Spotify opens on NYSE, valuing company at almost $30B | Hacker News Reader

Spotify opens on NYSE, valuing company at almost $30B

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692 pointsharshgupta453 comments

I do love Spotify as a product, however I don't think it will scale the same way Netflix does. Spotify is at the mercy of major record labels, and as their books become more transparent the record labels will squeeze every dollar they can for licensing. That is, unless they find a way to upend the record industry entirely.

Spotify has a unique position with their amazing discovery/recommendations engine- they could potentially start their own "label" and promote their own artists that sign on. Small/independent musicians could see more exposure and Spotify can deliver more music tailored for individual tastes. I've personally found myself listening to lots of small/indie artists as a result of their algorithms, to the point that these now make up the majority of my listening experience.

I think getting into concert tickets/streams, merchandise etc could help them potentially capture quite a bit of value in the future as well.

I know the comparison is similar to original content & Netflix - but keep in mind there's an opportunity cost with media (one can only consume X amount of shows/songs within a period of time). The more attention Spotify can divert away from the major record labels the better.

Netflix could be in the same position. With Disney launching their own streaming services next year, the situation could get dire for Netflix, too, if Netflix' own productions don't take off as much as they want.

It's very doubtful that Disney is or could be an serious issue for Netflix now.

Netflix is approaching - or already larger than - the size of Disney's comparable entertainment business, and Netflix is growing relatively fast whereas Disney's business isn't growing much or at all.

Disney's studio division does $8.3 billion in sales. Their media networks arm, which includes ABC & ESPN, does $23 billion.

Netflix will hit ~$14-$15 billion in sales this year. Apples to apples in terms of where they compete, Netflix will be comparable to or larger than Disney in size in 2018 or 2019.

Five years from now Disney isn't likely to be much larger than they are today (just look at their growth the last few years, flat to minimum). Netflix will very likely be over $25 billion in sales at that point (which would plausibly be larger than Disney's largest business, the media networks group).

At the scale Netflix has reached, every dollar of new growth that Netflix is obtaining is taking some bit of revenue away from Disney. Disney is going to mostly cannabilize themselves in switching to their own streaming service, including the mess at ESPN (the end of the hyper lucrative, subsidized cable & satellite subscribers that have been artificially fattening Disney's entertainment wallet for years).

Disney is mostly in a scenario of attempting to hold their ground. The same place Walmart is in with Amazon and for the exact same reason (minimum overall market expansion, low consumer spending growth across the developed world, while the new competitor is starting to eat your existing house).

Interestingly another similarity between those situations: Amazon is willing to compete at near zero profit generation in retail to pursue sales growth, which is brutal to an established giant like Walmart who has a huge investor base that expects them to generate considerable profits every year. Walmart can't just drop their profits dramatically to compete, their stock would implode. Disney is facing the same storm: Netflix operates at a level of minimal profit (~4%-5% net income margins), whereas Disney's long-established shareholders expect rich profits and a dividend (Disney typically sees 10%-20% margins in their entertainment groups, with a 16% overall net income margin). Netflix is willing to plow almost every dollar back into content production and licensing, and their shareholders cheer that on so long as the top-line growth continues.

I don't know how much business 21st Century Fox does compared to your numbers, but Disney is buying "most of" them[1]

http://money.cnn.com/2017/12/14/media/disney-fox-deal/index....

If the acquisition goes well, it could keep Disney ahead of Netflix's scale for another three or four years (on an apples to apples basis). The Fox assets they're acquiring are substantial, however there's zero organic growth in the Fox business (it's closer to a contracting business with 2017 sales below 2015 sales).

An acquisition like that might be as likely to throw Disney into chaos as anything and give Netflix a leg up on stealing market share, given the corporate history of very large acquisitions.

That also of course depends on what the Netflix growth profile looks like over time as well.

For example, does Netflix routinely still generate 15%-20% annual growth after they're up over $20 billion in sales? If so, there's nothing Disney can do to stay with them short of continuing to buy up the rest of the entertainment universe.

The global subscriber momentum Netflix has now is incredible. By the time Disney figures out exactly how all of their streaming pieces are going to fit together, Netflix might be up to 250 million global subscribers.

Is there a sizable precedent for companies hitting $20 billion in sales and continuing to routinely generate 15-20% growth?

Yeah I agree that Disney won't be a serious issue for Netflix. You may see some users cut Hulu or Prime out and add Disney but Netflix is still in a good place.

