back to article Spotify's rising revenues gobbled by royalties blackhole

Streaming services face a brutal few months, but leader Spotify can at least point to solid revenue. Spotify UK, which was responsible for the bulk of the music company’s global business until last month, saw its revenues increase to £63.17m in 2010, up from £11.32m in 2009, the first year of its rollout. According to its latest …

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owners?

Aren't Spotify's major shareholders the record labels? Dividends aren't tax deductable but inflated licenses are...

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Pirate

LastFM

Never really liked it much - the recommendation engine never really recommended stuff I liked.

Plus when they decided to make the Android app only available to paying customers (customers that pay about as much as customers of the far-superior Spotify, I might add) I lost interest completely.

I think what will kill these legal services is the record companies getting greedy WRT licencing fees. It's already annoying when bands you've been listening to disappear suddenly from Spotify - if it happens too much people will leave. And you can bet they'll go back to the old piratey way of doing things, yarr - as the record companies still don't seem to have realised, Spotify competes with piracy not with CD sales and so should be priced accordingly.

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Record company greed?

I'm not saying it doesn't exist, but 90% of the time, the reason a band's music will disappear from spotify is that they get in a huff and demand it to be removed.

A good example of this is Bob Dylan, who had a monster entire back catalogue on Spotify when I joined, but a few weeks later withdrew 99% of it, leaving one 'best of' album.

I'm sure record companies are more than happy to thrash the last few pennies from any material they can lay their hands on.

The other 10% of the time music will be missing because the artist sold their rights early on to a third party who doesn't have a deal with spotify. A good example of this would be Oasis, who sold the UK rights to their music very early on. The company with the UK rights either refuses to license them to Spotify, or is asking way too much. Oasis tracks are on Spotify if your billing country is not UK…

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The content owners ARE greedy, but...

...there's still too much interest in pandering to them. Spotify, Apple, Rdio, BOinc and so on are, after all, paying the money that Sony, Warner, Universal and so on are asking for.

For Apple it makes business sense, as acquiring the licenses firstly makes their hardware more attractive and then locks the unwary or uncaring customer in to buying more, and ever more hardware to access the content they've bought. As long as profit margins aren't badly impacted, no problem.

But for the others, well it's like Mr Orlowski says: throwing huge amounts of money at something, to make less money back from it. Kind of like those robots in the Matrix, harvesting humans for power.

So they'll all fail, eventually, and then licenses will either become cheaper, or piracy will destroy the business. So, licenses will become cheaper. I reckon, a couple more years of bullshit profiteering by the labels.

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Greedy WRT license fees...?

I don't think it's necessarily a question of "greed" with respect to fees -- Spotify's current business model simply isn't profitable for artists.

It has been estimated that an artist (a single singer-songwriter, that is, not a band) has to get over 4 MILLION plays to earn the equivalent of a month's salary at US minimum wage.

(http://www.informationisbeautiful.net/2010/how-much-do-music-artists-earn-online/)

Even back in 2009, it was claimed that Lady Gaga received a payment of only $167 for over a million plays of Poker Face.

(reported in 2010: http://www.pcpro.co.uk/news/357217/songwriters-attack-spotifys-tiny-royalties)

What will kill these legal services is that they are unsustainable.

Like a lot of stuff online, the business model is fixated on the price of bit-juggling, not the value of the content.

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Coat

CBS paid $280m for Last.fm

<--- This is the chap who concluded that deal. He's either off to collect his P45, or on his way to a high bridge...

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Spotibook

First thing I did when Spotify features were integrated into Facebook was to block that silly spam from my feed. It was oversized, always near the top and unhelpful to me. Sure, one person does not a trend make but maybe I'm not alone in doing that...

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FAIL

First thing I did when Spotify features were integrated into Facebook was to cancel my Premium subscription.

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Anonymous Coward

First thing I did when Spotify features were integrated into Facebook was to remind me again why I will never sign up for Facebook.

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Big Brother

I've just started using mflow which seems to be a pretty good (free, ad-free) alternative to Spotify, but I know it is only a matter of time before it goes the way of all those who came before and erects paywalls all over the place.

I've always thought that it might be a good idea for Amazon to do something like this. Major clout with content providers so it has a better chance of negotiating a good price, an existing MP3 store that they can link in to, the IT infrastructure to deal with the load, Amazon clouddrive tie in for those who want their purchases/music collections available anywhere.

The trade off: Amazon would also get to track what you listen to so that it can better target its advertising.

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They are

In the US at least. I expect they will in the UK when they may the Kindle Fire available over here.

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Last.fm

is great as a user. I like being able to occasionally log in and see my music listening history and the recommendations for things I might like (particularly local gig listings).

I never listen to the last.fm "radio" anymore and I'm not surprised they don't make any money, though.

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Last.fm used to be good for small/independent artists and DJs too - you can put your own stuff up there. When they actually had a player that allowed you to steam albums (you can only stream the radio now) it was good to find random stuff that you might want to listen to, via the related artists feature, give it a bit of a listen and see if it was "interesting"... now I do the same thing with Spotify, but that lacks those really small or unsigned artists.

I used to subscribe to last.fm as it was a decent service for those reasons (and the radio secondarily) ... I stopped subscribing when they changed to "radio mode"; sort of wonder whether they should be paying _me_ as I'm helping propagate their database every time I scrobble something.

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No Profit??

How do these companies continue if neither makes a profit?

They won't last much longer and unfortunately people will go back to the easy and freely available pirate channels for their music.

The greed of record companies has been their biggest problem for many years.

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FAIL

Nobody* makes any money from Spotify

Check this helpful infographic comparing label and artist revenue from a variety of digital outlets:

http://www.informationisbeautiful.net/2010/how-much-do-music-artists-earn-online/

*Excludes Spotify employees.

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Rather harsh on Last.fm

The figures you quote for Last.fm are from FY09, and since then they've removed the ability to stream tracks on-demand (which carries a significantly higher royalty rate - see also recent changes at We7). I'm guessing that the FY10 financials might come as something of a surprise, albeit not a $280m surprise....

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