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Spotify opens on NYSE, valuing company at almost $30B (techcrunch.com)
692 points by harshgupta 10 months ago | hide | past | web | favorite | 453 comments



I do love Spotify as a product, however I don't think it will scale the same way Netflix does. Spotify is at the mercy of major record labels, and as their books become more transparent the record labels will squeeze every dollar they can for licensing. That is, unless they find a way to upend the record industry entirely.

Spotify has a unique position with their amazing discovery/recommendations engine- they could potentially start their own "label" and promote their own artists that sign on. Small/independent musicians could see more exposure and Spotify can deliver more music tailored for individual tastes. I've personally found myself listening to lots of small/indie artists as a result of their algorithms, to the point that these now make up the majority of my listening experience.

I think getting into concert tickets/streams, merchandise etc could help them potentially capture quite a bit of value in the future as well.

I know the comparison is similar to original content & Netflix - but keep in mind there's an opportunity cost with media (one can only consume X amount of shows/songs within a period of time). The more attention Spotify can divert away from the major record labels the better.


Starting their own label is exactly what they need to do to remain competitive. It's exactly what Netflix ended up doing and I think it's turning out pretty well for them. I wouldn't be surprised if Spotify tried poaching higher-level strategy people from Netflix.


>"Starting their own label is exactly what they need to do to remain competitive. It's exactly what Netflix ended up doing and I think it's turning out pretty well for them."

This seems to be a common refrain that Spotify can just "pull a Netflix." And this is very unlikely.

Firstly no matter how much opriginal content they could create, if they don't have back catalog it's going to be a total non-starter for the mainstream. A streaming service that has no Beatles, Pink Floyd, No Motown, No AC/DC etc is going to shed users pretty quickly.

Also music and movies occupy very different spaces in peoples lives - emotionally, socially, where and how they're consumed and shared etc.

People need music for their commute, for their workouts, for their parties, at bars and for their workdays. People only need movies when they're home or maybe stuck on an airplane.

Lastly Spotify needs to stay in the record label's good graces. If they were ever to be viewed as a competitor or a thread to any the big 3 record labels it would be reflected in punitive price increase when it came time to renegotiate their licensing deals.


> A streaming service that has no Beatles, Pink Floyd, No Motown, No AC/DC etc is going to shed users pretty quickly.

I disagree. I think for most people music is fungible; they just want something to listen to. I think Spotify can afford to have gaps in it's library. Sure, if a large enough portion of the music industry cut them off it would be an issue, but I don't think they're in imminent danger of that.


I think you underestimate the annoyance and frustration users feel when content disappears from their library. This is especially noticeable in playlists: when half of your favorite workout playlist suddenly disappears, it's not something you'll ignore easily.

People pay Spotify a monthly subscription for the convenience of being able to listen to the music of their choosing, at the time and place of their choosing. Anything that jeopardizes that convenience is going to be a problem.


It’s already happening, and it’s less of a problem than I thought it would be. Some of my playlists are 200+ tracks. A few songs go missing from time to time. I can never remember which tracks have gone, I just know something’s missing as the flow from song to song is off.

It’s extremely irritating, but not enough to make me go elsewhere as I can’t see any other service not having the same problem.


In case you’re not aware, there’s a setting to show unavailable tracks greyed out in your playlist, so at least you can tell which ones are missing.


Best I can tell, this feature is only applicable if the track is not available in the region you're in, and/or for tracks that are 'local music' that haven't been syncned to the device you're playing on.

If a song is removed from Spotify entirely, it just disappears from the playlist.

I'd love to be proven wrong, however, and start to see all the tracks that have disappeared in the past!


Where is that setting on iOS?


Yeah, it's already happening, that's why I brought it up. Right now it's not a huge problem, because it doesn't happen too often or on a large scale. Like you said, it's usually a couple of songs in a larger playlist.

Now, imagine the scenario comparable to what @bogomipz said above: "no Beatles, Pink Floyd, No Motown, No AC/DC". I'm betting all of us would be a lot more frustrated and irritated than we are right now. Maybe you won't do anything about it. Maybe I won't, either. But it sounds plausible that a lot of people will, whether they switch to a different service, come up with a solution of their own or simply revert to piracy.


I’m curious. Do a lot of people actually use a single music streaming platform? As an avid music lover, I get my new doses from various services. Spotify is the only one that I pay for. I mainly use it to discover the latest mainstream stuff from genres I don’t typically listen to. But the Beatles? Come on, why isn’t that saved in your hard drive somewhere?


Because it’s included in my Spotify subscription. Why would I pay ~200 dollars to “own” all the Beatles albums when music ownership is basically worthless?


Why would I save music on my hard drive when I have music streaming services?


I don't think most people are avid music lovers, and many people probably don't even use a computer for music at all, just their smartphone.


I don't think they would switch to another service, because another service is likely to suffer from the same problems of rotating availability. The only service I know of that doesn't suffer from that is piracy, which I don't think people will go back to on any significant scale.


Absolutely agree with your point. Happened to me a couple of times when the music just disappeared and I could not really understand the reason. Good, I am paying for a student (4.99 instead 9.99 per month), but it's still money and I expect the promised services to be fulfilled.


Indeed. Since the rise of ClearChannel in the '80's, the industry has been reducing the variety of popular music down to the chords, and repeats trite elements like the 'millennial whoop"*, as far as they can. Content for them is very much a simple commodity. The number of really successful songwriters is tiny.

For those interested in this one, small-scale phenomenon: https://qz.com/767812/millennial-whoop/


Most people listen to top 40 music and artists, and not much else.

Most people on Spotify don't make their own playlists at all, and just rely on the ones that Spotify supplies in the Browse tab, or listen to albums.

From a quick scan of the friend activity pane, if Spotify only had music from the past 5 years, 80% of my friends would still be able to listen to their music.

People complaining about gaps in their library are a definite minority.


Indeed. 99% of Spotify users that I know, prefer to play Spotify playlists instead of listen their own playlist...


There are so many people that listen to their ONE favorite artist all the time...I don't think that music is as fungible as you think.


If this were true, Bandcamp and Soundcloud would be killing it.


Spotify's catalog is so spotty that it is borderline useless for me. Most small indie labels still do not publish to Spotify

If you are the kind of person that will sometimes strongly desire to listen to only one song/style/artist, and that desire is so strong that nothing else satisfies it, then Spotify not having your track can be a big deal.

If I can't build a decent playlist because Spotify's lack of coverage, that's going to be a big deal to me.

The mainstream is not sensitive to nor do they care about the logistics of music distribution. I wish there was a way for Spotify to ignore these bullshit distribution deals because the only people who care about them are megalabels and their A&R reps. I don't know of a single artist making bank off streaming...


Spotify is mass market music platform, it's not meant to be an indie publishing platform, and it doesn't even make economic sense for indie artists to publish on Spotify.

It's like complaining about the lack of techno (especially remixes) on Spotify, that's what Beatport is for.


What does Spotify not fitting your niche case have to do with its mass-market appeal?


I don't know what music you listen to but i have a pretty broad and eclectic taste and still find Spotify to be amazing for discovery.


I have never been happy with Spotify/Pandora as discovery system. Nothing beats an hourlong mp3+tracklist with real DJs pushing real buttons :/


Why the assumption that "to pull a Netflix", they will have to get rid of the back catalogue? Netflix has plenty of third-party content. I would assume that Spotify's music licences are highly variable cost, ie almost entirely pay-per-stream. All they need to do is to get people to stream less licenced content and more own-produced.


>"Why the assumption that "to pull a Netflix", they will have to get rid of the back catalogue?"

If they start poaching artists from the labels who own the back catalog or if the labels start to see Spotify as a competitor instead of customer there will a reckoning when it comes time for Spotify to renegotiate their licensing terms with the labels.

And then of course there's the risk of becoming a record label. For every Bruno Mars that blows up there are 30 or 40 other artist that failed to break. And each of those flops costs money and requires resources such marketing, A&R people etc.

>"All they need to do is to get people to stream less licensed content and more own-produced"

People want to listen to what they want to listen to when they want to listen to it. That's the whole value proposition of streaming for users. If someone has a specific record or song in my mind you aren't just going to persuade them to try some "non-licensed" content instead. It's not a sports drink.

>"I would assume that Spotify's music licenses are highly variable cost, ie almost entirely pay-per-stream."

No its most certainly not pay as you go. In fact the labels demand a certain percentage up front.


Because people expect broad coverage in their music service. When I ask alexa to play a song and she doesn't know it, I am like wtf? But I don't care if Netflix doesn't have every Matrix movie, I just watch something else.


