Why Spotify Keeps Losing Money
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- Опубликовано: 10 июл 2024
- Analysis of Spotify’s profitability problem and the company’s recent efforts in turning the situation around.
Despite being the world’s largest music streaming platform, Spotify has never made a single dime in profits so far. The company has never had a profitable year in its history, and over the years its losses has added up to over 4 billion euros. For a company that has not only disrupted the entire music industry but also completely revolutionised the way we consume music, one would reasonably expect Spotify to be drowning in profits. However, the reality is that Spotify has never been able to turn a profit, making it the only software company that generates over 10 billion euros in revenue each year to consistently lose money.
Sources & footnotes:
docs.google.com/document/d/1o...
00:00 Intro
00:43 Why Spotify Loses Money
02:45 Spotify vs Other Streaming Platforms
06:14 Spotify Is Not The Netflix of Music
10:06 Spotify’s Expansion into Podcasts
13:02 The Clock Is Ticking
14:44 Conclusion
Thanks for watching. Relevant sources & footnotes for this video: docs.google.com/document/d/1ow8sY3Luzj2c9mFEsIGMg8YKXpyrM5Lj/edit?usp=sharing&ouid=105845290081458110690&rtpof=true&sd=true
Thanks so much for sharing this! This is super helpful for me as I was just about to do more research on Spotify after your video revealed so many interesting things that were previously unknown to me~ Please keep sharing sources for future videos!
@@Thejoyceeful Thank you very much for your support! I’m super glad you found the sources useful - this is something I personally wish other business channels would do too since it really helps with doing additional research. Hope your research goes well and please do share any interesting findings on here! Hope to see you again in my next video :)
@@theartofbiz Hey! You seem like a cool person. Where can we connect? Do you have LI or twitter?
They do it on purpose the objective is to keep independent artists under control the guy who started Spotify was already stealing and damaging musicians way before Spotify. Once a thieve always a thieve. A lot of musicians are anti-system imagine the power they would if they had money to fight back against the wicked world we live. People tend to trust more musicians than politicians. This is the reason why in 17 years of Spotify nothing changed. Get wise.
Spotify should establish a concert ticketing company to compete with ticket master and end their disgusting monopoly.
Im sure Ticketmaster would do some evil shit to stop them just like when Live Nation tried to sell their own tickets to compete with Tickermaster but just ended up getting bought out/merged. Fuck Ticketmaster
I heard they might be
@@bib4eto656that’s probably why i got a survey yesterday asking how many concerts i’ve been to 😂
@@bib4eto656thank god
@@bib4eto656 Spotify already sends out promotional emails based on who you listen to for concert tickets. Though I'm sure they get a small cut from the ticket companies.
Now I understand why Spotify was so hell bent on pushing podcasts even when many users hated that.
i still dont get it.
@@iambox_facethe big 3 record label companies have too big of a hold on spotify's revenue and ability to produce their own content. Spotify sees podcasts as a way to produce their own content and sign better deals and make more money to eventually become profitable.
@@iambox_facethey need a source of high profits, they're pushing for podcasts to increase their profits as their profits are extremely low right now
@@iambox_faceper the video, podcasts have less aggressive licensing costs (10:33) and had positive effects on streaming retention (12:09)
brain turned off? @@iambox_face
The worst part is that nearly any innovation Spotify manages will immediately be adopted by their competitors, making Spotify little more than a free research and development department for their competitors.
That's sad. Spotify is a big company but at the same time they're carving out their own business at a loss while Apple, Google, and Amazon can take everything they do and offer the same thing without needing to turn a profit.
@@benm3382doggy dog world
@@telleva7890 I thought the video was about how Spotify can't do anything different because it's hemmed in by licensing fees in the first place.
@@telleva7890As stated in the video above almost all big artists/creators are under the big 3 which advertise their songs. To add to that, spotify did try to cut out the middlemen but backfired. I think it’s not about respect, the big 3 are the ones seeing the profits not spotify or the artists.
@@telleva7890lol
After watching the spotify documentary on netflix, i still despise the labels. Everyone in the course of spotify's uprising gave spotify shit for not paying the artists enough, but just prior to that the blame was placed on the labels! why is it still not on the labels? they take everything from the artist and the streaming platforms, and there is nothing anyone can do about it because
1. that's just the way it is
2. they have a lot of money to defend themselves
The labels atleast provided a service during the physical media era. But now they are useless. Artists are better off cutting out the middle man in the digital age.
Publishers should bleed to the point where they are just glorified vinyl distributer for artists who want to make those collector items for their core fans.
maybe those labels are the one that driven the hates on spotify
I disagree, labels provide a great means to help organize the business side of music. You can say that artists should cut out the middle man, but there's a reason most of those artists haven't reached the same level as those that signed with major labels. Labels allow artists to make the music, and leaves any part the artist doesn't want to do to the more experienced people. The problem isn't the labels, there just doing what they've always done, and adapting to the climate of music consumption. Spotify IS the problem, it means you aren't paying for the music, you're paying for the software, there's no exchange of money, thereby no one makes any money off of it: 1 person streaming a whole album is not worth as much as 1 person buying a CD of that album. @@wile123456
@@wile123456 Without the collective bargaining of the big 3, individual artists will make even less from spotify. This video contains actual figures from the musicians perspective as well as some more business oriented insight: ruclips.net/video/gDfNRWsMRsU/видео.html
Us independent artists who don’t interact with labels get screwed too. It’s not just the labels screwing people
Spotify supporting independent artists might solve lots of issues they are facing with major record labels. Yet editorial playlists are filled with the same labels/artists.
they wanna but can't because of the contracts they signed with the big 3
How ? Who are those independet artists ? Anyone that doesnt have contract with record labels, so they are noname artists ? I dont see a logic behind it for profits.
