The trajectory of Spotify’s marketing activities constitutes an important part of the music scene, and from what it looks like, the scene is getting more and more vulnerable by the day.
While revenues earned by Spotify’s increased by over 80% in 2015 (to US $2.18bn or €1.95bn), the annual operating losses too increased from €165m to €184m – as Spotify paid out more than a whopping 85% of revenues to owners of music rights. Last year, Spotify managed to raise a $1bn convertible note that has a sizable 5% interest rate which increases by 1% every 6 months – till the company declares its IPO of course.
That said, the music streaming service is still considering delaying the said IPO, until it renegotiates fairer and better terms with the three major record companies that are often called “The BIG 3” – Warner, Sony, and Universal.
Up until recently, Spotify’s deals with the BIG 3 entailed large advances as well as a significant portion of the company’s revenues. Though it is still unclear said advances were ever shared with the respective artists.
And while the BIG 3 clearly did support Spotify, it came only in return for the massive stock consideration that each of these received. That said, it can surely be assumed that artists never had much to benefit from any of these stock grants.
This puts the BIG 3 at crossroads. Should they continue their actions, the future of the streaming industry would mean Apple having complete and absolutely monopoly! To make sure that the market for music rights remains robust, the BIG 3 must go beyond short-term gains which will ultimately kill Spotify, as well as other similar streaming platforms.
Bear in mind the fact that the BIG 3, the streaming platforms and us independents form an inter-connected “ecosystem,” where we independents are bound to accept whatever is available to us. This makes us completely dependent on the BIG 3, who are seemingly aligned in a rather myopic vision.
Needless to say, the music industry ecosystem is extremely fragile, much like planet Earth, and that we must find a way that is sustainable to grow and thrive, which serve all sections appropriately.
What would happen should Spotify and similar independent streaming services fail? Well, that’s not very difficult – Apple Inc, along with the Apple Music streaming service would rule the roost, so to speak. After all, it is pretty much the ONLY company that can afford to lose its way (in terms of money) to the number one – or in this case the only streaming platform worldwide.
After all, given that Apple recently reported having $246bn cash in its bank account while returning 2% interest per annum, Spotify’s €184m loss is simply 2 weeks’ worth of its interest earnings.
Therefore, the one question the BIG 3 should ask themselves is, “Do we only want one streaming platform?”
They should perhaps remember the time when iTunes used to be the dominant download platform, which lead the record industry into a freefall.
History – especially of this kind is best left unrepeated. After all, serving a monopoly can never ensure a better future for songwriters, artists, and listeners.
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