> Apples to apples in terms of where they compete, Netflix will be comparable to or larger than Disney in size in 2018 or 2019.

For share of streaming wallet yes; but they hover at only about 5% of net income. So Disney doesn't need to be anywhere near the subscriber amount to reinvest heavily in content and acquisition. Also - Netflix has the US mostly saturated so they have to create or sign content for the various international markets. While Disney already has great content with global appeal.

> they hover at only about 5% of net income. So Disney doesn't need to be anywhere near the subscriber amount to reinvest heavily in content and acquisition

That's not quite the context. Netflix is rapidly growing sales and plowing its potential income into content expansion.

Disney has zero sales growth, with a large traditional investor base that expects profits to at a minimum not contract. That traditional investor base holds Disney to a particular standard that Netflix doesn't have to suffer (for now). Disney can't reinvest any more of their existing sales & profit toward content creation without subtracting from the profit figure they report. If they do that at any meaningful scale, the stock will crater.

Disney's situation is actually even worse than that, as the erosion of cable is eating into their solidly profitable TV business (especially ESPN). So they're facing a declining context on sales, profit and margin, and they can't afford to redirect a meaningful share of their existing profit.

Simply put, right now Disney has no sales growth to direct at new content investment. They have existing profit that is already allocated to placating investors that expect the net income statement to look great and expect the dividend to remain or increase. This is why Disney is looking to spend a vast sum to buy business expansion with Fox, to perhaps placate shareholders a while longer (how long will they tolerate zero growth otherwise?).

Netflix gets to operate on different terms of shareholder expectations than what Disney does.

Otherwise, Netflix would have a market cap about 90%-95% lower than it is right now, if Netflix (~220 PE) were being judged on a more near-term profit basis as Disney is (~14-15 PE). It's the exact same growth expectation benefit that is being given to Amazon ($3b net income) vs Walmart (~$14b net income).

I don't think you understand how much power Disney has. They own all popular superhero movies. Nearly all well-known children's movies are owned by them. Star Wars now is their IP. Netflix has what? House of Cards (which was discontinued)? 30 other TV shows that range from okay to "people talk about it once or twice to their friends"? 5 movies that are produced slightly higher than a TV show with mostly mediocre ratings?

Families with young children will subscribe to Disney's service almost guaranteed, and since a few years ago Disney has enough content for the parents, too. Why pay for two or three streaming services? Maybe Disney is enough. Disney's portfolio will also not shrink like Netflix' does often due to expiring licensing contracts but steadily extend over time.

Netflix might grow like crazy currently but they are massively in debt due to their movie making and their startup-like growth will eventually stop. As a Netflix subscriber I wish them the very best but I really, really hope they are aware of Disney and will be able to keep up.

You're right that Disney's IP is orders of magnitude better. But "Stranger Things" is much higher than 'people talk about it once or twice to their friends' (along with others like Black Mirror, Bojack Horseman, The Crown, Making a Murdered, etc.), though not on the level of Star Wars or Marvel obviously

not only that, but i watch those movies like they are meant to be watched, at cinema.

Disney has Simpsons now too!

Disney's revenue for 2017 was $55 billion. You can't take Disney Studio revenue in isolation.

Disney movies are just the top of the funnel that feeds revenue into their theme parks, dvd sales, television stations, and soon their streaming service.

By the time a movie gets to their streaming service, it has already made millions from the theatrical release. By the time a TV show gets there, it's already made money from advertising on TV. The streaming service doesn't have to find its own content or buy it from someone else like Netflix does.

It is alot easier (cost and effort) to start a band and put on album on Spotify, compared to creating a movie/tv show.

Consumption is different, as well - several minutes at a time versus dedicated visual attention for a minimum of 22 minutes.

And how is anyone supposed to sift through all that garbage to find something worthwhile?

Discover Weekly

Who is listening to all of this self-published music to get training data for Discover Weekly?

I'd imagine that the self-published music gets discovered by a few people and put into playlists, then more people who follow those playlists discover those songs, and then they percolate upwards through layers of algorithmic and editorial Spotify playlist generation including Discover Weekly.

There's also the Fresh Finds playlists, which work a little differently by surfacing unknown songs that "tastemakers" have been listening to.

Agreed that your hypothesis makes sense given the current state of things but I do not think it scales with any sort of consistency/quality control in the utopian "no labels all self-published" world.

They're not starting in a vacuum. Spotify has metric tons of listening and catalog data to help properly tag a newly signed artist. Discover weekly would help fine tune the data that's already on hand.