It's either higher monthly payment or make users to listen less big 3 music while keeping the paying customers.
Some editorial playlists are filled with fake, Spotify owned artists so it seems they are going the complete opposite of supporting independent artists...
Not true editorial is full of independent artists
@@kaarelk274 most musical innovation is happening outside of the big 3 bubble, its just that most people don't listen to that music or even know it exists precisely because the big 3 only want them to listen to the same easy to sell stuff.
The more we see that the content streaming model isn't the cash cow most companies expected to be. We see this not only with Spotfy, but also video and movie streaming services. Xbox's GamePass might as well not be profitable.
The streaming business does seem like an extremely competitive and tough industry! Licensing other people's content is extremely expensive (as shown in video). Producing your own content is better but still expensive on an absolute scale. On the other hand, getting your users to create content for you is free (i.e RUclips, TikTok etc). The more I think about it, the more genius the UGC business model seems.
I would argue that game pass is a different model then the rest. The goal of game pass is to get people to start playing games so the publishers can sell content in game, therefore it makes sense that game pass isn’t profitable, especially since the gateway into profitable product is way more valuable. They are two different businesses
@@chasesteeleAnd the time when you got the gaming console at a discount and paid extra for the game is gone.
Now you pay in full (with profit) for the console so the games are no longer the main cash cow, the game pass is a way to motivate the player paying a huge amount of money up front for the console.
(Meanwhile, gaming PCs are hugely expensive.)
It can be profitable, but not when you compete with companies that are willing to lose money on it by bundling it with other services. If Spotify could raise the price significantly it wouldn't be a problem for them.
Xbox’s game pass IS profitable and this fact has been reiterated several times. They wouldn’t keep expanding losses if they were losing money
You forgot to mention that Spotify now offers audiobooks and probably gets a significant amount of money by doing that.
Yes indeed, thanks for pointing this out. I came across their audiobooks segment in my research but didn't include it in the video as I wasn't sure how much it is contributing to their business at the moment (and it doesn't feel big at all currently) - but definitely something to keep an eye out for in the future. Cheers.
@@theartofbiz Spotify also now has discovery mode, which all major labels aren't opted into, and won't be either. Discovery mode gives 30% of royalties from an Artist on Spotify's radio to Spotify in exchange for boosting the artist in the algorythm. This will bring much more attention to indie artists, as well as boost Spotify's profits considerably. The people running Spotify are very smart, and know how to stay on top.
Same with a lot of podcasts as they don't have to pay the publishing companies.
yes but you have to buy it so people are much more reluctant to buy and i fell like people just go to someting like audible
Audiobooks would have been an interesting point to include. I'm a heavy Spotify user and have somewhat adopted the podcasts. However I was put off the Audiobooks because it's not included in the monthly cost. Another angle there is audible. I pay premium there and have quite a library. My instinct is audio books will fail in Spotify.
What a detailed analysis on Spotify’s unique situation! I like how you’ve kept it very concise and easy to understand even for people like me who isn’t usually interested in lengthy “business” videos. This is a GEM 💎
Thank you so much! I’m glad you found it easy to understand. It’s always a challenge trying to write a script that’s simple enough to follow yet detailed enough to actually offer unique & non-mainstream insights that might not be very obvious. I’m elated to see you comment again, thanks again for the engagement and looking forward to keep seeing your comments in future videos. Cheers!
I agree. The channel is very good. So I subscribed
In an ideal world, we would break up the power of the major labels. In a world with platforms like RUclips, where anyone is able to record a song at home and potentially push it to millions of people globally. Labels in the past provided the cash to record an album, distribute it globally and push it to radio. Not only that, but the deals that labels give artists are terrible. I can imagine a system like the App Store, where the artist uploads their music, Spotify takes a 15-30% cut and the artist takes the remaining 70-85%, which is significantly more than the maybe 10% they get from a label, then they have to pay their advance back to the label before the artist sees any kind of profit.
But in the real world, a lot of very valuable catalogs are owned by the labels (legacy and current major artists), without which, no one would bother subscribing to Spotify.
Very well said.
They could try and make their own version of iTunes, where people can buy music.
Tik tok is actually giving breakout artists a lot more power
@@jellytwins1018And what would be the purpose of that? Idk, the only way to force people to buy individual albums is to remove offline streaming. Although iTunes still exists.
@@jellytwins1018Way back when Spotify started you could actually buy songs and albums. But then they yanked the feature after a few years without any compensation 😂
the industry has consolidated into bodies which will resist competition, only because they've been aggressively purchasing labels. what this means is that indie labels gain traction, so all spotify needs to do is bias the algorithm toward the more favorable licenses. spotify could equally consolidate indie (and soundcloud, beatport, bandcamp) and self-published music to form a publishing platform with benefits exceeding those offered by large labels. the algo can, over time, create these leverages.
That's a super interesting take ,thanks for sharing. But don't major labels have the ultimate trump card - i.e they control most of mainstream music, which is what most people listens to. So majors can always trump Spotify by not licensing these mainstream music to Spotify anymore, which would mean tons of Spotify's users turning to other platforms - instantly destroying Spotify's business as a result.
So if Spotify starts doing what you've said here, and once the majors feel threatened enough, what's to stop them from pulling the trump card on Spotify?
Kanye West tried to warn you
Spotify should hire you
People still listen to FM radio. That’s the issue. FM radio is one big advertisement for record labels.
They already do this, I'm sure of it. I get too much NCS (or other of the kind) recommended for it to be a coincidence. NCS is a free music label.
NCS music quality is below or at most average. It shouldnt be in the "recommended"
I see that in their app they also let you buy artists' merch and concert tickets through other websites. They might wanna sell those themselves eventually.
