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Businesses Music The Almighty Buck The Internet

How Spotify Can Become Profitable 167

journovampire writes: Spotify just posted another big net loss, but it can become profitable with some specific changes according to one analyst. He suggests the following three options: Cut royalty costs to the music industry, freeze expenditure year-on-year, and what seems like the least likely option, somehow make free users pay $1 every three months. He points out: "if Spotify’s current free user base just paid €1/£1/$1 every three months, it would be a profitable company."
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How Spotify Can Become Profitable

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  • Who Cares? (Score:5, Interesting)

    by sexconker ( 1179573 ) on Monday May 11, 2015 @08:10PM (#49669167)

    If investors have been dumb enough to prop up the company for this long without seeing any sort of profit (and instead, big fat losses) why should I be worried about whether or not it can turn the tables? The worst that can happen is the service gradually winding down before the name is sold off to some other schlubs who will either:

    A - repeat the mistake and run their own version of it at a loss
    B - change some shit and run their own, slightly worse (for users) version of it at a mild profit
    C - change a lot of shit and kill it in the same way Napster was killed
    D - sit on it and do nothing

    In A and B, users win.
    In C and D, users lose until a new copycat (or 5) come along and get the same idiot investors to buy in and keep it running for free (to users) and at a loss (to investors) for years to come.

    • Who are the investors in this company? Oh yes, the record industry. They keep making money from the high royalty costs, and can at the same time point at the Spotify bottom line and say "look, streaming isn't profitable, we have to go back to the good ol' business model of sales and DRM, THINK OF THE MUSICIANS!"

      It's great when you have contracts with your musicians which enable you to have your cake, eat it, and then claim a part of their cake too to cover expenses of your cake eating.

  • If... (Score:2, Insightful)

    by Anonymous Coward

    If everybody in my country gave me just five cents per year, I'd be rich. What does that prove?

  • by Anonymous Coward

    And that's a non-starter right there.

  • $1 a month (Score:5, Insightful)

    by Tyrannosaur ( 2485772 ) on Monday May 11, 2015 @08:15PM (#49669205)

    it sounds cheap and easy for people to pay $1 a month, but personally there is a large bump in commitment as soon as I submit my monetary information. This often keeps me from doing still fairly inexpensive things because I don't want that commitment

    • by Anonymous Coward

      $1 every 3 months. You have commitment issues over $4?

      • Re:$1 a month (Score:5, Interesting)

        by jopsen ( 885607 ) <jopsen@gmail.com> on Monday May 11, 2015 @08:33PM (#49669337) Homepage

        $1 every 3 months. You have commitment issues over $4?

        There is something about recurring expenses... that people don't like...
        Now if they decided only to sell it as $50 and then you get spotify for 10 years... with no binding or recurring expenses people might bite :)

        Note, I pay for spotify, but I bought it in Denmark even though it's $20/mo, because the European selection is much better than the US selection (I live in US).

        • Re:$1 a month (Score:4, Insightful)

          by bloodhawk ( 813939 ) on Monday May 11, 2015 @09:41PM (#49669745)

          Recurring expenses don't bother me. Trusting a company like Spotify to handle them securely and professionally however does. To many of these companies consider secure handling of your details as something that is distant second in importance to actually getting your money. Recurring payments mean long term trust, I simply don't have that in such a company.

      • My commitment issue is giving out credit card info, I don't by free stuff of sites want my credit card information, to make the purchase either.

    • Re:$1 a month (Score:4, Interesting)

      by Technician ( 215283 ) on Tuesday May 12, 2015 @03:23AM (#49671019)

      The endless list of horror stories of subscription cancellation woes has built up a very real online resistance to signing up for anything with a credit card. Even free as they often are a hidden free trial.

      Having had the honor of first hand dealing with online ordering without just as easy online cancellation, has firmly entrenched the once burned twice shy response.

      I can name names to be specific.

      AOL, Comcast, Viatalk...

      Until the industry fixes the locked in reoccuring billing subscription, all sign up proceedures no matter how small are potential fights in the future to cancell, and customers are burnt out dealing with it.

      Guilt by association appplies to any service without a contract expiration date.

      For spotify to leave the reputation, they should offer term subscriptions. 1 month, 3 month, & 1 year. No questions termination at end of contract. Then provide excellent service so I'll renew because they are great.