You algorithmically seed new music to those with an interest in the genre and keep the songs with higher replays around for more recommendations. With perfect knowledge of who is listening to what and their overall tastes you can cut out all the inefficiency of the current gatekeepers (labels, billboard, and corp. radio) who act as self imposed kingmakers for a few anointed acts. The cream will rise to the top naturally.

This sounds terrible from a user perspective and arguably promotes certain types of music while penalizing others. As a user, if I hear more than a few songs that are terrible that were forced upon me by some algorithm, I am not going to listen to that playlist/use that service anymore. If users are the only way you are generating training data (for this supposed only self-published music world), you are going to end up with the music version of clickbait to get users' attention before they hit skip. I really cannot emphasize how bad optimizing for this would be for music.

Whatever your opinion on "current gatekeepers", some of them do provide valuable filtering services that I struggle to see how an algorithm could accurately replicate without compromising what makes music magical.

I think you could do this by pushing to users who tend to look for new artists already. There's a large set of folks that love to discover new music, and actively do so, and adding one or two new artists to promote here would be an easy way to start the network effect to other users.

In-house positions or they scrape/steal from the blogs.

Definitely would necessitate something resembling in-house positions but I just don't see how you maintain any sort of consistency if you have a group of people reviewing thousands of tracks. And then at that point aren't they just functioning as a label?

Blogs, don't know how they're going to discover stuff if it's all published on Spotify initially.

Discover Weekly as far as i know didn’t begin immediately or at least wasn’t what it is now at first. Now it’s great. Spotify has so much past and present data from listeners. Way more than they need.

I don't know if Paul Lamere is on HN, but he's likely the best person to answer this question. Short answer: It's not all about user-fed listen data.

I've watched some of Paul's talks as well as seeing some of his early demos at Sun Labs. The bottom line is that discovery is really hard generally and, for the most part, no one has cracked it pretty much anywhere even when there aren't competing commercial interests.

Personalized playlists, artist radios etc. The point is you don't have to sift because they do it for you.

The GP's post was implying that it's easier to bypass traditional gatekeepers (labels) by self-publishing on Spotify. I don't see how either of your recommendations solves the problem of the flood of self-published releases in a "labels are no more" scenario.

Finding music you like among all the competing possibilities is Spotify's strong point.

Sort of, but not really. In reality a lot of the streaming contracts with record labels dictate that they must promote certain artists more than others.

Spotify playlists and Browse are very bias. My Spotify 'home page' shows me mostly popular/mainstream stuff that I never listen to. :)

It was my understanding that Spotify's home page generally shows global trends and probably sponsored content, at least it's pretty obvious for me because as you point out it's filled with artists and music genres I never listen to.

There's however plenty of automatically generated customized playlists available next to that. When you create a playlist it also recommends tracks it thinks will fit etc... I haven't found any obvious bias in those so far and they often recommend obscure old tracks that I doubt anybody cares to promote anymore.

Social playlists are where it's at. Expect Spotify to further leverage social and friend features.

This is roughly the youtube model now, isn't it? Some grass-roots promotion will get content fed into a recommendation engine of sorts.

I built https://www.jqbx.fm to help with that. It let's other people play music for you. So if you know someone's whose taste or playlist you like you can listen to music in sync with him/her/them. Like a user-generated radio.

I suspect that the average paid Spotify user is actually listening for hours at a time, while they are working or driving. I don't think people are turning it on and off a few songs at a time.

I think the parent comment's point is that the smallest unit of attention is smaller for Spotify than Netflix

The point that it's a different consumption model is still valid and interesting, though. Nobody with a long commute (until self-driving is solid) is/should be watching Netflix to pass the time. Audio-only is feasible, though. Same goes for the gym and during the day at work. Music is common and acceptable, but video is definitely more of a leisure activity since it monopolizes your attention.

Do I think Spotify has anything special over Apple, Google, or Amazon? Call me skeptical. I'm just not sure you can make a direct comparison between an audio service and a video service.

I understand what you're saying, but a huge number of people commute by rail or bus (perhaps more so outside of the US, I don't know). Watching video on the Tube (London Underground) is fairly common, as it is on commuter rail into London

Netflix was at the mercy of the content producers but it managed to work out of the hole by making its own content. Even if Netflix dropped the entire third party content repo, their current production content is enough to justify a subscription for many people. Spotify could easily follow Netflix's playbook by identifying musical trends that people enjoy and crafting new music.

