Based on calculations I did back in April, Spotify has about 3 million paid users and 10 million unpaid users. Spotify said they were on track to do close to $900 million in revenue this year. About $662 million was set to go to the record labels. After all of Spotify's considerable costs, they'll run a loss.
When Pandora went public last year, they did it on $75 million in revenue and $74.25 million in expenses in that quarter (a 1% margin).
The more successful Spotify and Pandora get, the more likely the record labels are to ask for more money in contract negotiations.
These are great companies that make great products. They will unfortunately be sharecropping on the music labels' land.
Just as many of us consider it unwise to build on Facebook or Twitter's platforms, we should be just as wary about building a business on top of the music or movie business (Netflix is in the same boat).
Maybe that will attract more bands to directly do business with them.
If they have invested in Spotify, then they are just securing their place in case Spotify (or Spotify-like services) displace the old model. It doesn't mean that is going to make any difference in the change of business model when it happens.
If they have too much control in Spotify, someone else will start a new service/label. OR bands will just self produce.
I love the digital age.
Sounds like it isn't these "evil services" that are cutting them off a the knees, but the predatory contracts the labels set up with artists.
People resent record labels for the past, when signing with them was practically the only option, and the terms of the contract were cryptic and frequently misunderstood by signers. When artists were promised 15% royalties, cryptic "breakage" fees and other deductions brought that number closer to 5%, and forced the artist to incur costs such as tours, concerts and marketing, leaving the record labels only responsible to print records.
It occurs to me now, though, that I've read in the past that Spotify doesn't actually pay the same amount per stream to every artist or label. Apparently it doesn't even pay the same amount to the same artist each quarter.