Not just watch something else, if they don't have that matrix movie, you might watch it somewhere else. People don't make movie playlists and consume 35 movies in a row. Switching from one service to another to make up content gaps is OK when you're talking about a 2-2.5 hour block of time. It's not something people are going to do to listen to a mix of artists at a party.


> Not just watch something else, if they don't have that matrix movie, you might watch it somewhere else. People don't make movie playlists and consume 35 movies in a row. Switching from one service to another to make up content gaps is OK when you're talking about a 2-2.5 hour block of time. It's not something people are going to do to listen to a mix of artists at a party.

You nailed it. Music has a fundamentally different mode of consumption from music. People consume music in so many different ways and contexts. Music doesn't always demand your attention like a sensory-engrossing medium (like movies). But when music demands your attention (like having to change providers to hear a specific song) it introduces friction that is unnatural to that medium.


  Netflix has plenty of third-party content.
I agree they have plenty in the sense that they have many more hours of it than I have time to watch.

However, in my experience in the UK, if you pick a well known film at random and look it up on Netflix, there's only about a 5% chance they'll have it.

Not the sort of library that will have users throwing away their personal collections.


.. unless the music labels object to the conflict of interest.

Spotify has a lot of competitors biting at it's heels, they're certainly the largest (and IMHO, best) at what they do, but they've by no means locked up the market.

They're not exactly at the mercy of the labels, but they probably can't afford to piss them off either.


The labels themselves are large shareholders in Spotify, so they would have to balance the monetization of their own artists with Spotify's label artists.

This could lead to cartel-like behavior among the stakeholder labels and crowd out the smaller players, but that's basically been happening in the industry for a long time so I'm not sure how big the impact would be.


Yeah i disagree. In 20 years, the Beatles and ac/dc will be less relevant and easier to live without. If Spotify start their own content channels now, and i imagine they have, the situation could easily be reversed, where they have exclusive rights to the content that others want.

Time will tell but i feel like this can go either way.


>" In 20 years, the Beatles and ac/dc will be less relevant and easier to live without."

If you made that statement I'm guessing that you don't realize that the Beatles have been relevant for 50 plus years now and AC/DC for 40 plus years.

They are so enduring because they are classics. It's amusing that you believe that when yet another generation discovers these artists they are somehow going to become less relevant.

Both of those artists that you used in your example were long time hold outs to allowing their music to be streamed. And it was huge news for Spotify when they were added to their catalog.

It's worth mentioned that Beatles tracks were streamed 50 million times in the first 48 hours that they were available for streaming.[1]

[1] https://www.pastemagazine.com/articles/2015/12/beatles-songs...


I’m not totally stupid (just a little...), of course they have been relevant for a long time, but i think their ability to be a differentiator in what people choose to pay for exponentially deminishes as time passes. They will matter to some for sure, but i doubt it’ll be enough to really make or break the offering. Also, maybe in 20 years they’ll manage to license the content?


They have been relevant, yes, but that doesn't mean their primary audience isn't aging. If you truly believe the Beatles and AC/DC are gaining more followers than they are losing, you are woefully out of touch.

Spotify was excited to get them because it means older people might join. A larger audience, that's it.


You are flat out wrong.

65% of those 50 million streams in the first 48 hours were by people under the age of 34. See:

https://www.thewrap.com/beatles-songs-stream-50-million-time...

So yeah, catalog is king.


And you don’t think those folks weren’t streaming because they were heavily pushed towards it? First 48hrs is completely irrelevant, I want to see sustained numbers. I’m not saying the later numbers don’t show them leading still, I’m just saying your choice of facts doesn’t support the argument you are making.


>"And you don’t think those folks weren’t streaming because they were heavily pushed towards it?"

It's very bizarre that you don't understand the magnitude of the The Beatles. They are not something that requires a push.

So here's some number regarding the first 3 months of their catalog being available on Spotify:

"24 Million Hours Of Beatles Music Has Been Played In Their First 100 Days On Spotify

The company revealed today that in just over three months, people around the world have played 2,793 years worth of Beatles tunes.

Yes, that’s right — years. When that figure is broken down, it can be better understood as about one million days, or over 24 million hours. Considering that the average Beatles song is less than five minutes long, those 24 million hours multiply into several hundred million plays."

In fact, a conservative estimate of total Beatles plays on Spotify is still over a quarter of a billion. [1]

[1] https://www.forbes.com/sites/hughmcintyre/2016/04/08/in-thei...


> It's very bizarre that you don't understand the magnitude of the The Beatles

I don't find it bizarre at all.

They are basically unplayed on UK broadcast radio nowadays and indeed for the past 30 years. I don't know if that is due to restrictive licensing or just lack of interest.

I am mid-40s and have never knowingly listened to an entire Beatles song. I've just asked my wife and she has never owned one of their CDs.

I don't know if they're even on YouTube. Edit: yes, their most popular song has 123 million views versus 3.2 billion for Gangnam Style.

My only peers who seem interested in the group and seek-out their music are musicians themselves.


Your original point was that millennials and younger love the Beatles on Spotify. How does this new reply show that?

I’m not sure why I’m bothering because you continue to miss the point and instead use multiple logical falicies to try to belabor your point. I get it, you have an obsession with this and you want to convince the world you’re right, doesn’t make it so.

I’m happy to be proven wrong as I have no skin in the game, but so far, you’ve not done so.


Please don't stoop to personal attack regardless of how wrong or annoying another comment may be.

https://news.ycombinator.com/newsguidelines.html


>"Your original point was that millennials and younger love the Beatles on Spotify"

No my original point was the value of back catalog.

While its unfortunate that you aren't able to follow the conversation, it's even more unfortunate that you insist on making comments when you have nothing of value to add.


Would you please do a better job of respecting the civility rule here? You've broken it frequently. That's a problem.

https://news.ycombinator.com/newsguidelines.html


I will yes and I realize I should have just have flagged the OPs comment rather than respond at all. Cheers.


Again with the ad hominem. I tried to have an intellectual debate, but alas, have a good day and best of luck!


Spotify should not "pull a Netflix". Spotify should "pull a Bandcamp".

Rather, Bandcamp should start a streaming service. I've had a payment model in my pocket for years that I think would work really well for them.


This wouldn't make much of an impact because the statistical distribution of music listening time has an extremely long tail, i.e. the most popular songs are far more popular than even other very popular songs. In a given market, something like 90% of listening time will come from the top few hundred tracks, and 99% will come from the first couple thousand. Those top couple thousands tracks are already well-served by alternative distribution channels (youtube, "indie" labels, etc), so there isn't much room for disruption there. Starting a service to fight for that 1% of listening time will not move the needle.

source: I used to work in the data side of the music industry.


You can already stream everything on Bandcamp.


Why do you think Spotify has to ditch every other label when they start a new label? I think you're overblowing the power of music labels.

Indie and emerging artists aren't going to sign with a label if it means their music isn't available on Spotify, the #1 streaming service.

Music labels may have modestly more leverage, but it is not impossible for Spotify to start their own label while also maintaining relationships with existing ones.


Inversely, Spotify can buy super-low on fast-growing artists because they can juice the distribution channels for that artist.


The same reasoning would also have applied to Netflix when it was a younger company, though (i.e. back catalog, staying in the good graces of licensors, etc.).

Tidal has already been doing most of the stuff people are proposing here. It's a controversial topic but I don't think there is good evidence that music streaming services, from a business standpoint, shouldn't also be in the business of producing or sponsoring musicians.


How many shares do we think it would take to purchase a major record label at this point? What about a perpetual license to their content (since buying a label could be seen as anti-competitive)? This would certainly help avoid some of the down-side risk to the business. That said, their IPO didn't exactly help the company clear the working capital they'd need to do this.


Well there's no such things a "major record label" anymore. When people say "the Big 3" each of those three is global conglomerate. The result of years and years of consolidation.

Using the smallest of these 3 Time Warner Music Group, the company did $2.87 billion in revenue in 2013[1].

Let's say that Warner was actually interested in a sale. Let's say that the multiple they were looking for was 5x. Where is Spotify going to get the 15 billion dollars for that sale? Certainly not from this direct listing. And even if they had that cash what happens when you buy a 3,500 employee mega corporation? You actually have to run it and run it well.

[1] https://en.wikipedia.org/wiki/Warner_Music_Group


Wow, the big three put together did a laughable amount of revenue compared to an average tech major, surprised they haven’t been bought yet.

Where does the fear of these labels come from?

Why doesn’t someone just buy them for the catalog, and fire everyone in the dying parts of the business?

De-risk your revenue model, and gain leverage vs other streaming services.


Not only are there numerous labels with "must have" back catalogs, they now all know exactly how much money Spotify has.


A streaming service that has no Beatles, Pink Floyd, No Motown, No AC/DC etc is going to shed users pretty quickly

Last I checked, Spotify has those artists. Have you actually used Spotify lately?


