Move over Fifty Quid bloke - and make way for 14p man. Statements seen by The Register indicate that's all the hit music service Spotify makes per user from its advertising-supported business. The difference is the middle-aged spender coveted by the movie, games and music businesses plunks down £50 per week - but Spotify earns …
Whatever is being said,
offering a largely free service (as an enticement for users to subscribe to a premium service) will not allow them to make any money. And advertising revenues will dwindle. Mah, another nail in the coffin for the record industry at large (that includes, unfortunately, independents).
Younger users now ASSUME that music has to be free - there is no going back from that.
Downloads that never get played?
"...much of that music will lie around on a hard disk without even being played once..." I find this very hard to believe. Don't most people use some kind of shuffle feature so that every song is eventually likely to come up?
If you've got tens of thousands of songs on your iThingie it can take a very long time indeed for every song to come up on shuffle.
£50 bloke? Who's he then?
I'm struggling to think of anyone who's anywhere near to that figure, and so are the others in my office. Movies, Sky and console games, possibly, but I think this £50 Bloke must be a hen's teeth dealer who rides a unicorn to work.
My brother in law still buys a shed loads of CDs, and even he'll be no where near £200 a month.
Collect the whole set!
It is also to do with a collecting tendency I think. There's a lot of middleaged train-, bus-, heck lawnmower spotters, but very few young ones. These are legal larks, where you meet kindred spirits/losers.
With younger people, I've seen rooms with all walls covered solidly with downloaded dvd's, all neatly labeled and put in their black cases. Few of them to be watched, with say 10 films a day pirated and few (non-pirating) friends to borrow them to. At about 50p for a disk plus box, plus energy plus extra-large broadband package etc, it becomes substantial.
So I think you need to make it more social. 50QB tried the "go to highstreet, buy box, sit at home" thing and it didn't work for him. The industry interpretes it like "that demand for useless stuff is still out there even if they don't show it, so lets make new types of useless stuff". I think this is misguided.
[I for one cannot believe we still don't have a (Monty Python) <swamp castle> icon, for clearly hopeless schemes that keep being pushed through even after repeat failures.]
And the difference is?
Can someone explain why Spotify is different from ordinary radio as regards money making/cost?
Radio station keep going from advertising breaks, so why not Spotify? They may have to increase the rate of ads from the present level, but they'd still probably have a huge user base even then.
I heart Spotify
More often now than not I am turning to Spotify rather than putting on my CDs. It's just far more enjoyable to flick through songs I've not heard for ages and some faves than the physical act of choosing a CD - or even my barely used Windows Media Player.
But like all free Internet services, no-one can be bothered paying. "You can't get owt for nowt" exists very much across the net users. So Spotify will have to make it more enticing to sign up for the premium service - maybe stopping free users creating playlists? Or more adverts?
Waiting to get paid...
Is that a 14p profit off each user? or 14p turnover?
If it's not making a loss, and the sevice remains as good as it is now, then it will see a profit in year 3 at the latest.
I for one am going to be going on their premium service when I get paid (soon I hope!)
I hope this works for them
Spotify is an excellent service. My best friend showed her young son how to find music on it and now they have the premium service due to its popularity in their home.
My kids are all over it while they are playing games online.
Imagine the potential of just that as a revenue stream.
It reminds me of commercial radio before the rubbish playlists, keraaaaazy DJ's and endless crap adverts.
*thumbs up Spotify*
On another 'track'..
Is there anyway El. Reg's World-class Journalists can find out how much of a RIAA fine actually goes to the artist? I suspect square root of FA.
Eq - last time I looked, my iTunes library had something like over a month's worth of audio (includes podcasts as well as music) - I know full well there are things that are in there that haven't been listened to, and equally there is stuff that's been downloaded from p2p but not even loaded into iTunes, let alone listened to.
(To clarify this slightly - often it's stuff that I've heard or had in the past, downloaded out of nostalgia)
Does anyone know where the original data for the chart, http://regmedia.co.uk/2008/06/25/wallet_share_large.jpg , comes from?