Spotify has many "session" recordings from a variety of artists, they also have live albums from concerts that aren't available anywhere else on the internet. Trust me, I've been scouring every dark corner of the net for a recording of Run The Jewels Sxsw 2015 concert to no avail.

what.cd would have had it in FLAC, Ogg Vorbis, AAC and six different bitrates of MP3.

Leaving legality aside, I was always really impressed with the level of curation people put into that particular private tracker. You could find every vinyl and CD release of Miles Davis' Kind of Blue in just about every file format you could hope for.

I hope eventually streaming services become so low-friction and commonly used that enforcing copyright takedowns on sites like what.cd will become a thing of the past and we can benefit from their value as a deep archive of esoterica.

ugh I get legitimately sad thinking about how what.cd slammed its doors shut unexpectedly, never to be seen again.

> Spotify is at the mercy of major record labels

For now. They have a large enough reach to essentially "become" a major record label, all they need is to start signing artists to contracts.

They can't pay them as well.

I'm curious how you get to that conclusion, care to share your reasoning?

If they could do it and reduce costs that way, they would have done it already. In the Netflix case, licensing third party content was cheaper than creating their own and probably still is. Creating their own content acts as a differentiator for their service with the potential for future cost savings

Spotify + extreme bias towards X # of artists due to rights ownership = potentially crap experience for listeners.

I don't disagree, if you look at the way Netflix pushes their own content over what used to be entirely studio movies and network TV shows you can see a current example of how this plays out.

I was thinking that if Spotify kept the same experience for listeners that they had now in order to grow their subscription base, and just reported higher earnings for the artists they had signed versus ones signed to a 'different' label, that over time as contracts came up for renewal people would move over to Spotify.

Don't you think that as long as it's good users won't care? Netflix would likely have succeeded without originals but would have been nowhere near as pervasive. People were tired of the network crap and wanted content accessible everywhere. They delivered on those.

Good content is good content. For music - it's even better if it's not yet well known because for some reason people think more highly of themselves for being an early fan. Early discovery favors audio moreso than video. So pushing originals (newly signed artists) is a great strategy for Spotify. So long as it's good music.

I don't understand the appeal of this model. Do you really want to have to subscribe to 5 different streaming music services, one per label, just to listen to all your favorite artists?

I'm admittedly not a particularly big music person but I'd have trouble seeing subscribing to multiple music streaming services unless one of them was for some obscure sub-genre I was really into. A lot of music seems to be ambient. If there's some artist I really need, I'll but a CD now and then.

Mind you, I don't like video being fragmented but that's a more deliberate choice a lot of the time for me. I'll subscribe to a few places based on available and original content--somewhat grudgingly to be sure--but I accept those are my options.

I'm not aware of many distributors that have successfully made the jump to labelhood. Caroline is the only one I can think of right now.

Starting their own label is not going to make the labels that they depend on very happy, and as such would be a very bad idea until it's impossible for the labels to survive without Spotify.

Spotify definitely doesn't have enough market share for that to be true, and it's not clear that they ever will. Youtube has always had more free listeners than Spotify and Apple Music is set to surpass Spotify in number of paid listeners sometime this summer.

For this reason, I don't understand tech valuations.

Google is worth 1000B, general motors is worth 60B.

Why? I'd contest GM has more 'stuff' and abilities to do 'anything'. Google has a bigger population, but what does that translate to when the value of tech might be lower.

I'm not saying tech isnt more valuable, but there might be something wrong with google being 1,700% larger market cap than GM.

Well, GM has required direct government assistance in the recent past in order to stay solvent. Google is rolling in liquid assets.

GM exists in a very competitive industry with major competitors at or above their capacity, while Google has maybe 1 or 2 competitors in several of various industries, and dominates several independently and almost completely.

GM might be able to claw aware market-share from competitors, and end up more valuable, but not by that much. Google is in the sort of position that allows them to potentially capture a brand new industry if one appears.

GM could (relatively) easily get broken up or get massively devalued to to a large market event or by falling behind in an industry that is rapidly changing shape from what they are accustomed to. Google falling out of existence/dominance would almost have to be the result of a fundamental societal shift at this point (or anti-monopoly legislation somehow), and they could throw enormous amounts of cash at problems for years before facing insolvency (from my understanding).

Compare the difference in their profit.

I agree they should sign exclusive deals with artists which would give them leverage in their negotiations with the record labels with an eye on the long-term hope of breaking that reliance on them.