Read the context.


I did. The context is Spotify's back catalogue. Which includes the Beatles, Pink Floyd, Motown, et al.


It could easily stop including those if the record companies think Spotify is competing with them instead of helping them. I think that's the point being made: that back catalog is leverage that will stop Spotify from ever rocking the boat the way Netflix has.


They aren't saying Spotify doesn't _currently_ have those artists, they're saying that they wouldn't survive as a music streaming service _without_ them, as no one only listens to the latest and greatest, as many do with TV/Movies.

Thus, Spotify can't directly attempt to go in the same direction that Netflix did, as the other labels would see them attempting to compete and could possibly pull out, destroying any reason to use Spotify in the first place.


They'll be able to buy a bunch of those classic catalogs with the money investors are pouring in


> A streaming service that has no Beatles, Pink Floyd, No Motown, No AC/DC etc is going to shed users pretty quickly.

I could mangage quite well without all these.

Just one datapoint but...


I'm not convinced. You don't consume music the way you consume TV shows and movies, it's often a more "passive" activity where you start a playlist in the background while you do other things. You can do that with movie/TV shows of course but a movie will last you ~two hours while a TV show can literally last you days or weeks at a time without input if you really like having The Office in the background while you do other things. Assuming that you can afford buying subscriptions to various services it's not massively annoying to have to use HBO Go to watch Westworld and Netflix to watch Arrested Development. It's not as good as having a unified service but it does the job.

If like me you like composing playlists instead of playing one full album at a time then not having the vast majority of your music available on a single service is a huge deal breaker. When I hear a song out there and I want to add it to my playlist I expect that it will be available on Spotify and the vast majority of the time I'm right.

If I need to go hunt for songs on various services and I can't easily make a single unified playlist with all of it I think it'll be back to piracy for me, it won't be less convenient and it'll be much cheaper.


I think Spotify's model would need to be slightly different to Netflix, I think they would still need to allow their artists music onto other platforms.

The need for them to be a record label is not for exclusivity, it is so they can operate as an equal partner. At the moment their entire business is based on negotiating deals with record labels, all Spotify can offer is revenue, so they will be squeezed and squeezed as each contract is negotiated and renegotiated.

Every artist that signs up to them will save them this cost in the long run... So I'm sure there'll be seemingly crazy deals like comedians have been striking with Netflix, which in the long run are will be very beneficial to Spotify.


Interesting thought. I've been very anti Spotify-as-a-label, but this is a really neat way of looking at it that I hadn't considered before. What if Spotify becomes a (small) label that's very artist-friendly? Then they can offer non-streaming distribution of their artists as a bargaining chip for existing labels.

My only issue here is that I'm not sure if existing labels will begrudge a new competitor on the block (and then try to kill Spotify). It doesn't seem to me like Spotify being a fellow label gives them much more that the existing labels would want, but maybe I'm just not thinking of it.

According to my memory and a little research [1], the record labels have some stock stake in Spotify. Personally I think this is Spotify's best bet: if the labels can derive stock gains from helping Spotify (plus licensing fees), they have skin in the game so they won't try to sabotage Spotify. I'm of the opinion that instead of trying to produce music (and fight the record labels), Spotify is better off getting into a complimentary position: make it easier for fans to find out about concert, purchase tickets at fair prices, and buy t-shirts. All stuff that Spotify can probably do better than the record labels, and which won't cut into label profits.

[1] http://www.swedishwire.com/jobs/680-record-labels-part-owner...


One thing that stands out to me that differentiates Netflix vs Spotify is what happens when a license expires and content gets removed.

With Netflix, my reaction depends on if I watched the content before it was removed.

With Spotify, it's almost always rage.

Why? I often listen to music more than once but I often don't watch movies more than once.


> If like me you like composing playlists instead of playing one full album at a time then not having the vast majority of your music available on a single service is a huge deal breaker.

I have this problem with Spotify. About 80% of the music I like is on Spotify. Private label, soundcloud, older forgotten bands, and foreign music is often missing.


The problem with this approach is that there's so much music out there because it is way cheaper to make music than it is to make films and shows. Even if spotify was somehow able to sign the top artists, they just couldn't keep up with the influx of new artists coming up every single day.

Music lovers also tend to be very particular and nuanced about their taste in music. Therefore, if I as a consumer don't find my music on spotify it means I'd have no reason to subscribe nor come back to spotify.


I think we might be seeing a shift in how people consume music that Spotify is (better?) positioned to take advantage of.

First and foremost, I agree that Spotify will struggle if they try to compete with other services on providing all artists.

It seems like listeners (or perhaps a subset) are listening by genre rather than by artist. I know genres and waves of music are nothing new, but with the lower barriers to creation as well as to consumption [1], we are seeing the number and frequency of new genres and sub-genres increase dramatically.

Anecdotally, I find myself using radio based music a lot more. E.g. I have a Synthwave station on SoundCloud that I listen to. I think this style is further exemplified with the popularity of sharing Spotify playlists. This is also why I think Spotify in particular are ahead -- the very people who would listen to Spotify published content are the people that already use Spotify.

In fact, I think this style better fits a lot of people who would use a streaming service in the first place. A lot of the people who want to listen to their favorite artists question the idea of paying for a subscription to maintain access to their favorite albums.

Of course, if Spotify goes this route, they are not alone. They would have to compete with services like SoundCloud and BandCamp. I think they could find success by toeing the line between major label content and indie content.

[1]: e.g. a "bedroom musician" can make their album over the course of a few weeks and then that album gets bought and listened to by someone thousands of miles away within minutes/hours of release. No printing copies, shipping, stocking, ticket purchasing, etc.


Genre is a discovery hack. If you listen to "Reggae", that may be only because you know you like Bob Marley and the Wailers, but you don't necessarily already know that Peter Tosh plays similar music, or that Desmond Dekker is similar, but is actually considered Jamaican (First Wave) Ska. It won't be able to predict if you will also like or dislike Rage Against the Machine or Elvis Presley, or individual songs that an artist plays out of their normal genre.

If Spotify can solve discovery, by using actual human listening patterns, playlist contents, machine classifiers, or whatever else they may have at their disposal, it is much less important that they have licenses for all the most popular songs. The popular songs are the easiest way for the system to determine what kind of sound any given listener will like, but tuning the radio and auto-playlists to respond to likes, skips, and dislikes should be able to reveal the songs that people will like, from artists nobody has heard of [yet].

I think they're almost there. When I go to radio mode based on my "Liked from Radio" playlist, I want to also be able to specify between "I'm passively listening, so just play music I probably won't want to skip" and "play only new stuff, so I can actively train your algorithm". As it is, it mainly just plays things that are already on my list, and I have to skip ahead on everything I have already liked when I'm trying to train it.

The key issue is that if Spotify is the music discovery engine, people won't discover music that isn't on Spotify. You have to license to them, or you don't acquire new fans. It only helps them that broadcast radio has consolidated itself into a uniform ball of only the greatest hits by only the biggest stars.


Also I can listen to the same album over and over for hours on end, but once I've watched a TV series or movie I am unlikely to revisit it again for a decade. So exclusive TV/movie content has a "novelty appeal" that music doesn't.


I don't feel we're at the point of saying 'it's turning out well' for Netflix. For sure on the awards side of things and quality shows etc... but haven't they raised billions upon billions in debt to make these shows?

Their execution on doing their own content has been great. However the long term value of these movies / shows still has to prove out in profits at some point.


I’ve never heard anyone talk about Hulu and Chill


Starting their own label is biting the hand that feeds them, though. They need the libraries that the major labels have in order to stay in business.

Perhaps when they're not competing as heavily with Apple and to a lesser extent Google they could start their own label and the major labels would just have to deal with it, but I don't think it's a realistic course of action until then.


It would definitely be a good direciton to go in, but I suspect a major potential problem for Spotify will be the possibility that the major record labels pull their tracks off Spotify in retaliation.

This was less of an issue for Netflix as Netflix streaming already had an extremely limited selection of third-party licensed content.


IIRC the original content was in response, not in spite of 3rd party content pulling out of Netflix.


Can you imagine if most new artists start signing with this supposed new label. If it happens Spotify will be a monopoly soon enough and artists will be in a way worse state than they are now.

Making a TV series or a movie is not the same as making Music. Artists sign with a label and they are more or less stuck with them.


Isnt that actually in the same vein as what Tidal did/is doing? They even had exclusives, and I dont really think, its working out for them. Worth remembering, that most artist dont make real money on streaming, they make money playing live, merch etc.


Spotify already is a label. Right? A bunch of artists have done "Spotify Sessions".