Indeed - this area could be another source of revenue for Spotify. I wonder how much revenue this could bring them.
I would think that it has large potential but wouldn't amount to very much
At the end of the users would be the one who would determine spotify's future by buying subscriptions
This does explains why spotify pesters so much for premium by those annoying ads
@@theartofbizMaybe something like a "concert pass" could be interesting. Partner with some local venues in major cities and increase the monthly cost by $10-15 and let users go to X amount of shows per month/year.
Genuinely shocked that this channel only has 900 subscribers - this is genuinely some top-notch content. Keep up the great work!
Thank you! I really appreciate it!
I thought the same exact thing. this channel is going places
They will grow so big but obviously it will take some time.
It’s a clone of Modern MBA.
@@anoneemous406 Didn't realize Modern MBA was the only one allowed to make videos about companies on the Internet 🙄
One thing Spotify could do is partner with smaller labels and groups to give more promotion to music that doesn't charge them as high of licensing fees. If it works correctly, it would cause way more competition in the music space. Smaller music labels, that take smaller cuts, would grow to compete with the big three or the big three would need to lower prices. Either way, it's a win-win for Spotify and the health of the industry as a whole
They already do that. However, it's like a bucket in the seawater compared to the streaming count dominated by the songs owned by the big 3 labels. If Spotify manages to stay as an independent business by 2030 and that allows these smaller labels enough time to grow, it could start to make a small difference, however, the big 3 labels will continue signing a large proportion of the up and coming artists. The monopoly is just too strong in today's world.
Only problem is that bigger labels don't want the small guy to succeed.
Nice idea we gotta try everything cause these labels are disgusting!
big labels will just buy sucesssful small labels and their artists with offers they cant refuse. its a mafia
There’s another implicit ceiling on streaming plan pricing-most folks won’t pay more for an audio streaming service than a video one.
Great insight, so as the movie streaming battle continue to heat up, if they cut prices then it's going to have repercussions on the music streaming businesses as well.
One thing I've always found interesting is the asymmetry between the amount of content you need for audio streaming vs video streaming. For audio, you basically need to have all mainstream music to be competitive (i.e sign contracts with all the major record labels). But for video, you only need licenses from one or two major studios to be competitive, you don't need all of the world's most popular movies.
So I do wonder that given an audio streaming subscription (e.g Spotify/ Apple music etc) gives you access to the entire world's music catalogue, where as a video subscription (e.g Netflix / Disney+ etc) only gives you access to some videos, though arguably still enough to keep you entertained, is there a chance that people would be willing to pay more for audio?
IDK if it's an inplicit ceiling. Video content has more entertainment value to people on a daily basis - you're actively engaged in what you're watching whereas music is more of a passive activity that you often do while you're doing something else
Also as the other commenet mentioned - most if not all music streaming platforms have the same content - so they need to differentiate on the service and user experiences as opposed to content so the competition is tighter hence pricing is affected
Whereas with video streaming platforms have exclusive content specific to them so they have a content based USP which also affects pricing
Which is also why you find more people having multiple streaming subs than music subs - it's supply and demand
Spotify should become a record label and scoop up young talent on rewarding contracts. Basically doing Netflix’s approach of building an in-house arsenal. But, they probably can’t since the old labels have so much power over them and may pull their artists if Spotify oversteps.
I’d be interested to see Spotify enter into the audio book market. People are fed up with the monopoly of Audible, as demonstrated by the protest launched through the campaign Brandon Sanderson has done recently. It would be lucrative and potential for success. If Spotify can negotiate better deals for authors compared to audible, i think this could become a good business area for the company. Also, they should stop making deals with grifters like Meghan and Harry.
interesting point. i'd like to listen to a book!
They have actually, I think you get 14hrs ‘free’ a month if you have premium
A lot of the streaming or internet services we all know and love are hemorrhaging money at the cost of user gain.
Dear God, if Spotify goes down, I'm going to cry.
It loses money while still paying artists less per stream than their competitors. Impressive stuff!
Yes, this is because spotify is still the market leader without any other form of income, Apple, google and amazon pay the artists more because they have money “to spare” because they make money from other sources than their music streaming, spotify cant do that because what they give to artists is already “too much” to give away because they already dont make money
Sure, but Tidal pays more than any of those and they only do streaming
im confused, does that mean that Spotify pays the artists directly per streams on top of the liscensing fees to record labels? or is the artists' cut within the label liscensing fee and the label pays it out to the artists? I know Tidal and Deezer pay out more to artists per stream than Spotify so it seems the % is determined by the streaming platform but where is the money coming from
@@Josue-wj2uf spotify pays the license holder, who then pay a tiny bit to the artist, unless the artist is sole rights owner of course.
@kateb2643 tidal is also owned in large by artists.
@@Josue-wj2uf The deals are not public, so we won't know in detail we may like. But in general, the payout is based on the revenue (not profit, which is non-existing, as they lose money). Of course, each service takes a different cut based on its strategy.
Now, although all streaming services cost the same in the US and in Western Europe, Spotify's revenue per user is much lower, because it has strong presence in low-income countries (with adjusted pricing) and its student plans/family sharing is more lenient.
Only 2 videos and somehow one of the best channels on youtube. Actually mental.
Keep up the vids, but please don’t sacrifice this level of in-depth research and engaging writing for faster uploads, as it will be the reason me and many others keep coming back.
growth is gonna be exponential i can feel it ❤
Thank you very much for the support, I really appreciate it! Indeed, I will only be uploading videos that I deem sufficiently insightful and presentable (and hopefully entertaining), even if that means taking 3 months (or longer) to make one. Cheers and hope to see you again in future videos!
Please continue to make the presentations simple as you get bigger. It's fun and easy to follow.
