More generally, this is why no one who owns neither content nor un-disintermediatable distribution will ever be seriously profitable. Netflix is figuring this out right now: pipe owners (e.g. Comcast] make money and people-who-fund-and-front-for-content make money [e.g. NBC]. People who sit in the middle of the pipe and the distributor get squeezed. Even friends of the distributors [see: Hulu] can have a hard time.
And by "un-disintermediatable distribution", I mean: distribution without viable substitutes. If Spotify were so awesome that I'd never switch, then they'd be in the money. But I also use GrooveShark and Pandora, so Spotify is in for pain.
Sure, you can make nice money for a short time [again, see: Netflix], but the folks that own the content will raise prices as the market becomes attractive.
I pay $14/month for cable (so that I can get cable modem access). How in the hell can Netflix offer the full range of content for $8/month when that would cost me an additional $80/month if I bought it directly from Comcast?
Comcast negotiates directly with HBO to carry HBO's content. Is Netflix going to do better as they negotiate to carry HBO's content over Comcast's lines? Net neutrality helps, but the logical conclusion of that is to have the distributors representing themselves on the Net, not to have Netflix represent the distributors on the Net.
Projected usage, is my guess. I am probably missing key information, but it seems to me that the only way for netflix to work is if nine out of ten netflix subscribers watch one or two movies a month (or less).
Comcast is TV. I want to say the average American watches something like 3 hours of TV a day.
"If Spotify were so awesome that I'd never switch, then they'd be in the money."
The article implies that even this is not the case. If there were a single distributer who could increase pricing, the labels would simply increase their take accordingly, leaving the single distributor in the lurch.
Until the labels are forced to deal with standard market economics directly, rather than using VC funds to back a series of failed distribution schemes, I don't see why they would allow anyone else to make money.
If Spotify were so awesome that I'd never switch,
then they'd be in the money.
You (or the article) are arguing that they couldn't be that awesome. I tend to agree that is the case, but it only takes one billion dollar music [self-publisher-supporting-and-that-actually-makes-money?] service to prove me wrong.
Again, it comes down to bargaining power. Non-content-owners and non-disintermediatable-distributors don't have it. TFA is saying so but is doing so in such a way that suggests that the music industry is novel. It isn't.
The question is whether the pipe owners or content creators are capable of creating a distribution channel of the same quality (Netflix, iTunes) or less cost (Hulu).
And by "un-disintermediatable distribution", I mean: distribution without viable substitutes. If Spotify were so awesome that I'd never switch, then they'd be in the money. But I also use GrooveShark and Pandora, so Spotify is in for pain.
Sure, you can make nice money for a short time [again, see: Netflix], but the folks that own the content will raise prices as the market becomes attractive.