Publishing recordings of live performances is pretty different from having a division of the company dedicated to supporting the careers of an artist roster


I believe they are testing this in the 'generic' categories of music. Think elevator muzak - people want the ends and don't care about the means, so they can white label artists who make albums like "Ambient sleeping tones" or "Rain sounds" and algorithmically crowd out independent artists doing the same thing, thus getting a cut of the royalties in addition to the distribution fees.

Edit: Like Aldi does for groceries


If they start a label, I would hope that it doesn't try to compete with smaller record labels. It should compete with the big dogs and help out smaller ones similar to bandcamp. Idea: bandcamp + spotify...


If they start a label, the smaller labels will be the first one to feel the heat. Spotify would need to swallow them all to garner power so it can fight the bigger fish.

If Spotify start a label and is successful with it, the Music industry will most likely end up worse state than it is now.


I doubt the need to poach the people, just the strategy itself. Would likely be better to find people used to managing bands, or doing whichever relevant recording company position, at a high level I would suspect


They should just buy a significant stake in every major label with their ipo money


Or compete with Netflix. If Viaplay can do it, perhaps Spotify can also.


I agree they should sign exclusive deals with artists which would give them leverage in their negotiations with the record labels with an eye on the long-term hope of breaking that reliance on them.

They won't be able to get into concert tickets at the present time in any significant way due to the exclusive agreements between Ticketmaster and venues. Though maybe the could start with some smaller acts and venues and work their way up.

Live performances is where the money is for the artists which is why record labels are now signing acts up for complete deals which include not just the music rights but the concert and merch rights as well.

Edit: as somebody who has tried to buy tickets to a hot show on Ticketmaster the second they go on sale and watched the servers melt, it is Amazon that I would like to see get in the ticket game.


IMO signing exclusive artists seems like a strategic red herring because such deals would not be done in a vacuum. I think the transition period in building up substantial leverage with exclusive artists means theres quite a bit of time for the record labels to retaliate.

My pie in the sky recommendation would be to figure out a way to offer a record label's services for free without exclusivity. Then existing labels will have nowhere to turn.


>as somebody who has tried to buy tickets to a hot show on Ticketmaster the second they go on sale and watched the servers melt...

I’m just as amazed by that this problem has yet to get solved today as I was 15 years ago.


Presumably it's a technological arms race in which the platform has little incentive to innovate to get ahead of the touts. The platform gets paid either way, whether fans or touts are buying. Touts however, are massively incented to keep fans away from the hottest tickets.


Check the freakonomics show about ticketmaster. The tickets problem is not going away any time soon, and no company that leans heavily on good PR is going to get into that business



It is alot easier (cost and effort) to start a band and put on album on Spotify, compared to creating a movie/tv show.

Consumption is different, as well - several minutes at a time versus dedicated visual attention for a minimum of 22 minutes.


I suspect that the average paid Spotify user is actually listening for hours at a time, while they are working or driving. I don't think people are turning it on and off a few songs at a time.


I think the parent comment's point is that the smallest unit of attention is smaller for Spotify than Netflix


The point that it's a different consumption model is still valid and interesting, though. Nobody with a long commute (until self-driving is solid) is/should be watching Netflix to pass the time. Audio-only is feasible, though. Same goes for the gym and during the day at work. Music is common and acceptable, but video is definitely more of a leisure activity since it monopolizes your attention.

Do I think Spotify has anything special over Apple, Google, or Amazon? Call me skeptical. I'm just not sure you can make a direct comparison between an audio service and a video service.


I understand what you're saying, but a huge number of people commute by rail or bus (perhaps more so outside of the US, I don't know). Watching video on the Tube (London Underground) is fairly common, as it is on commuter rail into London


And how is anyone supposed to sift through all that garbage to find something worthwhile?


Personalized playlists, artist radios etc. The point is you don't have to sift because they do it for you.


Sort of, but not really. In reality a lot of the streaming contracts with record labels dictate that they must promote certain artists more than others.

Spotify playlists and Browse are very bias. My Spotify 'home page' shows me mostly popular/mainstream stuff that I never listen to. :)


It was my understanding that Spotify's home page generally shows global trends and probably sponsored content, at least it's pretty obvious for me because as you point out it's filled with artists and music genres I never listen to.

There's however plenty of automatically generated customized playlists available next to that. When you create a playlist it also recommends tracks it thinks will fit etc... I haven't found any obvious bias in those so far and they often recommend obscure old tracks that I doubt anybody cares to promote anymore.


Social playlists are where it's at. Expect Spotify to further leverage social and friend features.


The GP's post was implying that it's easier to bypass traditional gatekeepers (labels) by self-publishing on Spotify. I don't see how either of your recommendations solves the problem of the flood of self-published releases in a "labels are no more" scenario.


Finding music you like among all the competing possibilities is Spotify's strong point.


This is roughly the youtube model now, isn't it? Some grass-roots promotion will get content fed into a recommendation engine of sorts.


I built https://www.jqbx.fm to help with that. It let's other people play music for you. So if you know someone's whose taste or playlist you like you can listen to music in sync with him/her/them. Like a user-generated radio.


Discover Weekly


Who is listening to all of this self-published music to get training data for Discover Weekly?


I'd imagine that the self-published music gets discovered by a few people and put into playlists, then more people who follow those playlists discover those songs, and then they percolate upwards through layers of algorithmic and editorial Spotify playlist generation including Discover Weekly.

There's also the Fresh Finds playlists, which work a little differently by surfacing unknown songs that "tastemakers" have been listening to.


Agreed that your hypothesis makes sense given the current state of things but I do not think it scales with any sort of consistency/quality control in the utopian "no labels all self-published" world.


You algorithmically seed new music to those with an interest in the genre and keep the songs with higher replays around for more recommendations. With perfect knowledge of who is listening to what and their overall tastes you can cut out all the inefficiency of the current gatekeepers (labels, billboard, and corp. radio) who act as self imposed kingmakers for a few anointed acts. The cream will rise to the top naturally.


This sounds terrible from a user perspective and arguably promotes certain types of music while penalizing others. As a user, if I hear more than a few songs that are terrible that were forced upon me by some algorithm, I am not going to listen to that playlist/use that service anymore. If users are the only way you are generating training data (for this supposed only self-published music world), you are going to end up with the music version of clickbait to get users' attention before they hit skip. I really cannot emphasize how bad optimizing for this would be for music.

Whatever your opinion on "current gatekeepers", some of them do provide valuable filtering services that I struggle to see how an algorithm could accurately replicate without compromising what makes music magical.


I think you could do this by pushing to users who tend to look for new artists already. There's a large set of folks that love to discover new music, and actively do so, and adding one or two new artists to promote here would be an easy way to start the network effect to other users.


I don't know if Paul Lamere is on HN, but he's likely the best person to answer this question. Short answer: It's not all about user-fed listen data.


I've watched some of Paul's talks as well as seeing some of his early demos at Sun Labs. The bottom line is that discovery is really hard generally and, for the most part, no one has cracked it pretty much anywhere even when there aren't competing commercial interests.


They're not starting in a vacuum. Spotify has metric tons of listening and catalog data to help properly tag a newly signed artist. Discover weekly would help fine tune the data that's already on hand.


Discover Weekly as far as i know didn’t begin immediately or at least wasn’t what it is now at first. Now it’s great. Spotify has so much past and present data from listeners. Way more than they need.


In-house positions or they scrape/steal from the blogs.


Definitely would necessitate something resembling in-house positions but I just don't see how you maintain any sort of consistency if you have a group of people reviewing thousands of tracks. And then at that point aren't they just functioning as a label?

Blogs, don't know how they're going to discover stuff if it's all published on Spotify initially.


Netflix could be in the same position. With Disney launching their own streaming services next year, the situation could get dire for Netflix, too, if Netflix' own productions don't take off as much as they want.


It's very doubtful that Disney is or could be an serious issue for Netflix now.

Netflix is approaching - or already larger than - the size of Disney's comparable entertainment business, and Netflix is growing relatively fast whereas Disney's business isn't growing much or at all.

Disney's studio division does $8.3 billion in sales. Their media networks arm, which includes ABC & ESPN, does $23 billion.

Netflix will hit ~$14-$15 billion in sales this year. Apples to apples in terms of where they compete, Netflix will be comparable to or larger than Disney in size in 2018 or 2019.

Five years from now Disney isn't likely to be much larger than they are today (just look at their growth the last few years, flat to minimum). Netflix will very likely be over $25 billion in sales at that point (which would plausibly be larger than Disney's largest business, the media networks group).

At the scale Netflix has reached, every dollar of new growth that Netflix is obtaining is taking some bit of revenue away from Disney. Disney is going to mostly cannabilize themselves in switching to their own streaming service, including the mess at ESPN (the end of the hyper lucrative, subsidized cable & satellite subscribers that have been artificially fattening Disney's entertainment wallet for years).