They won't be able to get into concert tickets at the present time in any significant way due to the exclusive agreements between Ticketmaster and venues. Though maybe the could start with some smaller acts and venues and work their way up.

Live performances is where the money is for the artists which is why record labels are now signing acts up for complete deals which include not just the music rights but the concert and merch rights as well.

Edit: as somebody who has tried to buy tickets to a hot show on Ticketmaster the second they go on sale and watched the servers melt, it is Amazon that I would like to see get in the ticket game.

IMO signing exclusive artists seems like a strategic red herring because such deals would not be done in a vacuum. I think the transition period in building up substantial leverage with exclusive artists means theres quite a bit of time for the record labels to retaliate.

My pie in the sky recommendation would be to figure out a way to offer a record label's services for free without exclusivity. Then existing labels will have nowhere to turn.

https://tickets.amazon.co.uk/sd

>as somebody who has tried to buy tickets to a hot show on Ticketmaster the second they go on sale and watched the servers melt...

I’m just as amazed by that this problem has yet to get solved today as I was 15 years ago.

Presumably it's a technological arms race in which the platform has little incentive to innovate to get ahead of the touts. The platform gets paid either way, whether fans or touts are buying. Touts however, are massively incented to keep fans away from the hottest tickets.

Check the freakonomics show about ticketmaster. The tickets problem is not going away any time soon, and no company that leans heavily on good PR is going to get into that business

Soon enough Spotify will become the record label. All a record label does is, produce, promote and distribute. It's an antiquated model.

Most labels don't even distribute. There's standalone businesses that do that. See Ingrooves, The Orchard, ADA (owned by Warner but run as a standalone business IIRC).

For indies that have fewer requirements, there's lots of cheaper options such as TuneCore, DistroKid, and CD baby as well.

> Spotify has a unique position with their amazing discovery/recommendations engine- they could potentially start their own "label" and promote their own artists that sign on. Small/independent musicians could see more exposure and Spotify can deliver more music tailored for individual tastes. I've personally found myself listening to lots of small/indie artists as a result of their algorithms, to the point that these now make up the majority of my listening experience.

Have you ever used last.fm? I would be interested to hear if people still think that last.fm gives better recommendations than spotify can. I use last.fm with various music streaming services, currently Google Play Music, previously Amazon, but always using last.fm for discovering.

With the amount of users spotify has, it wouldn't surprise me to hear that it has eclipsed last.fm in terms of recommendation quality.

I use both for recommendations still. They both have their weaknesses. I’d probably lean toward Spotify if I had to now but I’m perfectly happy using both.

last.fm is easily the best discovery tool I've ever used. They do have spotify integration now though

Small artists are great, but music and money to be made from music seems to be dominated by large artists. Could Spotify ever sign, say, Taylor Swift?

ask yourself 5 years ago:

Could Netflix ever sign, say, Adam Sandler?

Probably. It's not like he is top rate talent, he will literally do anything for a check.

You mean as an exec? He'd be a better fit with Uber I'd have thought.

> That is, unless they find a way to upend the record industry entirely.

It seems like they can and are on their way already.

Didn't record labels complain some time ago that Spotify had supposedly commissioned music for its instrumental playlists (presumably to save money on royalties)?

There's probably a danger that large record labels will threaten to revoke their licensing agreements if they think that Spotify may start competing with them on that front. Not sure if that will be a problem, though, I'm not familiar with the whole streaming market.

Spotify could then turn into a label + live music organizer, giving artists more of a cut and cutting out labels entirely.

This. The money in the game doesn't come from just direct sales and hasn't for quite sometime. In the same vein an artist can get a million streams and still make >$5000. [1]

In recent years artists like Drake have started their own labels and collaborated directly with tour organizers to generate different sources of income and cut out middlemen. While it's difficult to imagine Spotify generating hit music at the same pace as Netflix produces hit shows, there is nothing stopping them from becoming a tour organizer or bringing artists to perform at their own show (hint: iTunes festival).

If they are really serious about the long term they would be developing new ways to experience "live" music. Perhaps VR concerts and performances or features that let the audience send feedback to the artists.

The good news is that they have shown they are not afraid of trying new things (ex: Video player within the playlist and the RapGenius tie ins).

Time will tell but I am bullish on Spotify changing how we listen to music for the better because the industry is ripe for a new disruption (Records -> CDs -> Digital -> ???)

[1] - https://www.digitalmusicnews.com/2016/05/26/band-1-million-s...

> In recent years artists like Drake have started their own labels and collaborated directly with tour organizers to generate different sources of income and cut out middlemen.

