their losses are from costs totally unrelated to that (heavy expansion, marketing, etc)? If they had a chance to get their finances in the black and make a profit, their investors would've absolutely put pressure on them to go down that path and wait to expand once they've at least demonstrated a sustainable business model.
This isn't some problem unique to Spotify. Any service that has a large percentage of customers on a free plan has this problem in the tech industry. They stay afloat with VC money for a while, and then either cut the free tier, figure out a new avenue for revenue that closes the gap, or they fold.
Zaraki_Kenpachi
Member
So you've got nothing and just throwing out assumptions you made up. OK
You won't get one. It's the same group brow beating how stupid you are for not making large leaps in logic like they are.
AyaisMUsikWhore
Member
I don't understand why people think Apple Music will just be easy breezy when it launches and completely take away the 70 million non paying Spotify users all of a sudden. And then Spotify will just go belly up.
Spotify has the ability to change those non payers to premium subscribers as shown with their promotions like the .99 when that first came around and also the student discount. Like come on.
Any source for all this wall of text or is it just your "personal in-depth analysis"?
Amazon doesn't make any profit either. In fact lot of online shopping companies don't make any profit either and solely rely on outside funding for expansion.
No one has said any of that. Maybe try responding to real posts instead of making up what you think people are saying?
D
Deleted member 12837
Unconfirmed Member
Which part doesn't make sense? We've established that they lose money on every free user. We've established that Spotify is losing money as a company as a whole. Why are you being purposefully dense about this?
He was talking about losses, which is different than Amazon's constant position of nil profits and nil losses.
Amazon usually doesn't have losses. They simply carefully manage their revenues to dump excess cash into capex to 1) avoid reporting a profit that needs to be taxed or 2) because they need to keep spending on capex to keep the business going.
http://ben-evans.com/benedictevans/2013/8/8/amazons-profits
A lot of online shopping companies have shut down because of consistent losses.
Zaraki_Kenpachi
Member
:lol Yes, we're being dense.
Step1: X is a negative to earnings
Step2: ????
Step3: ALL LOSSES are due to X
Step4: Profit?
Step 1: X is negative to earnings.
Your rebuttal: this is an outlandish claim!
How can you even intepret what I wrote this way? I never said it's a good thing, it's not a good thing period.
I'm just stating the obvious and Spotify CEO would be smart if he doesn't underestimate them.
The only thing hilarious here is that you couldn't interpret how bad these numbers are for them. As explained by others here, they keep losing money.
DoktorEvil
Banned
Well, Apple is offering a larger paid library for 5 dollars more, so 5 dollars more for a larger music library would be enough for a paying user like me to switch.
I'm sure I'm not the only paid user to think so.
Personally, Its nice to support free users but I'd rather them paying something than 0 dollars.
Zaraki_Kenpachi
Member
Wow, well thought out response. Really validates your point. Thanks
He was talking about losses, which is different than Amazon's constant position of nil profits and nil losses.
Amazon usually doesn't have losses. They simply carefully manage their revenues to dump excess cash into capex to 1) avoid reporting a profit that needs to be taxed or 2) because they need to keep spending on capex to keep the business going.
http://ben-evans.com/benedictevans/2013/8/8/amazons-profits
A lot of online shopping companies have shut down because of consistent losses.
Amazon CEO Bezos Faces Season of Worsts as Losses Mount:
For the third quarter, Amazon posted a net loss of $437 million, more than 10 times wider than the $41 million loss from a year ago. Sales rose 20 percent to $20.6 billion. Analysts had projected a loss of $331.4 million on sales of $20.9 billion.
http://www.bloomberg.com/news/artic...-bezos-faces-season-of-worsts-as-losses-mount
what am I missing? They said they went from 10 to 20 million paid users. I don't see why that's only 5 million? That's the category that really matters and they doubled it in the past year.
I'm only reacting to people thinking Spotify will be gone in 5 years or so. Wrong.
And I don't understand why you are being so obtuse about this when Spotify head itself believes that free subscription scheme is itself very useful for their company's revenue.
It doesn't work like that. Spotify is profitable in Sweden, France, the UK etc.
The model relies on markets maturing to where suscribers account for enough of the base. Losses are coming from rapid expansion into new countries and securing the rights for those regions which come in the form of advances.
Spotify is not a broken model, it's a very successful one.
D
Deleted member 12837
Unconfirmed Member
Except Step 3 is a straw man. I'm certainly not making that claim, and I haven't seen anyone else do so.
Free users cost more to support (royalties, infrastructure, etc) than the company makes back in revenue generated by them (via ads). Free users make up 75% of the user base. It's dangerous, and likely unsustainable, to rely on a small percentage of paying customers to not only pay for the cost of the free users, but also add enough additional revenue to cover the costs of running the company.
They would save a lot of money by cutting the free plan, but also lose the opportunity to upgrade those users, so it's a trade-off. Spotify needs to either make more money from ads or find a way to more effectively upgrade free users, otherwise the free plan will continue to be a huge cost for the company.
Yes, that's the bet he's making. He needs those free subscriptions to eventually upgrade to paid. It's an acquisition channel. It doesn't mean it'll end up paying off (it certainly hasn't yet, in the 9 years Spotify has been running).