Disney is mostly in a scenario of attempting to hold their ground. The same place Walmart is in with Amazon and for the exact same reason (minimum overall market expansion, low consumer spending growth across the developed world, while the new competitor is starting to eat your existing house).

Interestingly another similarity between those situations: Amazon is willing to compete at near zero profit generation in retail to pursue sales growth, which is brutal to an established giant like Walmart who has a huge investor base that expects them to generate considerable profits every year. Walmart can't just drop their profits dramatically to compete, their stock would implode. Disney is facing the same storm: Netflix operates at a level of minimal profit (~4%-5% net income margins), whereas Disney's long-established shareholders expect rich profits and a dividend (Disney typically sees 10%-20% margins in their entertainment groups, with a 16% overall net income margin). Netflix is willing to plow almost every dollar back into content production and licensing, and their shareholders cheer that on so long as the top-line growth continues.


I don't think you understand how much power Disney has. They own all popular superhero movies. Nearly all well-known children's movies are owned by them. Star Wars now is their IP. Netflix has what? House of Cards (which was discontinued)? 30 other TV shows that range from okay to "people talk about it once or twice to their friends"? 5 movies that are produced slightly higher than a TV show with mostly mediocre ratings?

Families with young children will subscribe to Disney's service almost guaranteed, and since a few years ago Disney has enough content for the parents, too. Why pay for two or three streaming services? Maybe Disney is enough. Disney's portfolio will also not shrink like Netflix' does often due to expiring licensing contracts but steadily extend over time.

Netflix might grow like crazy currently but they are massively in debt due to their movie making and their startup-like growth will eventually stop. As a Netflix subscriber I wish them the very best but I really, really hope they are aware of Disney and will be able to keep up.


You're right that Disney's IP is orders of magnitude better. But "Stranger Things" is much higher than 'people talk about it once or twice to their friends' (along with others like Black Mirror, Bojack Horseman, The Crown, Making a Murdered, etc.), though not on the level of Star Wars or Marvel obviously


not only that, but i watch those movies like they are meant to be watched, at cinema.


Disney has Simpsons now too!


Disney's revenue for 2017 was $55 billion. You can't take Disney Studio revenue in isolation.

Disney movies are just the top of the funnel that feeds revenue into their theme parks, dvd sales, television stations, and soon their streaming service.

By the time a movie gets to their streaming service, it has already made millions from the theatrical release. By the time a TV show gets there, it's already made money from advertising on TV. The streaming service doesn't have to find its own content or buy it from someone else like Netflix does.


I don't know how much business 21st Century Fox does compared to your numbers, but Disney is buying "most of" them[1]

http://money.cnn.com/2017/12/14/media/disney-fox-deal/index....


If the acquisition goes well, it could keep Disney ahead of Netflix's scale for another three or four years (on an apples to apples basis). The Fox assets they're acquiring are substantial, however there's zero organic growth in the Fox business (it's closer to a contracting business with 2017 sales below 2015 sales).

An acquisition like that might be as likely to throw Disney into chaos as anything and give Netflix a leg up on stealing market share, given the corporate history of very large acquisitions.

That also of course depends on what the Netflix growth profile looks like over time as well.

For example, does Netflix routinely still generate 15%-20% annual growth after they're up over $20 billion in sales? If so, there's nothing Disney can do to stay with them short of continuing to buy up the rest of the entertainment universe.

The global subscriber momentum Netflix has now is incredible. By the time Disney figures out exactly how all of their streaming pieces are going to fit together, Netflix might be up to 250 million global subscribers.


Is there a sizable precedent for companies hitting $20 billion in sales and continuing to routinely generate 15-20% growth?


Yeah I agree that Disney won't be a serious issue for Netflix. You may see some users cut Hulu or Prime out and add Disney but Netflix is still in a good place.

> Apples to apples in terms of where they compete, Netflix will be comparable to or larger than Disney in size in 2018 or 2019.

For share of streaming wallet yes; but they hover at only about 5% of net income. So Disney doesn't need to be anywhere near the subscriber amount to reinvest heavily in content and acquisition. Also - Netflix has the US mostly saturated so they have to create or sign content for the various international markets. While Disney already has great content with global appeal.


> they hover at only about 5% of net income. So Disney doesn't need to be anywhere near the subscriber amount to reinvest heavily in content and acquisition

That's not quite the context. Netflix is rapidly growing sales and plowing its potential income into content expansion.

Disney has zero sales growth, with a large traditional investor base that expects profits to at a minimum not contract. That traditional investor base holds Disney to a particular standard that Netflix doesn't have to suffer (for now). Disney can't reinvest any more of their existing sales & profit toward content creation without subtracting from the profit figure they report. If they do that at any meaningful scale, the stock will crater.

Disney's situation is actually even worse than that, as the erosion of cable is eating into their solidly profitable TV business (especially ESPN). So they're facing a declining context on sales, profit and margin, and they can't afford to redirect a meaningful share of their existing profit.

Simply put, right now Disney has no sales growth to direct at new content investment. They have existing profit that is already allocated to placating investors that expect the net income statement to look great and expect the dividend to remain or increase. This is why Disney is looking to spend a vast sum to buy business expansion with Fox, to perhaps placate shareholders a while longer (how long will they tolerate zero growth otherwise?).

Netflix gets to operate on different terms of shareholder expectations than what Disney does.

Otherwise, Netflix would have a market cap about 90%-95% lower than it is right now, if Netflix (~220 PE) were being judged on a more near-term profit basis as Disney is (~14-15 PE). It's the exact same growth expectation benefit that is being given to Amazon ($3b net income) vs Walmart (~$14b net income).


> Spotify is at the mercy of major record labels

For now. They have a large enough reach to essentially "become" a major record label, all they need is to start signing artists to contracts.


Spotify + extreme bias towards X # of artists due to rights ownership = potentially crap experience for listeners.


I don't disagree, if you look at the way Netflix pushes their own content over what used to be entirely studio movies and network TV shows you can see a current example of how this plays out.

I was thinking that if Spotify kept the same experience for listeners that they had now in order to grow their subscription base, and just reported higher earnings for the artists they had signed versus ones signed to a 'different' label, that over time as contracts came up for renewal people would move over to Spotify.


Don't you think that as long as it's good users won't care? Netflix would likely have succeeded without originals but would have been nowhere near as pervasive. People were tired of the network crap and wanted content accessible everywhere. They delivered on those.

Good content is good content. For music - it's even better if it's not yet well known because for some reason people think more highly of themselves for being an early fan. Early discovery favors audio moreso than video. So pushing originals (newly signed artists) is a great strategy for Spotify. So long as it's good music.


I don't understand the appeal of this model. Do you really want to have to subscribe to 5 different streaming music services, one per label, just to listen to all your favorite artists?


I'm admittedly not a particularly big music person but I'd have trouble seeing subscribing to multiple music streaming services unless one of them was for some obscure sub-genre I was really into. A lot of music seems to be ambient. If there's some artist I really need, I'll but a CD now and then.

Mind you, I don't like video being fragmented but that's a more deliberate choice a lot of the time for me. I'll subscribe to a few places based on available and original content--somewhat grudgingly to be sure--but I accept those are my options.


For this reason, I don't understand tech valuations.

Google is worth 1000B, general motors is worth 60B.

Why? I'd contest GM has more 'stuff' and abilities to do 'anything'. Google has a bigger population, but what does that translate to when the value of tech might be lower.

I'm not saying tech isnt more valuable, but there might be something wrong with google being 1,700% larger market cap than GM.


Well, GM has required direct government assistance in the recent past in order to stay solvent. Google is rolling in liquid assets.

GM exists in a very competitive industry with major competitors at or above their capacity, while Google has maybe 1 or 2 competitors in several of various industries, and dominates several independently and almost completely.

GM might be able to claw aware market-share from competitors, and end up more valuable, but not by that much. Google is in the sort of position that allows them to potentially capture a brand new industry if one appears.

GM could (relatively) easily get broken up or get massively devalued to to a large market event or by falling behind in an industry that is rapidly changing shape from what they are accustomed to. Google falling out of existence/dominance would almost have to be the result of a fundamental societal shift at this point (or anti-monopoly legislation somehow), and they could throw enormous amounts of cash at problems for years before facing insolvency (from my understanding).


Compare the difference in their profit.


Starting their own label is not going to make the labels that they depend on very happy, and as such would be a very bad idea until it's impossible for the labels to survive without Spotify.

Spotify definitely doesn't have enough market share for that to be true, and it's not clear that they ever will. Youtube has always had more free listeners than Spotify and Apple Music is set to surpass Spotify in number of paid listeners sometime this summer.


I'm not aware of many distributors that have successfully made the jump to labelhood. Caroline is the only one I can think of right now.