  • by ZeroNullVoid ( 886675 ) on Monday May 11, 2015 @08:26PM (#49669295)

    I would pay $1 a month to upgrade my account. The $11 is too much. I would prefer just keep Netflix streaming and listen to background music and dialog. I did the 3 month thing or 99 cents the time before last that it was offered, but they only allow you to do that once. My option was to create another account and pay the 99 cents or just continue as a free user. I choose to stay a free user, as it doesn't really bother me. To me, it just says they pushed away a potential paying member, who is not willing to pay the price they are asking, but would be willing to pay another price. If spotify gets rid of the free tier, I would leave it. Even if I were a premium paying member.

    • And that's the problem with services like this. You don't really need that much music. 50 years ago people heard songs on the radio from time to time and were happy. I have enough good music stored on my HDD (most of it ripped off of CDs I bought) that I don't really need more.

    • You bring up an interesting point. Streaming movies, which is exponentially more expensive from production through distribution, is a cheaper subscription than a music streaming service. And then there's the fact that a lot of Netflix films have music in them too. That suggests their price is really too high.

  • by jd2112 ( 1535857 ) on Monday May 11, 2015 @08:38PM (#49669371)
    the ??? before 'Profit' in their business plan.
  • by Anonymous Coward

    How to become profitable: charge for free service. The mind boggles.

  • Cut royalty costs to the music industry

    Given the constant bad press that Spotify gets about how little money artists get from their work being streamed on Spotify, how does the analyst expect them to be able to get away with paying the source of their content less?

    • by jedidiah ( 1196 ) on Monday May 11, 2015 @10:03PM (#49669863) Homepage

      ...except the problem with all of that is this is being driven by idiot savant musicians that don't understand that there's a money grubbing middle man in between them and Spotify. What the artist gets and what Spotify actually pays are two different things.

      And that's not even getting into the problem of assigning a reasonable value to a single impression.

      • by swb ( 14022 )

        At this point in history, I don't have much sympathy for musicians who complain about their lack of wealth.

        Musicians who have risen to any kind of popularity in the last 10 years ought to be well aware of the greedy "recording industry" and its money grubbing ways. I'm pretty sure it's been common knowledge for the last 30 years.

        I don't know why popular artists don't try to structure their income around self-production and distribution and making money off touring and reduce their exposure to the record la

    • by fermion ( 181285 )
      Streaming services are not radio. They are going to replace physical media or even digital media files for the new generation. These services are not cheap advertising, so there is no way that payments to copyright holders are going to be minimized. We are going to need compulsory licensing and reasonable payments to right holders. The lack of such is what is causing the friction and inefficiency, and what is causing loses. I think the argument of whether streaming services are the future is over. This
      • by PopeRatzo ( 965947 ) on Monday May 11, 2015 @11:21PM (#49670285) Journal

        We are going to need compulsory licensing and reasonable payments to right holders.

        Not to "right holders", but to artists.

        Limit copyrights on recorded music to 25 years and don't let them be assignable to anyone but the artist (maybe a spouse). Not children, not publishing companies, not record labels.

        If I listen to Charlie Parker records, why should I be paying license fees to anyone? Every single person associated with that recording and the music therein is dead. Earlier tonight, I was listening to Dizzy Gillespie, Charlie Parker and Al Haig's recording of "Shaw 'Nuff" which was recorded 70 years ago today. Why shouldn't that entire recording be in the public domain? I'll pay a company to stream it, no problem. But why should any "rights" money change hands?

        https://youtu.be/1IuZNbdwAk8 [youtu.be]

      • by dwywit ( 1109409 )

        I pay ~USD$70/year for ad-free on Live365. It's a service I'm 98% happy with; some stations have started to "offer premium products of interest to our listeners" - I mean, if I wanted to know about organic skin care cream, I'd look it up. I really don't see the link between organic skin cream and celtic music. I pay so I don't have to listen to ads, and those stations that start advertising anything beyond CDs or digital downloads quickly lose their place in my "favourites" list.

        I've even told them I'd pay

  • by Anonymous Coward

    They all start with the words, "If only..."

  • by koan ( 80826 )

    Proving what I have always said, musicians get paid too much and music isn't worth a dollar a song.

    Closer to .05$ a song or less.

    Now if we can just keep them out of politics....

    • musicians get paid too much and music isn't worth a dollar a song.