"Does anyone know where the original data for the chart, http://regmedia.co.uk/2008/06/25/wallet_share_large.jpg , comes from?"
The BPI report from 2008.
@Andus: "how much of a RIAA fine actually goes to the artist? I suspect square root of FA"
The record companies sue individuals (not the RIAA, you must be reading blogs) and until the Jammie Thomas case the settlement was out of court. It goes to the bottom line. They don't make money on them, since the case is settled for less than the cost of legal fees. So no net revenue, and nothing for the performers.
Strange logic Andrew. Cannot follow it
The record companies sue individuals (not the RIAA, you must be reading blogs) and until the Jammie Thomas case the settlement was out of court. It goes to the bottom line. They don't make money on them, since the case is settled for less than the cost of legal fees. So no net revenue, and nothing for the performers. [/quote]
Have to ask how you follow this logic with the recent case of Thomas-Rasset who was ordered to pay $80,000 per infringement mounting up to a total of $1.92 million in fines. So the court costs were 1.92 MILLION and the RIAA made absolutely nothing with your logic.
Any better answer to this question by Andus @Andus: "how much of a RIAA fine actually goes to the artist? I suspect square root of FA"
@AC "And the difference is?"
You control the playlist. You can create playlists for others and listen to theirs too. Just like making compilation tapes 'back in the day'.
Premium users got a bitrate bump today too
Sure I read that on facebook earlier. 320kb/s rather than the 120kb/s for us freetards.
Do try and keep up.
Jammie Thomas received a $1.92m fine because she refused to settle, then lied to the court and destroyed evidence. You'd probably get the same treatment over a parking ticket. Jonathan Aitken got a 2x18 months custodial sentence for perjury, remember. For this she is undoubtedly the World's Dumbest File Sharer.
Jammie doesn't have $1.92m to pay them, the legal fees will far outstrip anything she can pay them, so the artists will receive nothing.
So from the litigation we can conclude:
a) the lawyers get rich
b) the artists get nothing
c) P2P file sharing has not decreased
£50 is roughly accurate
Me and colleague at work probably fall into this category. We'll buy games, CDs, DVDs that probably won't get played for years, but can't pass up a good offer or completing a collection of something or other.
Spotify wouldn't do very well out of me tho as I already have Napster subscription, and will keep it as long as it works with my Sonos.
Can somebody please explain this obsession with using the word "song" to describe a track or piece of music?
I know that in the mind of yer average chav teen if it ain't got some talentless plastic git warbling away in the foreground it ain't music, but could we at least try to rise a shade above that level of intelligence round here?
d) File "sharers" can't claim the moral high ground because they also pay the artist FA.
Was Premium, now Free
I used Spotify for around a week for free, and promptly paid for a Premium subscription. I found that after a week, however, that the experience while using the Free version was so very close to Premium, there was no value for money in paying for a subscription.
Now, I know the reduction in advertising is a good thing for my listening time, but for 30 seconds every half an hour, I can afford it. £10, however, pays my phone bill for a month.
Guess which loses out.
Spotify are a victim of their own success; They can't drop the quality of service for the "freetards" as they'll just leave, and the paid service has nothing to offer worth £10 a month which the Free service doesn't have.
Too popular to succeed.
Surely the business model is that of many other web 2.0 operations - build up a big enough user base and hype that one of the big media conglomerates buys it up for a stupid price, despite no discernable income being generated. Said buyer then fails to moneterise it, screws the format and drives away subscribers whilst the original owners swan about on the proceeds of their sale.
nowt for me here, despite spending £50/w
I probably spend about £50 a fortnight, but not on songs or popular music. I pretty much have to buy CDs, as the music I like isn't widely available online as downloads. Yes, I can get tracks from Amazon, occasionally, and classical.com allows me to download plenty, if I don't mind masses of badly-recorded, mis-labelled music from often second-rank musicians. Can I get my hands on the full Lautenbacher version of Locatelli's Art of the Violin? Can I, heck. Spotify is all very well, but I am middle-aged with loadsamoney to spend, want my own preferred music, and can't find what I want, not even scrounging around second-hand CD sites. Catered for? Nope.