One big thing that has to happen is that consumers need to see value in music again. Until that happens, customers will absolutely not care about paying more for streaming services.
Part of the problem is a general apathy (or even animosity) towards the music business itself. It’s basically a rule that the business behind a product is less popular than the product itself, but music seems to be especially bad in that regard. The rough transition to digital distribution is a big part of that, but I also think a lack of exposure to background information is also a cause. There’s a larger discussion to be had there.
@@pokepress you make a lot of great points. I don't disagree with you.
@@pokepress Completely agree. Great insight!
I think the profits lay with the Big 3. If they didn't have as much leverage over streaming platforms as well as artists, it would be more viable for artists to seek other ways of getting their music out to the consumer. For example if they could produce directly with Spotify, they could both cut out the Big 3 completely, making them able to split
the profit.
This is of course torpedoed by the Big 3 as shown in the video as it could really threaten the existing power dynamics.
@@theartofbiz I miss the era of buying cd, vinyl, and mega combo packs at the local entertainment/music store. I remember the days of going into any mall within the USA, going to Hot Topic or any other store that sold music and getting to hear that music before I bought it. Wouldn't that be amazing if there was a uniform system where you could just scan a barcode on the product packaging, it would pull up a playlist of song fragments so you could hear it like the good old days when you had the turn table like product displays that had numbered buttons for a rotating music selection.
I tried to buy some music cd's for my daughter a couple of months ago. I emailed 3 different companies asking about LARGE order questions since I wanted to buy a lot of things but they didn't have a link or way to do it through their damn amazon or other retailer storefronts. I got 0 replies, nada. I went and just pirated the individual songs I wanted "as opposed to paying for the complete albums, which I was initially equally excited for." Here comes the era of piracy as companies stop offering PRODUCTS and only start providing service nonsense. Some of the biggest known names in educational and childrens music "even including The Wiggles" DONT SELL ANYTHING ANYMORE. You must subscribe to a f streaming service be it apple music or amazing. I want the CD, it is infinitely more convenient for me to have a WAV or FLAC ripped off that cd so I can use it across all of my devices. Streaming is inconvenient for me, I don't value it and I also don't like being attached to wifi 24/7.
I bought some wav/flac off of TrackItDown for some happy hardcore/ UK scene music many years ago. One of the songs I wanted, they didn't have a link to the song url to just buy it outright on SoundCloud. I had to contact a regional UK specific production label on there who did one of the mixes I wanted. It took him more than a week to response with a solution " he had to check who was actually a distributor." I finally bought it and a couple of other cd's in flac at the time because they were so helpful and actually responded. I have moved and used those FLAC and WAV files on my phone, computer,laptop, and other devices for the greater part of the last decade. How is this LESS convenient than streaming? Streaming might just abruptly remove those songs because of licensing. This modern economy is a f'ing fraud. The worst thing about it besides the revenue split "which was shit before, labels might take 50% from artists or more back in the day" is that it is even LESS sustainable now than ever. It is MORE inconvenient to buy shit now. I just don't get why the general population is happy with this arrangement. Artists and consumers alike should revolt. Companies want to make money, but they're making it MORE DIFFICULT for us to actually spend that money.
The entire system needs a revolution. The old world order of the Big 3 sucks, spotify and streaming subscriptions suck. It was profitable with the old model, but it really sucked for creators who bit the bullet because they could use other revenue streams. This new system sucks, especially when you read into or go down the rabbit hole of how these services actually operate in relation to algorithm versus the people who make the media we consume. This timeline is so disappointing. Suck. Suck. Suck. We need to be like France and governments needs to break up these consolidated mutually cooperative oligopolies . . . which reminds me why do we allow corporate donations in the first place? It is a never ending system after systemic failure and we need to change that.
This is a really good video so first thing to say is thank you!
I was one of the initial users of Spotify in 2008 (my college roommate introduced me to the very new service) and, as an obsessed music-nut, it completely blew my mind. I have never used a service as much as Spotify and I adore the platform.
What differentiates Spotify from its competitors is really the quality of the app - it’s AI algorithm in particular - and this is really responsible for it having the lowest churn rate in the industry. Is this enough for it to be successful against the Apples and Amazons of the world? My mind says no, but my heart says yes.
Either way I am a shareholder at the relatively low price of $90/share and I’m happy to see Daniel Ek’s vision through - for better or for worse.
Interesting point of view, thanks for sharing!
I agree.
lmao quality? Spotify is, very genuinely, one of the most broken and unpolished apps I have ever used compared to its size and success. They can't even get a fucking shuffle button right, and that algorithm you mentioned might be the worst part of it all. They also promised to roll out lossless streaming years ago back when Apple did it, and still nothing on that. I honestly despise spotify both as a musician and as an actual user, and the fact this shit tier app is making me side with Apple of all companies is just one final slap in the face lmao
Great content, surprised to see you just had 1k subs last week, congrats on the amazing growth. I will seriously look forward to your future videos!
What an excellent, concise and well produced video detailing Spotify’s unique financial situation. The comparison between Netflix was also very well done. Bravo.
Thank you very much! Hope you enjoyed the video and found the content both interesting and insightful! Cheers
I bought Spotify premium back in 2012. It’s now 11 years later and I still have premium only having paid once. The card expired but due to some glitch, my account still has premium without a card even on it. It’s beautiful. I’m also part of the reason behind the video bwawawa
You are a crook!!
Hahaha that's hilarious, thanks for sharing!
lock this man up we got him
The quality your channel is giving for the amount of subscribers you have is insane….i expected this channel to have millions of subscribers…I believe this will be the case if this level of quality is maintained…loved the content hope to see more such detailed analysis ❤
This channel is made by AI😂 and relatively new
Thank you very much for the support! I really appreciate this a lot. Super glad you enjoyed this video and hope to see you again in future videos :)
there are probably over 100 channels with this style now its just simply not special
Good job! This channel deserves more subscribers.