They can't pay them as well.


I'm curious how you get to that conclusion, care to share your reasoning?


If they could do it and reduce costs that way, they would have done it already. In the Netflix case, licensing third party content was cheaper than creating their own and probably still is. Creating their own content acts as a differentiator for their service with the potential for future cost savings


Didn't record labels complain some time ago that Spotify had supposedly commissioned music for its instrumental playlists (presumably to save money on royalties)?

There's probably a danger that large record labels will threaten to revoke their licensing agreements if they think that Spotify may start competing with them on that front. Not sure if that will be a problem, though, I'm not familiar with the whole streaming market.


I'd wager that Spotify is nearing the point at which - if not already there - record labels cannot afford to revoke their license. If they can get away with it, they'll try to push some buttons, but I doubt a full confrontation.

If there's any evidence against this, please let me know. I think it's interesting.


Spotify's market share is currently being attacked on both ends.

Apple Music is supposedly set to surpass Spotify in number of paid subscribers this summer.

Youtube has always had more free listeners than Spotify, as far as I know.

It's not at all clear who the major players in the music streaming business will be five years from now, which means that all of the power remains with the owners of the music that people want to listen to. AKA the major record labels.


>Apple Music is supposedly set to surpass Spotify in number of paid subscribers this summer.

Where did you get this info? Look at the graph

https://www.statista.com/chart/8399/spotify-apple-music-paid...


YouTube being insanely slow with rolling out Red doesn't help YouTube their business. I really wanted YouTube to have Red in Europe but they cant or won't so I moved over to Spotify because no ads and massive quality increase.


I wonder what happened behind the scenes to get Taylor Swift on Spotify. I think that was a major test.



Ah, shit.


Spotify could then turn into a label + live music organizer, giving artists more of a cut and cutting out labels entirely.


This. The money in the game doesn't come from just direct sales and hasn't for quite sometime. In the same vein an artist can get a million streams and still make >$5000. [1]

In recent years artists like Drake have started their own labels and collaborated directly with tour organizers to generate different sources of income and cut out middlemen. While it's difficult to imagine Spotify generating hit music at the same pace as Netflix produces hit shows, there is nothing stopping them from becoming a tour organizer or bringing artists to perform at their own show (hint: iTunes festival).

If they are really serious about the long term they would be developing new ways to experience "live" music. Perhaps VR concerts and performances or features that let the audience send feedback to the artists.

The good news is that they have shown they are not afraid of trying new things (ex: Video player within the playlist and the RapGenius tie ins).

Time will tell but I am bullish on Spotify changing how we listen to music for the better because the industry is ripe for a new disruption (Records -> CDs -> Digital -> ???)

[1] - https://www.digitalmusicnews.com/2016/05/26/band-1-million-s...


> In recent years artists like Drake have started their own labels and collaborated directly with tour organizers to generate different sources of income and cut out middlemen.

Drake starting his own "label" is not a new innovation he came up with (rappers been doing that since the 90s) and still comes with just as many middlemen. Emphasis on last sentence in quote.

>During the composition of Nothing Was the Same, Drake started his own record label in late 2012 with producer Noah "40" Shebib, and business partner, Oliver El-Khatib. Drake sought for an avenue to release his own music, as well helping in the nurturing of other artists, while Shebib and El-Khatib yearned to start a label with a distinct sound, prompting the trio to team up to form OVO Sound.[297] The name is an abbreviation derived from the October's Very Own moniker Drake used to publish his earlier projects. The label is currently distributed by Warner Bros. Records.

https://en.wikipedia.org/wiki/Drake_(musician)#OVO_Sound


Generally, artist labels are for creative control, and distribution (along with most of the "business end") is left to a major.

See: G-Unit, OVO, GOOD Music, DFA Records, OWSLA...


It really depends on how much market share Spotify gets for being people's primary access to music. Wal Mart has (I think?) decent influence on the music industry over what CDs it will and won't sell.


Yes. The one in particular I heard about was one of their ambient playlists, where an artist called "Deep Watch" (whom nobody had heard of previously) was supposedly placed into the playlist to avoid having to pay the artists that would otherwise take that place.


This seems to be an area where they are limited compared to Apple.

In my view, Spotify have pretty much "won" the streaming war. They beat Apple to the market with their streaming offering, and they have a good product that people love.

The one area Apple has Spotify beat is in its understanding of the music industry. Apple's acquisition of Beats seemed ridiculous at the time, but getting Jimmy Iovine on your side in a music war is like having Goku on your side in a Universe Survival Tournament. When you've got the likes of Jimmy Iovine and Zane Lowe committed to your cause, you're going to know how record labels work, how the industry works, and given that Iovine recently came out to say that streaming services are similar and need to diversify to succeed I'd be inclined to agree with him.

Apple have failed in the past by trying to make its music exclusive and by having artists on its payroll try to attack Spotify (to backlash on both sides). It makes me think that Spotify could wrap things up by doing what you say, but licensing its own songs equally to all other streaming services. Instead of doing what Apple did, promote availability by ensuring their music is played on competing services.

Of course, to do this Spotify will need their own Iovine, and that's no mean feat. They'd need world-class talent behind them to find musicians, produce them, and market them in the way that Apple potentially could. If Spotify can build that dream team and create their own means of production then, in my view, they've won.


http://www.swedishwire.com/jobs/680-record-labels-part-owner...

This should be considered when making points about what the Record Industry will allow spotify to get away with. They own a lot of the shares at play here.


> Spotify has a unique position with their amazing discovery/recommendations engine- they could potentially start their own "label" and promote their own artists that sign on. Small/independent musicians could see more exposure and Spotify can deliver more music tailored for individual tastes. I've personally found myself listening to lots of small/indie artists as a result of their algorithms, to the point that these now make up the majority of my listening experience.

Have you ever used last.fm? I would be interested to hear if people still think that last.fm gives better recommendations than spotify can. I use last.fm with various music streaming services, currently Google Play Music, previously Amazon, but always using last.fm for discovering.

With the amount of users spotify has, it wouldn't surprise me to hear that it has eclipsed last.fm in terms of recommendation quality.


I use both for recommendations still. They both have their weaknesses. I’d probably lean toward Spotify if I had to now but I’m perfectly happy using both.


last.fm is easily the best discovery tool I've ever used. They do have spotify integration now though


I honestly hope they don't take that approach. One of the biggest benefits of spotify is that they have damn near everything. If suddenly music becomes fragmented across a bunch of different services (like video), spotify loses their value.


This Exponent episode on Spotify is excellent and they discuss how they don't have quite the same power as Netflix but still more than people appreciate - http://exponent.fm/episode-144-90s-alt-forever/


Spotify has many "session" recordings from a variety of artists, they also have live albums from concerts that aren't available anywhere else on the internet. Trust me, I've been scouring every dark corner of the net for a recording of Run The Jewels Sxsw 2015 concert to no avail.


what.cd would have had it in FLAC, Ogg Vorbis, AAC and six different bitrates of MP3.

Leaving legality aside, I was always really impressed with the level of curation people put into that particular private tracker. You could find every vinyl and CD release of Miles Davis' Kind of Blue in just about every file format you could hope for.

I hope eventually streaming services become so low-friction and commonly used that enforcing copyright takedowns on sites like what.cd will become a thing of the past and we can benefit from their value as a deep archive of esoterica.


ugh I get legitimately sad thinking about how what.cd slammed its doors shut unexpectedly, never to be seen again.


I like Spotify too. But in the end, it will just be another MegaCorp controlling music, especially when shareholders are involved. So I'd rather see the delicate balance between all parties maintained as-is.


I think a different interesting comparable is Uber. Both have really promising revenue growth stories, but (unlike Netflix) have no control over content/supply costs. For both Spotify and Uber ~80% of that gross revenue number goes straight to either record companies or driver commissions and rider subsidies. And the 80% does not diminish with scale.

Uber's 2017 gross revenue was 37B to Spotify's 4B, but the valuations are 50B to 30B. Think Spotify's valuation is a little overheated?


How is Netflix not at the mercy of major movie studios? Their originals, while popular, are not a proven business model. No tech company to my knowledge has proven that taking content 'in house' improves the bottom line, yet. Pandora attempted to get into tickets and I don't think that went well although I am not sure a true stratechery style analysis of that has ever been done to my knowledge.


Netflix was at the mercy of the content producers but it managed to work out of the hole by making its own content. Even if Netflix dropped the entire third party content repo, their current production content is enough to justify a subscription for many people. Spotify could easily follow Netflix's playbook by identifying musical trends that people enjoy and crafting new music.


starting a new label would be a massive undertaking. maybe partner with Google and snag popular YouTube channel sign and distribute only within the Spotify ecosystem.

