12/15/2023 0 Comments Spotify music bar![]() Spotify’s market value is bigger than both the world’s largest record label, Universal Music Group, and the world’s biggest online radio service, Pandora, combined. That makes Spotify more dependent on the music companies from which it licences content than, for example, Netflix is from the film industry. Its competitors all have parent companies that are cash rich: Apple Music is owned by Apple, Amazon Prime Music by Amazon, YouTube by Google and so on. For one thing, Spotify only offers music streaming and is dependent on the revenues that subscribers pay. While that is not disastrous, Spotify’s business model makes it look more vulnerable to Apple Music’s challenge. It all depends how you cut the figures, but Apple Music and Spotify are vying for poll position. This year, it may become the world’s largest streaming service, according to a study by Verto Analytics. But Apple Music, which launched in June 2015, has been leveraging its dominance in the mobile phone market to play catch up. On one hand, that looks like great news for the company. Leading analysts have observed that the music industry is on track to become a streaming industry in all but name. ![]() Prior to 2015, it had seen 15 years of consecutive contraction. ‘It’s easy to forget that just three years ago, even in the United States, streaming wasn’t really a thing.’ In 2017, the global music industry grew for the third consecutive year, from $15.7bn to $17.3bn, with streaming subscription sales rocketing by 45 per cent – making it the biggest source of revenue for the industry. When Ek told CBS that Spotify had been credited with helping to revive a shrinking music business, he was not far wrong. But while it remains a streaming-only business, it will be constrained by the laws surrounding music rights “Spotify could diversify more into video content. While Napster closed in 2002, following a crackdown on copyright infringement, it set a cultural trend among music lovers to download content from illegal sites for free. Illegal music downloading had become ubiquitous, with net services, such as Napster, enabling fans to share digital files of their favourite music for free. When Spotify launched, the music industry looked as though it was in terminal decline. Today, Spotify has about 160 million users, with 70 million of those paying for the subscription service. Spotify’s music offering has always included a free service, available with advertising, and an ad-free premium offering. In 2009, the app began gaining traction in the United Kingdom as mobile phones made listening on the go easy. That’s not bad for a business that is unprofitable and whose longer-term business model is under threat from competitors such as Apple Music and Amazon Prime Music.ĭaniel Ek and Martin Lorentzon set up Spotify back in 2006, launching their first music app in 2008. Pundits described the event as ‘orderly’ – and the shares settled at around $145 after an initial few days of trading, giving it a valuation of $26bn. Direct listings are usually reserved for spin-off companies, those coming out of bankruptcy or companies moving from another exchange. That is extraordinary in itself, but the company also offered shares for the first time without having a bank underwriting the process. It sold its 178,112,840 shares directly to the public. Instead, Spotify was true to the internet’s ethos of open participation. There were no investor roadshows, no relentless television appearances, and little in the way of the pomp and ceremony that generally revolves around stock market initial public offerings, the typical route for tech companies. Spotify’s listing was anything but conventional – a behaviour in keeping with its philosophy. ![]() The Swedish music streaming business garnered widespread attention for its novel stock market listing, but to achieve long-term success, it will need to overcome an over-reliance on royalties. Arthur Piper, IBA Technology Correspondent ![]()
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