What an amazingly written and well researched video. Definitely deserve way more subscribers.
Thank you very much!
If these streaming services go away, people will just go back to peer to peer sharing. It’s in right holders best interest to keep these streaming platforms in business.
Yes. They forget Spotify is now part of the ecosystem
Major rights holders have stake in Spotify. Warner Music Group, Sony, and Universal Music Group make up 18% ownership and dominate 80% of playlists.
Just stumbled upon your channel and the videos you’ve made so far are high quality, interesting and made easy for us to understand so thank you!! Keep it up, it’ll be a matter of time for this channel to blown up. I’m glad to be somewhat early lol. Rooting for you!
Thank you so much! Reading comments like these make my day. Happy you found the videos interesting and hope to see you again in future videos!
I was enjoying this video and thought it was from a popular channel, but the views and subscribers were low. This video deserves more attention!
Thank you very much for the kind comment! I'm glad you enjoyed the video and hope you found it insightful!
Phenomenal video, and really appreciate the sourcing both in the description and comments, make a patreon or something, Id happily support the effort even if videos are sparse.
Thank you so much, I'm really glad to see someone liking the sourcing - it's something that I often wish other channels would do since it would really help with doing my own research, that's why I made an effort to do so in my videos :)
And I truly appreciate how you'd like to support me on patreon or otherwise, but at the moment I don't really feel that I deserve this kind of support from any of my viewers yet - maybe its because I've only made 2 videos... I don't know... but to be honest having people watching (and liking) my videos is the biggest reward for me right now, maybe in the future I'd make a patreon but right now it doesn't feel right to have one. Cheers nonetheless and thanks once again for the support!
What an amazing video! I can see the time spent in research and was surprised to see that you haven’t blown up.
Keep on going! This popped up on my feed so I assume you’ll be getting a algorithm bump.
I wish you luck
Thank you very much! I really appreciate it
i just came across this YT Channel and i'm astonished, your content is amazing and very well curated... if you keep up the hard work you'll go up to 1 million subscribers, this i know, so keep up with the nice work
Thank you very much, truly appreciate it!
your video showed up in my feed and i was baffled at the subscriber count
768?? not 768k huh?? super interesting video!! i always assumed music artists made very little money from spotify (less than a cent per stream) and spotify was profitable, but guess it mostly goes to the record owners and higher ups and i never really thought about how apple bundles keep it in the game. i wonder if more companies will keep bundling everything up and continuing with acquisitions until there's only 2 or 3 big players
Thank you so much for the supportive comment! In terms of bundling, I think it is extremely likely that we'll continue to see more of it (both in music streaming... as well as other industries such as corporate SaaS), as it really does give those who does it (Apple, Google, Amazon etc) a strong competitive advantage. However, the challenge for these companies is 1) they need to come up with the right products to bundle with it, and 2) anti-trust issues... which I suspect will be the real headwind in the future.
My band has a total of 200 listeners each month and that’s huge since our genre (punk) is dying or at least declining compared to meaningless pop-music these days. But what is really huge is the fact that with those numbers we have managed to make almost 500 dollars from Spotify. The closest competitor I think is iTunes where we made a whopping 3 dollars. I think that the problem lays somewhere in there.
Thank you for sharing. From my limited understanding, 500 dollars per year (?) on Spotify with 200 listeners per month is quite a lot isn't it? That's impressive if so and I wonder how that works - since many comments I've seen here are saying people with millions of streams getting only a couple hundred dollars from Spotify.
@@theartofbiz It’s over the span of 3 years and we make approximately 0,004 dollar per stream. Maybe either A; the signing labels take a large share so millions of streams is worth much less or B; the artists and/or companies are buying those streams which would make the profit margins much less or C; we just have a very loyal fan base who like our music and therefore listens a lot more times per unique listener. RUclips makes sharing images and files hard for some reason but I can assure you that those numbers are about right without showing any proof 🤷♂️😄 Good video mate 👍
Punk is dead, high live the Punk. Try German audiences. Punk is still going here.
Yes.
Scandinavia is worth a shout too. They too like music with these weird things called instruments.@@VSDeluxe
Impresive work. Your channel is going to explode.
Wow. Your channel has exploded in the the last few days. Awesome job!
Thank you very much! It literally just suddenly got a lot of views. A very pleasant surprise for me!
Great video and explanation of the Spotify business model. Interested to see how this plays out for Spotify in the future 🤔
Thanks very much. Indeed, I'll be keeping an eye on Spotify in the future as well.
"Netflix doesn't pay licensing fees on originals", yes, but they do have to pay to write, create, hire and produce said originals. Which still hampers it's profitability (which you pointed out) but what you didn't point out is that they must be a hit. If it's not, which a lot aren't, they're produced, unwatched and end up being cancelled after 1 season anyway. Which are basically money sinks alongside the some that do attract viewers - compared to licensing a show you know people love/will bring in subscribers. Netflix is notoriously known to be unprofitable, and by having to backflip on subscriber password sharing (having previously being for it) and heightening prices, these are all symptoms of that lack of profitability.
Great insight into how producing your own content has higher upside if done right, but also greater downside if executed poorly. Higher risk, higher reward. Thanks for sharing!
Yeah they have to pay for production of their originals but once they make them they have them forever without any further costs.