HERE'S THE PROBLEM: Spotify doesn't pay shit to artists. They will have to increase the level of financial contribution to artists if they take this avenue.


Actually, they pay way better than most other streaming services: https://torrentfreak.com/artists-think-instead-spewing-spoti...

Quote: “I can tell you that Spotify has made me about 30% more than iTunes, Pandora, Amazon, Xbox Music, Google Play, eMusic, Rhapsody, Rdio, Deezer, MediaNet, Simky, Nokia, and MySpace Music combined in that period. Even if you tack on my checks from ASCAP to that long list, Spotify is still ahead,”


It's fine if you're a huge artist like Beyonce, but I've read plenty of accounts from artists who bemoan Spotify's distinct lack of useful payout.

You get paid proportional to your plays, so even if you're a successful drum and bass artist, you're going to struggle to be supported by your fans via Spotify than via something like Bandcamp.

That's one of the reasons I went back to buying my music from Bandcamp/Beatport. I'll contribute significantly more to the artist than I ever would via streaming, and that's important if I like their work and want them to keep producing.


> Spotify doesn't pay shit to artists

I thought that Spotify didn't pay ANYTHING to artists. They pay to labels, who then pay to artists depending on their recording contract.


Small artists are great, but music and money to be made from music seems to be dominated by large artists. Could Spotify ever sign, say, Taylor Swift?


ask yourself 5 years ago:

Could Netflix ever sign, say, Adam Sandler?


You mean as an exec? He'd be a better fit with Uber I'd have thought.


Probably. It's not like he is top rate talent, he will literally do anything for a check.


It's funny that you described it as less scalable, but proceeded to detail many great ways for the company to scale. Great ideas all around.


Soon enough Spotify will become the record label. All a record label does is, produce, promote and distribute. It's an antiquated model.


Most labels don't even distribute. There's standalone businesses that do that. See Ingrooves, The Orchard, ADA (owned by Warner but run as a standalone business IIRC).

For indies that have fewer requirements, there's lots of cheaper options such as TuneCore, DistroKid, and CD baby as well.


Spotify could do what Netflix started doing and produce their own music... Netflix used to be at the studio's complete mercy too.


> That is, unless they find a way to upend the record industry entirely.

It seems like they can and are on their way already.


Why has Apple not started their own label? They have enough cash to buyout almost any artist.



I use Spotify more than Netflix at this point.


And in Sweden, home of Spotify, the other big news is that NYSE raised Switzerland's flag.

https://www.thelocal.se/20180403/spotify-swiss-or-swedish-wh...


Not a mistake. It's a nod to the tax havens.


They're basically the same country right? I mean their flags are both crosses and their names both start with Sw...

/s


It's not even a correct Swiss flag. The Swiss flag is rectangular.


Mistaking Switzerland for Denmark is understandable, mistaking Switzerland for Sweden is just wrong.


Maybe my perception is off, but it seems like we're getting lots of tech IPO's in a relatively short time. Stitch Fix, Dropbox, Blue Apron, Snap, and Roku to name a few.

For a long time we weren't seeing too many big tech IPO's. Did something fundamentally change in the market to lead to this, or did all these companies just happen to make it to "market maturity" around the same time?


The alarmist in me thinks there is a huge crash coming and companies are seeking to allow stakeholders to quietly cash out in the public markets. Given the numbers on some of these companies they definitely wouldn't be acquired for the amount they would want. An IPO while they're hot seems like a better yield.


I think they are dumping their stock on the public before the market takes a downturn. For most of these stocks the only way to go is down.


Snap is certainly fitting that pattern. Down 48% in the 13 months since IPO.


If the only way is down, no one would have bought at current prices.

If the only way is down, the price would have corrected itself to the down level already. So there is no only way down anymore.


> Did something fundamentally change in the market to lead to this, or did all these companies just happen to make it to "market maturity" around the same time?

One successful IPO will beget a whole raft of follow-ons in similar segments to profit from the 'atmosphere' as much as possible. Until the first one that bombs, then it is immediately game over. So there tends to be a bursty nature to this IPO thing.


This leads me to believe that a Hawkes process would be an excellent way to model IPOs.


Thanks. I don't follow IPO's too closely and was less than 10 for the .com bubble filled with IPO's. I'm still learning the general patterns.


My thoughts are after almost a decade of growth, the popular opinion (right or wrong) is we are due for a market correction. I think that these companies want to cash out at the top of the curve.


A decade of growth....?? Where were you in 2008?


How long ago was 2008? It's 2018, so about ten years. Now what's another word for ten years. It's on the tip of my tongue.


I said almost a decade

Take a look at the 10 year S&P 500 chart:

http://www.macrotrends.net/2488/sp500-10-year-daily-chart

It bottomed out in early March 2009. The period from March 2009 to right now can roughly be described as "growth." We describe it as "growth" because the overall movement is upwards. 9 years and 1 month is "almost a decade" because a decade is 10 years and 9 is pretty close to 10.


Are blue apron and stitch fix tech companies? I thought they were just sending out boxes of stuff to subscribers, with a website/app for taking orders?


I used to work at Blue Apron...sending people boxes of perishables is actually a very tough problem to solve and there was extensive tech powering the warehouse side of things. We had a fairly large engineering team working on these problems.

At the end of the day who really cares what is and isn't a "tech company"? Every company has a tech aspect to it these days.


How's that different from, say, the logistics of grocery stores? Yet Wegmans isn't considered a "tech company."


Most grocery stores use off-the-shelf tech for this sort of thing; our business model made a lot of that not feasible and there was a decision made early on to build it ourselves, if anything because the tech we developed could have its own value down the line.

If Wegman's was writing software like this (maybe they do! I have no idea) then I'd happily consider them a tech company.

But like I said, it's a silly thing to argue about anyways.


I used Wegmans as an example specifically because Wegmans is known for doing a lot of their own R&D to improve their operations. I don't know if they write some of their own software, but it wouldn't surprise me if they do.


If your company is in SF and funded by VCs you are tech by default, otherwise you aren't tech.


> At the end of the day who really cares what is and isn't a "tech company"? Every company has a tech aspect to it these days.

Because the way a tech company grows and a non-tech company grows are very different. Nike extensively uses software but you wouldn't call them a tech company, because their growth is limited by sales of their apparel, which is a physical good. 'Real' tech companies aren't typically limited by the distribution of their product (other than scaling issues and the like). There's (generally) nothing physical produced so there isn't a resource problem - growth can be much greater and faster.


That's right, 'real' tech companies such as Apple, Intel, Samsung, and many others can sell as many products as there are bits streaming across the network.


Fair enough.

I'll add the caveat that the product they sell or use for revenue needs to be the tech they are developing. So, once again, Nike sells athletic apparel, and while they use tech to do so, I wouldn't consider them a tech company. But Facebook and Snapchat don't sell a product (other than user info) but depend on the tech they develop to make money.

It's a fine line, but I think we can see what might divide tech and non-tech companies.


It matters because of the multiples you get on the market.


Others have already talked about Blue Apron. The NPR podcast How I Build This released an episode on April 1 with the Stitch Fix founder, Katrina Lake which was quite interesting.

Stitch Fix has quite a team of data scientists working on their recommendation system. They typically send about 5 items per shipment, so they need to be very confident the 5 will fit, you'll like them, and you'll like the price.

With Spotify or Netflix, the user can browse around and can skip between songs or shows quickly. If their recommendation engine wasn't phenomenal, it'd still be a viable product. Stitch Fix typically has 1 shot per month to sell you stuff you care about.


Is Spotify a tech company? I thought they were just sending an audio stream to subscribers with a website/app for searching?


Spotify is a tech company by all measures. Their core value propositions - recommendation engine, UI/UX, scaling responsive applications - those are pretty 'tech' problems.


And exactly the same can be stated for Blue Apron and Stich Fix, thus the point of my rhetorical question. Just because the two in question aren't as sexy as Spotify or Dropbox shouldn't exclude them from being considered a tech company.

I'd argue that the logistics of shipping perishable food is significantly more difficult than streaming an audio file, and recommending clothing to meet an individual's specific style/size/gender/budget is a lot more complex than applying publicly available [1] Netflix-style collaborative filtering to recommend music.

[1] https://www.netflixprize.com/assets/GrandPrize2009_BPC_BigCh...


Blue Apron and Stitch Fix aren't selling software/hardware as a customer-facing value proposition, so they're definitively not tech.

You definitely have to draw the line, or else every big company in existence is a tech company. Banks hire thousands of software devs.


Is E-commerce tech? Amazon has built out a ton of technology to scale their fulfillment operations and wouldn't be the company they are without it.

