For a simple human being, this is nonsense. For an economist specializing in this economic model, perhaps not. Can anyone explain the logic and future of this model?
What is? If you mean the ānobody makes a profitā, the expectation in all these internet service businesses is that only one or very few survive per market. Everyone tries to be among the survivors and until then, losses are accepted. Wins would be huge, so acceptable risks are large.
Itās the same everywhere, be it food delivery or music streaming
1 Like
It may also me as a consequence of increased running costs, the cost of living crisis has meant some companies giving staff larger than normal pay increases.
The question is if the streaming model is unprofitable because of competition or if itās fundamentally unprofitable at a price normal people would pay each month.
Whatās the true monthly price per customer to have all the music in the world? It sure aināt $10!
Itās inaccurate to compare music streaming to things like Uber, food delivery etc. The music business has many layers of rights holders that things like Uber does not.
If all the streaming services except Spotify went out of business, would Spotify even then be profitable?
1 Like
This is why Iād never buy a lifetime subscription, if Tidal and Qobuz go belly up, Iād ditch roon.
1 Like
Thatās somewhat correct, though internet-based food delivery also depends on the content providers like restaurants. Whatās similar is that the economics favor a winner-takes-it-all situation and thatās precisely why each player is willing to incur losses to get there. There canāt be a different winner in each city or federal state if conditions are comparable, the way it was with brick-and-mortar businesses. (Though there can be a few in a larger region if there are differentiators).
I bet most of us could do something like that, or just use tidal connect, I suspect we could all get good sound another way if we needed to.
I like roon and will continue to use it whilst there is lossless streaming service integration, I donāt care which.
Yes and then thereās the artificial low pricing, to actually make a loss but knowing that it will put a competitor out of business.
Exactly right
The question is whatās the true monthly price?
Is it $75 per month? Which would still be a bargain but would the masses pay it in sufficient numbers?
Iām not sure theyād pay $25/ month.
If they canāt get to a true price then the whole thing is doomed to fail.
Digital killed the radio star.
What if all new music was only released in analog formats? Would vinyl rips on torrent sites still do them in?
Tidal hifi plus is only a little over the equivalent of 25$ here and people are paying it.
1 Like
I donāt know, but once you ate up the ramp up cost and have most music digitized on the servers, established upload mechanisms for artists/labels, server and app code, and a global CDN, my guess would be that most costs [1] are for cloud CPU/RAM and network traffic - both of which get cheaper all the time.
I suppose the assumption is that it will inevitably become profitable at some point in the future when costs have sufficiently come down, but you canāt wait until then because by that time someone else (who managed to survive the debt) will have eaten your lunch. And if you are the only survivor (at least in your segment) you may be able to find a price point that works.
When seeking investors who are willing to pump in the money until then, you will need to show them some numbers and projections. They may be not entirely correct, colored by hope, etc., but they are probably not completely plucked from thin air, either.
And investors at this scale donāt need every investment to be profitable and they can wait many years, some of them for decades. They are well aware that they canāt see the future and will often get it wrong. They just have to make sufficient profits at the bottom of the sheet across all investments. Part of that can be smaller profits in a significant ratio of the investments, but part of that can also be the one huge win that covers many failures. Think iPod and iPhone - nobody knew and they could have flopped, and ramp-up costs must have been breathtaking at the time with the available tech, but today many wish they would have rolled the dice on such a thing.
[1] I included just infrastructure in the widest sense as costs here, not content licensing from labels, although this is of course a big factor. But though labels will want to increase their cut as far as they can, they are also completely dependent at this time on the services. Fragmentation is already not very successful in the video streaming business and would completely kill music streaming. Nobody will buy streaming services from a thousand different labels
1 Like
They would certainly increase the cost of subscribing very substantially.
3 Likes
Itās true that most users are not willing to pay anywhere near $75 or even $25 but itās not true that they need to charge this.
The big boys (Apple, Google and Amazon) can take the losses as an ecosystem play. They hold the price down and take losses but make up for it using other services.
Once you pay for one service you are more likely to pay for others and when you start talking bundles those big players have a lot of room to play with where they get the margin from.
It is true that companies like Tidal and Qobuz are doomed in this scenario, they will not be able to compete. If costs continue to rise (which they do because the labels charge more rising every year, they have shareholders too), then the small players get wiped out.
The odd one out is Spotify. They have the stickiest user base and the brand value but they lack profitability and have no way to offset that yet. They are making the argument that audiobooks can help with that, I would argue that Amazon begs to disagree.
Another option is to take the L on people who wonāt pay the extra. If the number of people willing to pay $15 a month outweighs the loss of price sensitive users, they will raise the price to that. Spotify is exploring another option in this area, creating a premium $20 option for power users. They get to keep the $10 people and make a tasty profit off the small percentage of super users.
All of this to say is that this can continue for a very long time if it proves to be a valuable ecosystem add to the big players. There are lots of areas where they can adjust the business model, with players like Amazon, Apple and Google in the space (Apple just started acquiring classical labels), there is enough leverage to keep the services and sap money from the labels.
3 Likes
at 75 month i would go back to buying used cdās and ripping them onto my computer ,streamer for playback.
3 Likes
From a cost perspective maybe (and I do buy used CDs occasionally) but not from a use case for me - one of the main uses of streaming I have is discovering new music which, if I like sufficiently, Iāll buy a copy (download). Iād say even at $75 a month it is good value and Iād buy (as long as it wasnāt Lossify).
3 Likes
Iād spend it on band camp, I still actually buy music I really like on BC to support the artist, even though I could stream it anyway. Iām not alone in doing that.
From the BC page:
āFans have paid artists and their labels $1.19 billion using Bandcamp. In the past year alone, theyāve spent $193 million on 14.1 million digital albums, 9.8 million tracks, 1.75 million vinyl records, 800,000 CDs, 350,000 cassettes, and 100,000 t-shirts.ā
There seems to be plenty of money spent on music and this is just one retailer
Itās worth remembering that Qobuz sells music downloads, they have a premium streaming tier that gives a percentage off purchases, so some people must be subscribing and buying the downloads.
Buying second hand CDs doesnāt help the artist IMO.
2 Likes
Iāll listen on Spotify for free to find albums I want to buy
The largest cost for streaming services by far, are music licensing fees and royalties to record labels and publishing rights holders. Spotify spends billions of dollars each year.