Entertainment For Lively Minds
Spotinomics
Following on from the Spotify Generation thread below, I got to thinking about the economics of the Spotify business model, and something struck me.
Forgive me if the following is a statement of the bleeding obvious, but please humour me.
As I understand it Spotify's key income stream is from subscriptions, and its main (variable) expense is commission to artists, based upon number of plays of their tunes. I know there are a huge raft of other costs associated primarily with their IT infrastructure, but I am treating those, and other overheads, as fixed costs.
So - let's assume I am a subscriber, paying my £10 a month or whatever. My tenner goes, in the first instance, into Spotify's bank account. Happy days for Spotify.
Now let's assume I listen to absolutely nothing all month. No listens = no payments by Spotify to artists. Big win for Spotify.
But let's assume instead I'm addicted to the service, and it's constantly playing in the background while I work, rest and play. BIG outgoings to artists - maybe Spotify's not so happy.
Now I know this is complicated by other income streams from advertising which will inevitably be predicated on number of users, and I am sure there are also 'sweeteners' received for the promotion of big new albums, but I'm still left with one simple thought:
Spotify want you to subscribe, and to use the service - but not too much, please.
Or am I missing something obvious?
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Thats the one
Same principle as health clubs, video/DVD subscription services & anything else that wants to take a monthly fee off of you but not have you use it too much as that means their services and facilities require upkeep (in the case of Spotify, payments to artists/record companies)
Reports suggest that the 'per-play' payments made by Spotify
are tiny* so I suspect it makes little difference to the business model how often you listen to a specific track. The few users who listen to 'more than their sub worth of music every month' are WAY outweighed by those who subscribe then listen to a few tracks.
(* I seem to recall the figure of 600,000 plays a year just about pays the artist the US minimum wage)
per play payments
Jon Hopkins tweeted recently that he got paid £8 for 90,000 plays. He then said something naughty about Spotify.
It's (arguably) better than radio airplay payments though...
£8 for 90,000 plays = 0.009p per play, but Radio 1's arrangement with the PRS pays around £60 for a 3-minute track IIRC, so a play on Chris Moyles' show (7.4 million listeners) comes out at 0.0008p per listener... it's all about whether we (or even Jon Hopkins) treat Spotify as "plays" or "listens", if you see what I mean...
Of course Spotify is play-on-demand and therefore probably supplants purchases, but I still think it's not quite appropriate to compare it to other "promotional" streams, not that Hopkins made the comparison, but many do, and no-one complains about radio play payments.
It's also worth pointing out that the big labels are all major shareholders in Spotify, and almost certainly have put some sort of capped payments to artists in their secret agreements, just to insure against the OP's power-user scenario.
I don't see the problem
I start a streaming music service based on a subscription model. I keep. let's say, ten percent of the income to cover costs and make a profit. The remaining 90 per cent gets divvied up among all the artists based on numbers of listens.
I wasn't really suggesting there was a problem...
...just that the way it worked meant it was not necessarily in Spotify's interest for its subscribers to make too much use of the service once they'd signed up.
However from other comments I doubt very much the split is anywhere near the 10:90 ratio you use in your example above!
Good Interview
by Mark Kelly, CEO of the Featured Artists Coalition on this subject:
Rest: http://www.pocket-lint.com/news/39727/featured-artists-coalition-intervi...