We are getting closer to the day where every company is a tech company. Marketing requires tech to do what is very complicated bidding and A/B testing. Most companies involved in sales are using CRM to understand how to better reach customers. This list goes on and on, as tech is embedded into everything people do these days.


That’s the point. Using tech isn’t what makes you a tech company, and never has been. Banks, airlines have been running cobol and what have you for ages.

When your product is software/hardware, then you’re a tech company.


Just so you know, 1.recommender systems != collaborative filtering. 2.RBMs are good only for certain situations like explicit ratings (where users provide direct feedback), its a really hard problem in implicit recommendations (which are most sites). See Bayesian Personalised Ranking Algorithm. 3. >I'd argue that the logistics of shipping perishable food is significantly more difficult than streaming an audio file. Thats exactly the point. I am not measuring hardness. But that looks a supply chain problem that a software engineering problem.


Remember what the stock market charts looked like last time? Stockpile some cash, invest when it falls out.


Pivotal also filed their S-1, though I don’t recall any date estimates on that one.


Getting in quick while they can. Surviving a 5 year down turn on borrowed money is challenging.


I just don't see how this can be a successful company long term. If the labels see any profit they will demand more fees at the next deal negotiation. To become music's Netflix they would have to produce their own music which people want to listen to, which is a lot easier said then done. The easiest route is probably to become Tidal and give the company away to a few big artists in exchange for exclusives.


Or purchase some existing labels. Warner, which is about 20% of the global market, was worth $3.3b -- 11% of spotify -- in 2011 [1]

If I read that correctly, it implies the bulk of the recording industry is worth less than Spotify.

1. https://www.reuters.com/article/us-warnermusic/blavatniks-ac...


People tend to overestimate the size of the music and movie industries, apple and google could buy them outright with change from their couch cushions.


What that says about Spotify's valuation is another thing


This is something that has been bothering me. Doesn't it seem like stock prices are getting out of whack?


There aren't enough IPOs and companies to invest into, so the public markets are chasing anything they can get their hands on. Do these companies have value? Absolutely. Is the demand arbitrarily high because there's supply? Absolutely.


Yeah, that makes sense I suppose. I just don't see the growth path for Spotify. Yeah, they have an excellent music service, but whats next?

Edit: and I as about growth, because I don't see how Spotify is currently worth 30B.


*ask


Meant to say "because there's limited supply"


Nearly all companies I’ve researched on the exchanges have historical highs going back a couple years. This is across multiple industries (tech, utilities, real estate, grocers). It’s a significant trend. As for whether it’s substantive (ie not likely to correct), well, I’ve seen many economists suggesting a correction “soon” for years.

The more worrying thing is the consumer reports I’ve read. They said people aren’t saving money in 401ks, nor even savings accounts. This could indicate high confidence in the market. Or, it could indicate a lack of income to save. I’ve read reports indicating the later and not the former - specifically reports of people working multiple jobs to afford the basics.

If that’s the case then luxury goods and services should be commensurately lower valued. But they’re they are not.


With a decade of low interest rates, people have been investing in the stock market hoping for a better return on their capital.

At some point all bubbles burst.


Yes although this mostly just applies to consumer tech companies.


Apple and Google could, but I doubt Spotify has a few billions around to make any acquisition.


Well, as of today, one could seriously consider an all-stock acquisition and the numbers probably could be made to work.


That would be fun to watch if they tried.


More than likely it won't come to this. Most musicians want their music everywhere, and give it away for (almost) free. Spotify/radio/etc are the marketing, and concerts/festivals/movie licensing/etc are the product. Unlike movies, there's insane repeatability of music, meaning it can be everywhere.

I wouldn't be surprised, though, if less-popular tracks for artists moved to another service. You want to hear The Chainsmoker's radio singles? Play them non-stop on Spotify! But if you're a huge fan and want to hear back tracks, demos, etc, you can pay them $10/mo on a Patreon-like site. Basically, charging more for a closer relationship to studios you like, while their more popular music is released for free.


>To become the music's Netflix they would have to produce their own music which people want to listen to, which is a lot easier said then done.

What Spotify has going for it is that indie artists can easily (or at least relatively easily) put their music up on Spotify, which bypasses the record labels. Now, not all of that music is going to be good but that is a way they are already bypassing record labels.


The labels have a large stake in Spotify. Your assessment misses this crucial fact. Getting into the production biz is still an open opportunity, though.

> According to Spotify's F-1 filing, 85 per cent of their streamed music is owned by the three major labels -- Universal, Sony and Warner -- and Merlin, a network for independents. The major labels also hold a sizable equity position in Spotify, as much as 18 per cent back 2009. This gave Spotify some help when it was renegotiating licensing deals last year. [0]

[0] https://ftalphaville.ft.com/2018/03/26/1522056334000/Canvass...


> To become music's Netflix they would have to produce their own music which people want to listen to

Which would make them (like Netflix) one exclusive content provider (potentially among many) which is fine for them if they can get good content, but not great for users who may find music fragmented like streaming video. The great thing about Spotify now is that they have access to nearly everything. Netflix has a decent streaming library of TV series, but their movie archive is terrible compared to the red envelope DVD.com option (or Blockbuster in its prime). It would be a shame for that to happen to music, too.


I would not be surprised if the long term goal is to not just produce but to be THE market place for all music. They already promote tickets to concerts, why stop at promotion, they could easily displace ticketmaster, and with ticketmasters lack of goodwill I am sure lots of people would be happy for this to happen.


Start off by offering no fees for Spotify Premium members. Charge the event organizers the fee, or take it as a loss leader initially. The value add of Spotify is an unique avenue for promotion (e.g. visual displays of upcoming concerts when playing similar songs, which users are unlikely to see as intrusive ads).


They could look at purchasing Bandcamp, which has done a great job of promoting and selling independent music.


Bandcamp lets me download lists of people who've bought my music and of people who follow my profile. This is because they understand the business is mine, and they're simply a service provider for that business. Even their subscription system runs right through the musician's own Stripe account, so you can always take your subscriptions elsewhere.

I don't have any reason to trust that a VC-fueled monster like Spotify understands this. If Spotify bought Bandcamp, I would remove my music from it.

VC-fueled behemoths like to make people dependent on them. I can't trust my business to a company that gets most of its money from outside investors instead of the people who use the service. Their incentives are fundamentally misaligned with my interests.


Apologies if I come across as harsh but as a consumer, I would prefer my consumption activities to remain as private as possible. In light of FB news, I don't think even some Options > Privacy Settings on Bandcamp would be sufficient since most people wouldn't do it. I hope Bandcamp is opt-in for this info.


It is opt-in if you pay for it, but almost no one leaves it unchecked. There's also the option to not require an email for free downloads.

Often these are people I've sent from somewhere else, and we talk regularly. It's not like with Facebook where it's a faceless corporation unless you're spending enough on ads to get an account specialist.

They generally knew me before they gave me money. I'm not collecting any data on them other than the email. I don't even run analytics on web pages I control. I wouldn't even know what to do with it that would tell me anything I don't already know, or that I couldn't get by just asking.


It's opt-out, I normally leave it checked, you get the option clearly when purchasing music/items. The artist can then send updates/you get follow notices, the volume is pretty low at the moment for me at least.


That's still generally seen as opt-in among marketing types, though I can understand the perspective where pre-checking the opt-in is a kind of opt-out.


Please dear god no.

Bandcamp is maybe one of the few examples of a service/shop that actually benefits artists and fans. Having them bought out by some VC tech behemoth will almost certainly see their offering ruined.


Off topic.

Bandcamp's site loooks like it was designed by a schizophrenic person.

A lot of music sites in general seem to prefer form over function IMHO.

Discogs.com is a notable exception of course.


The goal is to make the labels need them too. Plenty of people just won't listen to music if its not on spotify.


Thats fair, but accessing free music is a lot easier than free tv. If they can get people to pay anything for music, thats at least better than zero for labels.


I think the music industry still isn't quite sure what to do about pirating. Seems their solution is "send spec-op soldiers to kick down doors of people in other countries" still.


The equivalent would be to start their own label and sign artists. It's hard, sure, but not impossible. They have the same advantage Netflix did - an intimate knowledge of people's musical tastes and habits. Plus they have already shown willingness to diversify into other areas - merch, concerts, original shows, videos etc.


The thing is, Netflix now is very different from Netflix 5 years ago -- most of the content is the one they produce. Music doesn't work this way, many people just want to listen to old music while it's rare for people to rewatch old shows and movies. There are many albums I have listened to tens of times, and I don't think I have ever watched a film more than three or four times. If the labels pull the artists to make their own Spotifies, Spotify will be left with pretty much nothing, in a situation much worse than Netflix


>To become music's Netflix they would have to produce their own music which people want to listen to

Didn't Starbucks try something like that? I think it was called Hear Music.

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