“Spotify Saved Music. Can It Save Itself? – https://www.bloomberg.com/news/articles/2018-03-23/spotify-saved-music-can-it-save-itself” via Digg
Ek, 35, started Spotify in 2006 because he thought he could stamp out the piracy that had ravaged the music business. He was right.
More than 70 million people now pay Spotify an average of about $5 a month to access 35 million songs, plus playlists and podcasts. In private transactions, investors have valued the company at more than $20 billion.
There’s only one small flaw in the business model: Spotify doesn’t make any money. The service has reported higher losses in three consecutive years despite quadrupling sales. It’s hard to be profitable when music-rights holders collect more than 75¢ on every dollar that comes in.
Pandora Media Inc.hasn’t been profitable in six years as a public company. Deezer SA, a European service once seen as a Spotify rival, called off an initial public offering in 2015. If you don’t remember Grooveshark, MOG, Songza, or Rdio, it’s because they shut down or were bought by larger companies. Meanwhile, the tech giants don’t mind losing money on music if it helps sell other stuff
Ek is optimistic. “The music industry today is quite inefficient when it comes to breaking artists, when it comes to promoting and marketing artists,” he said at the investor presentation. “There is a tremendous opportunity in connecting these 3 million artists we have today with these 160 million-plus users that we have.” The question now is whether investors think he can do that and how much profit he can wring out each time he does.