For Spotify, a Cool Million Paying Subscribers

6 thoughts on “For Spotify, a Cool Million Paying Subscribers”

    1. David,

      Agreed though it is doing really well overseas and they need to keep doing that in order to build the scale which would allow them to exist as a company and get more traction with the music industry.

  1. Hmmm… Because everything is so low margin, they’ll never make enough money to ever justify their valuation or their investment. They may be “red hot” but, between:

    * Licensing costs per streamed track and
    * Cost of bandwidth for streaming

    They can never turn a profit, which is why they’re taking so much investment. Unless the music industry capitulates and picks the business model of Spotify, instead of the iTunes model:

    * Itunes pays approx $0.94 cents to labels
    * Spotify pays approx $0.00029 cents to labels

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

    Thats not going to happen soon. And I predict that the service will continually grab investment dollars — and probably sell CPM ads around the free part of their service to justify that *some* revenues are actually coming in.

    Its high time we stop enabling companies like these who have absolutely no path to profitability in their current business model. I’m not saying they can’t pivot into something else, but they way how it is not, no profits will even ensue.

    And Om, you should know better.

    1. Your analysis is wrong for a number of reasons.
      1)Emerging markets (eg Russia,Brazil,Indonesia)In these areas the record labels have nothing to cannabilise so terms will be easier. A lot of people live in these countries.
      2)Other revenue streams
      a)software distribution (eg Bing toolbar)
      b)user data – Spotify know what music you like and where you live.This info is useful to record labels and artists to upsell merchandise,endorsed goods and tickets.For example Live Nation has used Groupon to offload difficult to sell concert tickets at discount prices; Spotify should be a better vehicle to fulfil this function.
      c)e-commerce If you were a music hardware manufacturer(eg headphones, sound systems) wouldn’t you like to get access to Spotify audience of music lovers and sell direct through their platform?
      3)Better advertising. None of these music startups engage in behavioural targeting or collect detailed social or economic data from their user.
      4)Spotify’s bandwidth costs are lower than other music subscription services – P2P

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