It's slightly different in this case because production is a once off cost where as licensing is a continous cost so based on 80/20 principle 20% of the original content will make it worthwhile
Now what I don't understand is how the licensing structure works. If it's similar to Spotfiy where the owners get paid from the revenue based on how many streams they have. Or if its another method
I hope you make more videos, these 2 videos are already high quality! You got me hooked on watching the whole time 🎉
Thanks for watching! And stay tuned ;)
the fact u respond to comments basically guarantees that ur not an automated channel
Respect.
Excellent video. Just found your channel and you earned yourself a new subscriber. As for Spotify, even though their stock went up over the past year, I still wouldn't invest a dime in this company unless they demonstrate that they have a true plan to profitability. It sucks how the record labels basically have them by the balls, but it is what it is.
Thank you very much! Agreed on the investment decision as well ;)
I just hope they don't get rid of the service. 3,158 songs and I'm not even half way done with the list of artists and bands I want to listen to. I feel like I have to screen record what I have now in case Spotify kicks the bucket.
When I was done watching the video I couldn't believe a channel with 6k subs made thsi video. This is so well done bro
Thanks very much!
im impressed. very great video. love videos like this. i know they take a long time to make. great work. keep it up. you got yourself a subscriber. im excited to see where this channel goes. this channel is definitely gonna blow up.
Thank you very much! I'm very glad you enjoyed the video, it did indeed take a long time to make but comments like these make it more than worth it. Thank you for the support and hope you to see you again in future videos ;)
I heard spotify always loses money before. Great deep dive and analysis
Thank you! Glad you enjoyed the video
I enjoyed your high quality analysis. Keep it up
Thank you very much, I really appreciate it!
Awesome detailed analysis. Keep up the great work!
Thanks very much!
It feels like the brand image of Spotify is so closely linked to music and audio, that it prevents Spotify from expanding into different more profitable industries.
Leaving a comment here just to support the author ❤️ Keep doing what you do!
Thank you very much! Truly appreciate the support!
Subscribed!
Amazing channel, keep up the great work 👍🏻 👏🏻
Thank you very much! Really appreciate it :)
Interesting. Could be good to have a video of 'top 10 businesses you think make money but don't'.
Could be a good idea! Cheers for the suggestion
I think upgrading your sound quality will make a huge impact on the quality of your videos. Your sound isn't bad now, just that it would be an improvement in quality in the future. In terms of why I clicked on the video - I saw the big Spotify logo (didn't read the text in the thumbnail) and then I saw the title of the video, the title made me interested in the video more than the thumbnail. That being said, the video is awesome. Very engaging, easy to understand and making business concepts and the topic in general interesting. I was honestly kinda shocked when I finished the video and I saw that it only had 5.1K views and you have only 347 subs. Great quality, great content, I'll tune in for more of your stuff. Cheers
Thank you so much for taking the time to write such a constructive feedback! This is extremely helpful and everything you said is well noted :) I will definitely look into upgrading the sound in the future - perhaps by starting with getting a microphone so that the voice is clearer and more consistent across the video.
Out of curiosity, are you maybe a content creator yourself? The feedback you gave is pure gold and everything a creator wants to know about. Looking forward to seeing you again in future videos. Cheers!
Great videos! Please keep uploading
Thanks for watching!
Loved the whole breakdown! You’ve got yourself a subscriber
Worst part is that of the 70% that Spotify pays "artists", these are major label artists, not your average working musician. Spotify pays artists really badly. They just pay A TON to those labels that guarantee the major artists (i.e., Taylor Swift level) remain on the platform.
Is this bad? Absolutely, but I bet they can't afford losing those artists.
"Price is the only thing they can compete on" - wrong. They can compete on features. Which Spotify does. For example, Spotify introduced a feature where you can stream music simultaneously with another's person's account, which means if one skips, pauses, plays, it does so on the other. They also introduced their "Wrapped" feature, which people love, illustrating all of your patterns, habits, and favourite genres, and music personality, that you can compare with others. Release Radar, which shows you new releases for the week based on your taste. And their most recent feature is an AI DJ, which acts as a real-time DJ that changes it's patterns on the go as you skip songs, mixing them smoothly between. So no, it doesn't have to _only_ be on price, and it isn't. And the fact that Spotify doesn't have a priority businesses that makes it's app a side-thing is actually a positive for them in this space compared to Apple or Amazon because they'll be more focused/spend more time on developing and improving the functionality of their app.
You are right, thanks for clarifying! Before making this video - I personally thought price and content are the main (and perhaps only) things that most people really cared about. But from reading the comments so far, it seems there are many other things that people do care about a lot as well, so much so that it could sway their decision in which streaming app to choose. The features you mentioned are some examples, as well as Apple music's higher sound quality etc.
These features will cost time and money and most likely wont increase users (and therefore neither revenue/profit) as much as you think, especially since more likely than not those features will be copied by competitors
Off what use are all these features if the company is not making any profits?
Well, those extra features of Spotify are nice but, ultimately, they are not a deal breaker. Even though RUclips Music is horrible in terms of usability, if Spotify raises its monthly fees by 50% (which is the only thing which can realistically save the company), I will strongly consider switching because I'm paying for RUclips Premium anyway and all those subscriptions quickly add up
Agreed. Spotify’s UI is the best.
Great video!
great video
This channel is going to blow up ❤
I swear I thought I was watching that Modern MBA channel this whole time till I saw a comment saying you only had 1k subs and I checked who I was watching.
Modern MBA is the best. I'm a huge fan of his channel as well, and his channel is a big inspiration for why I started mine. Hope you enjoyed the video!
subbed, great video
Thank you very much!
Great content, you need more subs ❤
Thank you very much for the support, I really appreciate it!
I think the idea of podcasts is worth continuing to push. Maybe it decrease music listening but if I understand the model they have fixed per user income and variable cost. If users are using more time on podcasts then music they are getting their value still and Spotify is spending less on providing that product
I have Spotify on my device to play music, not listen to dumbasses rambling about their own opinions.