      For the junk that gets massively popular, yes that's true. That's why they need to sell millions of copies and let their labels reap in most of the profits. There are better musicians out there, but since they keep most of their $1/song and don't need to spend crazy amounts of money advertising, they're happy to remain relatively obscure.

  • WTF? (Score:4, Informative)

    by rudy_wayne ( 414635 ) on Monday May 11, 2015 @09:28PM (#49669647)

    The following are listed at the bottom of this page under "Related Links":

    Gunmen Kill 12, Wound 7 At French Magazine HQ
    Misogyny, Entitlement, and Nerds
    Officer Not Charged In Michael Brown Shooting
    How To Execute People In the 21st Century
    Seattle Approves $15 Per Hour Minimum Wage

  • Hindu Or Bollywood....see how i did that?
  • by wvmarle ( 1070040 ) on Tuesday May 12, 2015 @01:41AM (#49670761)

    Music with the occasional advertisement. Isn't that exactly what traditional radio has been doing for the past decades? Playing music for people to enjoy (broadcast for free), usually with some talk in between by a dj announcing the songs, telling funny things, doing interviews, etc. And most of those radio stations managed to make a decent profit out of it.

    Here we have Spotify, doing effectively the same but broadcasting on the Internet rather than the airwaves. Playing music interspersed with advertisements, broadcast for free for anyone who wants to tune in to.

    Radio stations have an expensive, power hungry transmitter to pay for. Spotify just needs an Internet connection (I suspect this to be cheaper).

    Radio stations are hiring DJs, the more popular ones demanding high salaries. Spotify doesn't have DJs.

    Radio stations have to maintain a studio building for the DJs and other staff to do their work. Spotify just an office and a rack in a data centre.

    Radio stations are usually limited to a relatively small geographic reach due to the physics of radio waves. The Internet has no boundaries. Larger reach means more potential value for advertisers.

    From the face of it, Spotify has many advantages compared to traditional radio stations. Lower overhead, larger potential audience so more advertising revenues. So how is it that Spotify can't keep up? Is the competition of traditional radio really so strong?

    • by henni16 ( 586412 )

      Radio stations are usually limited to a relatively small geographic reach due to the physics of radio waves. The Internet has no boundaries. Larger reach means more potential value for advertisers.

      I have to disagree with that one; I doubt that this is an advantage. I think that small geographic reach can be an advantage if the region is sufficiently populated.
      I haven't listened to a lot of radio in years, but when I did, there were lots of adverts by local businesses or the regional branches of bigger chains; you don't have e.g Ford advertising how awesome their new trucks are, you have some car dealership with a couple of local branches promoting zero interest payment plans.

      I don't think there

      • Valid point.

        OTOH, the Internet - and the fact that this kind of services are streamed with separate streams to every listener - allows for targeting by location. Just like the good old Google AdWords allows local entrepreneurs to advertise to local customers.

  • by l3v1 ( 787564 ) on Tuesday May 12, 2015 @02:28AM (#49670891)
    Well, I might be alone with this opinion, but I really do like Spotify, and if they'd raise their yearly subscription fees with a few (I do mean a few) bucks, I wouldn't mind very much. I generally don't mind paying for stuff I like.
  • by bradley13 ( 1118935 ) on Tuesday May 12, 2015 @05:08AM (#49671301) Homepage

    I listen to the free version of Spotify once in a while, but it's fundamentally irritating. They have commercials, and that would be fine (since it's free), but the only commercials they have are 2-3 Spotify commercials that they repeat over-and-over-and-over, telling me I need to upgrade to get rid of the commercials.

    In other words, they can't sell their advertising, at least not in Switzerland. But they don't want the non-paying user to have an uninterrupted experience, so they put in their own interruptions. The result is just irritating, and that's why I don't listen to Spotify very often.

    Lastly, I find their prices kind of high. As someone who listens to music maybe once a week, I just don't see paying $15/month for the privilege. If they have a problem with too many people not buying their premium service, maybe that's because it's overpriced for the typical user.

  • but it can become profitable with some specific changes according to one analyst.

    So, another attempt to get rich on music falls flat on it's face, burning it;s investors arses in the process. And why should anyone care? If we believe the bullshitters, the entire music industry needs to die so that people can pay musicians directly, instead of letting the money be stolen by the music industry.

    Well, that'll be great. And if the music industry goes down the shitter and takes the musicians with it, who's goin

How come financial advisors never seem to be as wealthy as they claim they'll make you?