Music Industry

A question that needs to be asked: Is streaming music doomed?

When Spotify stock starts publicly trading later this year, there will no doubt be a frenzy of people looking to buy, even though the company lost $1.4 billion last year alone. And given the peculiarities of the way music is licensed to streaming services, it’s doubtful that Spotify (or any other streaming company) will ever be in a position to make any money.

At the same time, record labels are making hundreds of millions (billions?) from the proceeds of streaming, far more than they are from physical sales. This obviously can’t continue. So is Spotify really worth $20 billion?

New Atlas takes a look at the finer points of Spotify’s IPO documents and has to ask the question “Is streaming doomed?”

The Spotify filing gives a fascinating look behind the curtain at the world’s largest music streaming subscription service. The company reports having 159 million monthly active users as of December 2017, including 71 million paying subscribers. While generating consistent revenue growth over several years, culminating in €4.09 billion (US$5 billion) at year end 2017, the company has also incurred consistent net losses, peaking recently at €1.235 billion (US$1.5 billion).

The numbers seem rather clear, as more people subscribe, more songs are streamed, resulting in more royalties paid to record labels and music publishers. Spotify suggests in its SEC filing that its primary growth strategy is to penetrate new markets and expand its subscriber base. But the fundamental concern still remains over whether the numbers will ever be able to generate a profit for a music streaming service.

Music entrepreneur, and current head of Apple Music, Jimmy Iovine has been very vocal about the fundamental issues facing streaming music subscription services. In a frank interview with Billboard last November, Iovine starkly suggested that music streaming, as a sole business model, is “not a great business.” And for a company like Spotify, which has no other revenue source, it could be a signal of ultimate doom.

Keep reading.

Alan Cross

is an internationally known broadcaster, interviewer, writer, consultant, blogger and speaker. In his 40+ years in the music business, Alan has interviewed the biggest names in rock, from David Bowie and U2 to Pearl Jam and the Foo Fighters. He’s also known as a musicologist and documentarian through programs like The Ongoing History of New Music.

Alan Cross has 38398 posts and counting. See all posts by Alan Cross

3 thoughts on “A question that needs to be asked: Is streaming music doomed?

  • Isn’t Spotify looking to expand into some hardware offerings? Not sure what that looks like and can’t see anything compete with cell phones and wireless speakers on the market. I think artists should get the same royalty deal and have their music on any of the streaming services….Amazon, Google Play, Apple, Spotify. Maybe streaming services will start signing their own artists….the new label.

  • So, Spotify is losing money and the creators are complaining about not making any money yet “record labels are making hundreds of millions (billions?) from the proceeds of streaming”.

    Isn’t this news that is as old as news gets? “Record labels screwing over …”. It used to just be artists but it seems they are now they are also screwing over the other end of the supply chain.

    Clearly there is a big cancer in the middle of the supply chain of music being created and consumed.

    While I can appreciate some of the arguments made in the article about how the music streaming business is unlike Netflix and how they (Netflix) are dealing with the royalty issues by producing their own content, it seems to me that Spotify needs to be more of a disrupting force and needs to start signing artists directly.

    Sure, that won’t get them the back-catalogs, but it does give them the new material and like Netflix, their business model will shift over time from paying royalties for content to producing their own content.

  • Pingback: Community Broadcaster: Movin’ and Groovin’ With the Times – Newsletter

Let us know what you think!

This site uses Akismet to reduce spam. Learn how your comment data is processed.