If they increase advertising on the free version then they'll lose people who use it casually but don't want to pay.
I buy lots of music (maybe 50 quid a month rather than per week) but I sure as hell won't pay for spotify because I don't get anything physical, nor do I get to keep the music. I'm probably a relic, but it's those shiny, new-fangled Compact Discs for me every time.
And if Spotify becomes annoying due to ads, I've still got a huge music collection I can listen to where and when I want...
@The original Ash
I reckon Spotify could increase the advert rate slowly, without most people noticing. Then when finally people start to find the adverts intrusive (I can't even remember hearing them at the current rate! ) the premium service does look a lot better in comparison.
> Can I get my hands on the full Lautenbacher version of Locatelli's Art of the Violin? Can I, heck.
Love for Spotify
The Spotify client is excellent. It's incredibly smooth and light in feel, it's easy to navigate, it's pretty intuitive and streaming has never paused for me - nor has it ever taken a noticeable amount of time to begin.
The service itself is also excellent. There's a huge amount of music on it and I've been really enjoying finding other releases by artists I already know - and exploring new stuff, including via links to tracks/albums/artists/playlists that people create. It's also great being able to send people a link to one of the above.
Where I've liked albums, I've gone out (or rather gone to a website) and bought the CD so that I can rip a FLAC copy. If Spotify provided a 'buy this as FLAC files' for the same price as the CD normally sells for, I'd be using that instantly.
I am paying for the premium version because: 1. I want to support the artists. 2. I hate adverts.
Spotify is a portent of the future of music distribution. It may not turn out to be the actual shape of what comes, but it's a step in the (IMO right) direction.
@The original Ash
My point exactly. Once habit is set, it is very hard to recede. Their free service is way too similar to the premium service to convince sufficient subscribers to jump to a subscriber service. Possible Solutions?: stream half a song for every song, severely increase the frequency of the disturbance (adverts) etc etc., yet make people feel how good a service it is (good as snappy, quick, intuitive etc etc. Availalbitlity of catalogue (the magical: "whatever song I think about - it's there!"), speed and reliability of the interface, smoothness of streaming, quality of the APIs. But for God's sake, make people pay for the damn service.
@James Hughes :
difficult to increase it slowly, people will migrate to other incumbent services who are sitting at the edge of the market - there is nothing really proprietary about the Spotify technology, it can (and will be) replicated - proprietary is the breadth of licensing they managed to achieve (but then again, Record labels will do deals with anyone today, so newcomers to the game may even get better deals than Spotify - hence enjoy a lower cost base) and, if they survive long enough, proprietary is their brand.
Fact of the matter is: the streaming services do not pay much royalties to aggregators/labels and therefore to artists.
Once people went mental and said music=water the damage was done (ok ok the internet may have something to do with it...)
My curiosity is rather: what kinds of accessory services could Spotify offer? (if it doesn't it will eventually die and be superseeded)
Let's concentrate on the facts
The facts are these:- Spotify's ads make virtually no money and a pitfully small proportion take up the Premium Service.
In many ways Spotify is worse that Pirate Bay in that it PRETENDS to create revenue for artists and so lulls users into a false sense that they are participating in a brave new monetising model.
This is a LIE!
Spotify is a great user experience but as a monetising model it is a dangerous con.
It couldn't be that this mythical bloke is buying boxed sets to replace his prized vinyl collection, and that once that has been done the spending drops drastically, could it? That seems to describe almost every middle aged bloke I know. except for those poor sods that went totally digital and put their faith in iTunes.
Actually, iTunes policy towards lost songs would explain why someone would spend this sort of cash on music. Why yes, I have attempted to recover my kid's iTunes after a machine crash. Why do you ask?