The real issue is just that music is cheap and has a low profitability from the start.
This is just your 2nd video? Its really good
My second one indeed, I'm glad you liked the video, thanks very much for the support!
Great video! Well written and simple to follow script. You got a new sub. Hope to see more from you.
Thank you for subscribing! Hope to see you again in future videos ;)
Worth noting that the other services also offer annual plans which make them significantly cheaper than Spotify
I don't know where you are, but in my country, Indonesia, Spotify offer annual plans with price that equal with arround 9 months plans.
@@BayuAH in the US they don’t offer an annual plan. Typically here annual plans are equivalent to 10 months
@@BayuAHlucky you. I’m in Canada. Neither Spotify nor Apple Music offer actually subscription
This is incredible content. A very good insight on something that I never knew before, the world need more content like this. please keep it up!!!
Thank you for watching and for the supportive comments! Really appreciate it!
Interesting topic! Thanks for the effort u put in the production of this video!🙂
Wow. This is a brilliant video. Great work.
Thank you very much, I really appreciate it!
As these music streaming platforms don't own the content they profit of, they are basically virtual music distributers. You can't say that owners of music rights and publishing is a problem in general, it is a challenge for Spotify however. But their profit margins should be compared to other distributors. Good comparison with Netflix, displaying the difference between just distributing and producing their own content. It does seem that the business case of streaming platforms depend on being tied to other media uses and/ or products. Maybe Spotify should start producing their own electronic devices?
Producing their own electronic devices would be a cool idea. What kind of devices do you think they should make? I remember they previously tried making a hardware for cars - it was literally called "Car Thing" and was completely useless - not surprisingly that it flopped dramatically!
And yes having data on the other music streaming platforms would've been nice, but unfortunately I couldn't get my hands on any... it would've provided a much clearer picture of where Spotify and the music streaming industry stands.
Yeah you can get one of those CarPlay/ android auto portables for the same price as car thing was. Objectively superior products
@@theartofbiz Yeah, I don't know. But the Spotify brand has strong recognition, så maybe it doesn't have to be very unique.
I have almost 400 hours of music on my Spotify account. Do i ever have to worry about loosing all that and Spotify shutting down? Cuz its gonna take me a loooooong time to try to archive/save it all elsewhere
You don't keep exported final versions of music? You don't publish music to other platforms?
Since they are priced the same one thing that also plays a major impact in a consumer’s decision is the features that service offers & it’s user interface.
Love your analysis and your videos! I’ve just subscribed :) hope to see more - how about one on Disney next? 😅
Thank you very much! I'll consider Disney for future videos ;)
The thing is, Spotify doesn't pay that high in royalties compared to other streaming services (even though its a leader).
It's pretty low on the list which is suprising as it has lots of premium users and free users have to listen to ads. So it's a bit poop that so much goes towards the big record labels and not the independent artists.
who offers the highest to music artists then?
Spotify are equally culpable for not paying artists enough. A tiny fraction of the artists on any streaming platform are with Universal/Sony/WB, so they can get some of the blame - sure - but we need equal and improved rates for all artists.
Major rights holders are getting 2/3 of every $ but artists are getting $1 for every 400 streams...
@@Atriums Exactly, this is a massive issue. And that $1 per 400 streams is for artists with non-negotiated rates from major rights holders. The rates negotiated by the big 3 can get up around $0.0084 per stream, so $1 per 119 streams. So better rate, right? But as you said, with them taking 70% of the royalties their artists are basically getting the same $ to streams ratio independent artists are on Spotify…
So it works out as equally awful pay for all artists, and as usual Universal/Sony/WB are soaking up all of the cash for themselves… the worst thing is the services they provide - such as distribution, advertising and licensing - are becoming less relevant, they’re just clinging on to every penny because they’ve large legal teams. The sooner direct licensing and artist-ownership drowns them out, the better.
i didn't even know this, i prefer Spotify way more than any other streaming platform - this is sad to see that they make no money leaving them in a vulnerable position
Never knew abt this, even tho I've used Spotify for quite a while! Good video.
Interesting video. The funny thing is that Spotify is often demonized as being "anti-artist" for the notoriously small payouts that artists see from streaming revenue. As usual, it's the music companies that are siphoning the majority of money generated from streaming. Obviously Spotify's present model isn't sustainable and its shuttering would mean a pretty substantial loss of revenue for the "Big 3". My question is, wouldn't it be in their interest to find a "fairer" royalty rate to make Spotify more feasable? I guess they figure if Spotify goes under, people will just migrate to the other platforms and they'll still get their money. Gotta admit, things don't look too good for Spotify...
Great video man, love this work 👏🏽 you have a new subscriber 🤝 Also worth mentioning in the initial breakdown that Spotify actually have a small % ownership in the majors and vice versa which has various implications.
Thanks very much! The cross ownership point would've been an interesting point to include for sure. In my research I only came across the fact that the majors had ownership in Spotify (though think they've mostly sold out of it), but I didn't know that Spotify had ownership of the majors too! Cheers for pointing this out.
For sure! I’m unsure if it is directly however Spotify are shareholders in Tencent who in turn have a big equity stake in UMG and other majors.
@@AAAPASS Ah I see, cheers for clarifying!
I'm scratching my head wondering why Spotify hasn't dived into the record label scene. Imagine, they could have one for every country, with indie artists and big-name artists. There's a truckload of talent out there, and if Spotify had its label, artists like me would be interested to be all over it. They've got playlist placements, direct deals, exclusive jams, and that "Spotify for Artists" app. Having their label could be a genius move to cut down on losses. Also, think about it - if Spotify had its record label, they could score big with concerts, raking in cash from ticket sales and sponsorships. They'd be onto something huge.
