About Your Streaming Music Service

Posted on 03/04/2023 in misc

Spotify controls about a third of the streaming music market. It's closest competitor is Apple Music, at 15%. Surely, with 10+ years of experience and that kind of market domination, Spotify must be a profitable company by now.

Spotify lost $500,000,000 in 2022.

That's one-half of a billion dollars. If you are losing that kind of money with overwhelming market share something is very wrong. They've lost over $2 billion in the last 5 years.

I've never been a big fan of streaming music, and I've never depended on it at all. It's convenient at times, and not a bad way to discover new music. I've been plenty critical of the streaming music model over the years, partly because I didn't believe the market could really work at $10/month. I had assumed in the last couple of years that I had been wrong about that, but seeing Spotify's 2022 results suggests I was actually right all along.

We know artists are mostly screwed by the streaming business model. This article suggests an indie label artist would make about $2000 from 1 million streams. So if it's a 4 piece rock band they pocket $500 each. There was a time when a good cover band could get that for one gig at a local club. The local music scene has faltered too, so I don't know what the money there looks like today. It's probably safe to assume it's not good.

So Spotify isn't making money and the artists (with the exception of global superstars) aren't making money. The founders and folks in earlier for the inflated IPO certainly cashed out with FU money, but companies losing $500,000,000 a year aren't making their investors rich. At this point the streaming market has to be leveling off. It's not like there are vast numbers of people not aware of Spotify. Everybody that wants a Spotify account has one at this point.

They could start buying competitors, but the creative output of people doesn't scale like that. There aren't serious economies of scale to be found by Spotify buying up their competitors. All they'd be doing is buying money losing subscriptions in bulk.

So what does that leave? Change the business model and/or increase prices. All you can eat pricing might be in danger. $12 a month subscriptions probably have to go too. Will you pay $20 or more monthly for Spotify that has usage limits? That is still about the equivalent to buying 2 albums a month, which on the surface seems like a great deal. But we all know people aren't good at math.

Where does that leave artists? Given that most barely make beer money from streaming, it probably doesn't impact the 80% part of the 80/20 split all that much. They'll keep making music because they are artists, and artists have to create art. it's what they do.

As usual, I don't have any brilliant answers. I kept buying MP3 albums all along, so drastic changes in the streaming market will have zero impact on my life. I have YouTube Music because it comes with YouTube Premium. I have YouTube Premium to avoid all the ads in YT videos, the music component is fun for exploring new music sometimes, but it if went away tomorrow I wouldn't miss it. If you have a collection of carefully curated playlists on a streaming service, it's probably a good time to think about just how meaningful they are to you, and how you might get along day to day if you lose access to them.

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