Of course there's no profit in suing filesharers, the record companies were hounded throughout the 80s and early 90s for their dubious ways of making sure nothing the artist got a cut of ever turned a profit. If it looked like a promotional event was going to turn a profit then they brought out the more expensive champagne on which the executives got a per-bottle kickback. The kickback was a windfall, bringing out the champagne pushed up the bottom line to equal the revenue and screw the artist.
In the case of filesharers, when settling out of court they first give themselves contracts which guarantee the staff (themselves) performance bonuses that will swallow up the out of court settlement. These show as costs in the bookkeeping because staff pay is a cost.
Same swill, different trough.
Spotify is great!!!!
Freetards who try to condone their thieving habit of TPB use, always say that the music industry needs to change it's business model. Well, they have made a big step in the right direction. If Spotify plays an ad after every couple of tracks, it is still way better than radio as I choose the playlist, listen to what I want, when I want, and no inane babble from come hyped up idiot presenter. I hope they do survive cause I think this is the perfect replacement for radio stations.
Freetards also state that they want to listen to music before they buy, well now they can. Time to kill Pirate Bay as it has no excuses left.
So the 14p comes from the monthly advertising revenue... but the fifty quid, whilst also income not profit (not explicitly stated in the article), is the _consumer_ spend.
So we're not really comparing like with like here, are we?
It would be rather more useful if we had some idea of the overall turnovers and percentage profits per year, instead of just some bland numbers that don't really mean much by themselves.
P.S. Out of interest, what proportion of startups manage to reach the 1m per year (82k x 12...) ad revenue mark?
Re: Finance 101
Read the last paragraph, we're working on Pt.3.
Re: @The original Ash
They've said they don't want to increase the advertising so much that it becomes intrustive and annoying.
At that point, people could fork out for the Premium... or more likely they'll simply go somewhere else.
Is a couple hundreds thousands pounds so bad for a start up that's a few months old? I can't imagine that many companies that are 4 months old are so succesful?
They have bumped up advertising recently though plus added some more pay for features but not sure it's quite worth paying for, waiting for the mobile version. Good product, overall.
But Spotify is totally song-oriented, at least in the basic version. The ads are, as people have noted, really pretty unobtrusive scattered between renditions of your rockaboogie faves, but getting plugs for the Killers between movements of Pergolesi's Stabat Mater is a completely different kettle of aaaaargh. And the tagging and cataloguing of classical stuff is, well, just about as complete and consistent as you get by plucking random stuff of your favourite P2P network.
How on earth can an audio advert be deemed unobtrusive? It interrupts your playlist and forces you to listen to what is normally a badly produced ad with a vile commercial message. The first time I was confronted with this listening to spotify I decided never to use the program again - their alternative which is essentially paying for radio is a load of bollocks - back to last.fm and winamp.
i guess they mean relative to tv ads, or having someone put a drill through your eyeball..
but i'm with you, all commercial advertising is obtrusive by definition, and should be banned. (and preferably have dire and/or terminal consequences for everyone & anyone involved in it's production -you should be ashamed of yourselves you scumbags)
Jury's still out
Spotify is way too new to determine the real levels of ad revenue they're likely to earn, especially in an advertising market that is torrid to say the least. Give it a year, and the introduction of the off-line cached service to see what the real settle down revenue figures are.
Having said all that, I don't think there are enough ad-dollars on the planet to pay for all of these ad-funded content models; certainly not enough to offset the loss of direct earnings from physical music, DVD, games and book sales.
Have Spotify thought about experimenting with their subscription pricing? Where did they pluck £10 from?
Like most 50somethings, I have others costs like getting son thru Uni on an average but highly taxed income.
Also like many 50somethings I use Spotify for roughly 2 hours a month - but love the idea that it's unlimted if I want it.
Did I hear £2.50, anyone? Or maybe thrown in as a freebie with one's bank account or season ticket.
Oddly enough, all the artists that refuse to play ball with Spotify, I either already own the catalogue of or don't like.