Take a look at their annual income for their last 10 years. I didn't say they never make losses. It is effectively a nil profit margin under 0.5% (even though 7 of 10 years are nominally profitable).
Except it has.
You are ignoring the markets where it is already profitable, and failing to acknowledge the costs of rapid expansion and need for those new markets to mature.
The model works, it's why they were able to secure such backing to expand so rapidly In the first place and continue to do so.
As DECK'ARD mentioned, it has worked, which you are clearly avoiding to understand right now.
badcrumble
Member
Ah, I think you guys think that because they got additional investments in a number greater than their 2014 losses they're in the black. Is that it?
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Deleted member 12837
Unconfirmed Member
If you have some links to support the current model working, I'm happy to retract my statement, but everything I've read has suggested otherwise. It's not like I'm the first person to be arguing this:
http://jonmaples.com/2015/03/03/growing-concerns-does-music-subscriber-growth-cripple-profitability/
http://copyright.nova.edu/free-streaming/
http://rainnews.com/new-research-current-streaming-music-business-model-is-doomed/
http://www.cnet.com/news/spotify-needs-to-lose-free-option-opinion/
I realize that rapid expansion costs money. I'm not convinced that if you take away that money spent on expansion, Spotify would suddenly be profitable in its current state, without making any of the changes I proposed in my previous post.
I think the numbers they just released showed a little over a billion euro in revenue. If I remember right, 880 million or so were paid out in royalties and they had something like 180 million in payroll. I'm not sure if that number covered general overhead, but those two numbers alone almost put them in the red.
http://billboard.com/articles/business/6320047/spotify-france-profit-2013
When a model relies on individual markets maturing you can't look at the picture as a whole during rapid expansion.
The question of sustainability was floated by the record industry itself once Spotify was firmly established to bring pressure on the dominant player, and argue the model was impossible to sustain and kneecapping the industry.
It wasn't, and it isn't.
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Deleted member 12837
Unconfirmed Member
As I stream music in the background of Elder Scrolls Online while I PVP on my PS4, I sing! Price is definitely one factor for me, but availability is the biggest. If I can't stream your service in the background of my games, your service isn't good enough for me.
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Deleted member 17706
Unconfirmed Member
Nice! I'm definitely going to give it a try when it comes out. Hard to beat a three month free trial.
D
Deleted member 12837
Unconfirmed Member
Thanks for the link, I wasn't aware of Spotify's performance in individual, smaller markets. Gives me something to chew on. Two things:
1. I don't think it's safe or fair to extrapolate performance in a few small markets, to how the company will do in the US, let alone on a global scale.
2. Spotify launched in the US only a year after it launched in France. If your argument is that the service still needs more time to mature in other markets, how much longer is it going to need? Will we be seeing profitability next year in the US?
Yeah, all the markets will vary but when a model relies on them maturing to become profitable wondering why a company isn't profitable when it has been expanding into dozens of new ones each year is rather silly. Although it does make good headlines
The model isn't inherently broken, its success is what made that expansion possible because it is proven. Before expansion Spotify was one of Sweden's most profitable music companies. The model just by definition needs time to work. It will become profitable in the US at some point, we'll just have to wait and see.
The ones who don't want it to have that time to work are the record industry, who have been driving up the licensing costs now its established and previous contracts expired, and their fear of the success of Spotify's model is a large part of why Apple was able to extract the concessions from them which they did with the 3 month free and family plan pricing.
There's pressure on Spotify, but it's not because of the model itself.
D
Deleted member 12837
Unconfirmed Member
Yeah, all the markets will vary but when a model relies on them maturing to become profitable wondering why a company isn't profitable when it has been expanding into dozens of new ones each year is rather silly. Although it does make good headlines
The model isn't inherently broken, its success is what made that expansion possible because it is proven. Before expansion Spotify was one of Sweden's most profitable music companies. The model just by definition needs time to work. It will become profitable in the US at some point, we'll just have to wait and see.
The ones who don't want it to have that time to work are the record industry, who have been driving up the licensing costs as it has now expanded and previous contracts expired, and their fear of the success of Spotify's model is a large part of why Apple was able to extract the concessions from them which they did with the 3 month free and family plan pricing.
There's pressure on Spotify, but it's not because of the model itself.
Time doesn't seem to be the only condition though (otherwise US would be much closer to profitable right now, as I mentioned in my previous post).
Support/cooperation from record labels is important, as you mention yourself. Additionally, I imagine you need better than a 75/25 split of free to paid subscribers, but I didn't see any data about the splits in France, Sweden and the UK so I don't know that for sure. The model depends on these things.
I also still believe that Spotify will eventually (once they're past their explosive growth phase) want/need to get rid of the free tier. If anything, to make the labels happy.
The later Spotify arrived in a country the higher the licensing costs were because its success was proven, and this has also occurred where existing licenses have expired.
It's all a big game going on behind the scenes as a record industry tries to dictate the terms of the market now that it's established, and plays different services off against each other.
This is also why Spotify has now looked outside the music industry, in order to increase their flexibility with how they deal with them.
It's to preserve a model that works, and not compromise it due to external pressure.
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