Beautiful analysis, excelent channel!
Thanks for watching!
I wish Spotify would make there sound quality better. If my Spotify wasn’t free I’d have Apple Music because standard (not talking about lossless) sound quality is by far better.
Indeed, sound quality is something that Apple has Spotify beat hands down.
If Spotify can prove that the big 3 have a monopoly on the current market and is forcing them to lose profitability, couldn’t they bring them to court to try and change the contract? I’m sure there must be some pretty annoyed investors who want this to happen
Now I would love for someone on RUclips to do the analysis for QQ music. As someone who can read Mandarin and have used Apple Music and Spotify too, in my opinion the selling point of Apple Music is the audio fidelity and ecosystem integration (as always for Apple) and Spotify sells the best song recommendation algorithm. QQ music is selling a price advantage and extended catalog for Chinese exclusives (though this applies more for the Asian region).
Fingers crossed your sub count goes up like a rocket, quality here is great
Thank you so much, really appreciate it!
Some initial thoughts after a few minutes: ...So Spotify get 33%? Isn't that actually quite a large cut(!) From what I learned in economics 20% was considered a good markup for a store or a distributor in any other business.
The problem shouldn't be that Spotifys cut is too small, but it has to be solved by other means, -and that's something business-owners har been doing for as long as humans have traded with each others. They have to solve this in other ways than complaining that they get a too low cut of the pie when they get 33%!
...and what about the artist, songwriters, musicians and the ecosystem surronding it - is really Spotify's contributions *that* important?
The "ecosystem" between artist and the store may look, an even be(?), like a bad "mastodont", -but that's something you can see in any trade.
Fair point. If you consider Spotify as a marketplace that connects buyers (listeners of music) with sellers (artists... or more accurately - labels), then a 33% take rate does sound incredibly high. I just did a quick Google search on what Amazon's take rate is for amazon.com, and it turns out its around 15%. But on top of that, they charge sellers another 20-35% for Fulfillment (which includes storage, shipping fees etc), and they charge many sellers advertising fees as well (if they choose to advertise, which is most of them as amazon has become very competitive. Advertising fees normally is up to 15% of GMV). So in total, Amazon actually charges sellers around 50% of GMV, which is really high.
I wonder if Spotify can take a page out of Amazon's book? Perhaps charge labels "advertising fees" for promoting songs? (Although the ROI is probably much lower than on amazon.com given the much lower "selling price").
Spotify had a good idea when they tried cutting deals with major artists outside of the record labels, of course the "big 3" were never gonna let them get away with it, but they shouldn't have abandoned the idea. Instead they should've doubled-down and start making their own artists to compete with the big 3. Think about it, Spotify already has a monopoly on streaming - that's millions of users on their platform. Nothing is stopping them from finding new artists, signing them under their own Spotify label and promoting them like crazy. If they could successfully promote a few artists into the mainstream and have them under their own label, not only will they "stick it to the man", they'll also have some leverage to negotiate better rates with the major lables.
subscribed !
Great analysis.
great video; concise, informative, broke down many misconceptions
one more question: could spotify beat the big 3 in court with antitrust law?
Thank you very much!
I feel like they probably couldn't, otherwise I'm not sure why they haven't done it already. Though I'm no legal expert on this matter so this is all just guess work...
How cool would it be if Spotify announced that they were gonna make high end headphones.
Very well made and very well explained. You remind me of Modern MBA
Thank you very much! I'm a big fan of Modern MBA and his channel has been an inspiration for starting this one, so there could be some resemblance indeed - though not on purpose!
Interesting video, nicely done and well explained. I wonder how much money the golden idea gets (if there is any) that breaks free of the big 3. It would be funny if it could be as easy as having a middle man doing the dirty work as in rights buying for Spotify to then "sell" them cheap to Spotify as a loophole.
There just needs to be actual regulation in the entertainment industry. Almost all of the problems around music are directly related to the 3 labels always having a stranglehold on everything.
If Spotify allowed the artists to upload their music videos they could really increase their revenue. Especially if they pay out for video views
No?? Streaming music is cheap streaming video is expensive af. How would that remotely work?
@@wehushi_sushi it will bring all the artists work to one place and allow the customer to really invest in their favorite artist without having to search for their work. When u search on RUclips you get lots of different results. With this method you will have exclusive material (potentially) and artists would promote the service like crazy. This gets the cheap people off the free tier of Spotify and into the premium tier. Currently their premium tier isn’t really premium it only allows you to stream without ads. With RUclips you get movies, other content and ad block all for the same price. The only way to enhance the Spotify experience is to allow artists to put their music in there and sell their merch exclusively through Spotify
^They're completely right. Hosting an audio file is _significantly_ cheaper than hosting 4K+ music videos on their servers. Plus I wouldn't be surprised if the videos are licensed seperately from the track
@@kiwaminski u do realize there are more Indy artists than majors right? Tons of locals that don’t even license Their stuff they just upload it. With more features they can convert their free members and even charge more
@@NoahJonesNews In what way does whatever you just said relate to anything I wrote lmao? Hosting video formats eats up a shitload more bandwidth on servers than audio files do, thus increasing the cost drastically.
The fact that these 'tons of locals' would then upload their videos on a music streaming platform would in no way increase Spotify's revenue and would actually plummet it further into the abyss.
And if you think for a second people would value watching music videos more than LISTENING to music on their MUSIC streaming platforms (where they usually have their app in the background doing other things) is frankly absurd. They wouldn't and if they dared increase the price because of that 100% of people would just switch to the cheaper platforms to listen to their music for less money. Most people watch music videos on youtube anyway, so it's a banal proposition whatever way you swing this whole ludicrous idea lol