Drake starting his own "label" is not a new innovation he came up with (rappers been doing that since the 90s) and still comes with just as many middlemen. Emphasis on last sentence in quote.

>During the composition of Nothing Was the Same, Drake started his own record label in late 2012 with producer Noah "40" Shebib, and business partner, Oliver El-Khatib. Drake sought for an avenue to release his own music, as well helping in the nurturing of other artists, while Shebib and El-Khatib yearned to start a label with a distinct sound, prompting the trio to team up to form OVO Sound.[297] The name is an abbreviation derived from the October's Very Own moniker Drake used to publish his earlier projects. The label is currently distributed by Warner Bros. Records.

https://en.wikipedia.org/wiki/Drake_(musician)#OVO_Sound

Generally, artist labels are for creative control, and distribution (along with most of the "business end") is left to a major.

See: G-Unit, OVO, GOOD Music, DFA Records, OWSLA...

It really depends on how much market share Spotify gets for being people's primary access to music. Wal Mart has (I think?) decent influence on the music industry over what CDs it will and won't sell.

I'd wager that Spotify is nearing the point at which - if not already there - record labels cannot afford to revoke their license. If they can get away with it, they'll try to push some buttons, but I doubt a full confrontation.

If there's any evidence against this, please let me know. I think it's interesting.

Spotify's market share is currently being attacked on both ends.

Apple Music is supposedly set to surpass Spotify in number of paid subscribers this summer.

Youtube has always had more free listeners than Spotify, as far as I know.

It's not at all clear who the major players in the music streaming business will be five years from now, which means that all of the power remains with the owners of the music that people want to listen to. AKA the major record labels.

YouTube being insanely slow with rolling out Red doesn't help YouTube their business. I really wanted YouTube to have Red in Europe but they cant or won't so I moved over to Spotify because no ads and massive quality increase.

>Apple Music is supposedly set to surpass Spotify in number of paid subscribers this summer.

Where did you get this info? Look at the graph

https://www.statista.com/chart/8399/spotify-apple-music-paid...

I wonder what happened behind the scenes to get Taylor Swift on Spotify. I think that was a major test.

http://www.swedishwire.com/jobs/680-record-labels-part-owner...

Ah, shit.

Yes. The one in particular I heard about was one of their ambient playlists, where an artist called "Deep Watch" (whom nobody had heard of previously) was supposedly placed into the playlist to avoid having to pay the artists that would otherwise take that place.

Starting their own label is exactly what they need to do to remain competitive. It's exactly what Netflix ended up doing and I think it's turning out pretty well for them. I wouldn't be surprised if Spotify tried poaching higher-level strategy people from Netflix.

I doubt the need to poach the people, just the strategy itself. Would likely be better to find people used to managing bands, or doing whichever relevant recording company position, at a high level I would suspect

I'm not convinced. You don't consume music the way you consume TV shows and movies, it's often a more "passive" activity where you start a playlist in the background while you do other things. You can do that with movie/TV shows of course but a movie will last you ~two hours while a TV show can literally last you days or weeks at a time without input if you really like having The Office in the background while you do other things. Assuming that you can afford buying subscriptions to various services it's not massively annoying to have to use HBO Go to watch Westworld and Netflix to watch Arrested Development. It's not as good as having a unified service but it does the job.

If like me you like composing playlists instead of playing one full album at a time then not having the vast majority of your music available on a single service is a huge deal breaker. When I hear a song out there and I want to add it to my playlist I expect that it will be available on Spotify and the vast majority of the time I'm right.

If I need to go hunt for songs on various services and I can't easily make a single unified playlist with all of it I think it'll be back to piracy for me, it won't be less convenient and it'll be much cheaper.

I think Spotify's model would need to be slightly different to Netflix, I think they would still need to allow their artists music onto other platforms.

The need for them to be a record label is not for exclusivity, it is so they can operate as an equal partner. At the moment their entire business is based on negotiating deals with record labels, all Spotify can offer is revenue, so they will be squeezed and squeezed as each contract is negotiated and renegotiated.

Every artist that signs up to them will save them this cost in the long run... So I'm sure there'll be seemingly crazy deals like comedians have been striking with Netflix, which in the long run are will be very beneficial to Spotify.

Interesting thought. I've been very anti Spotify-as-a-label, but this is a really neat way of looking at it that I hadn't considered before. What if Spotify becomes a (small) label that's very artist-friendly? Then they can offer non-streaming distribution of their artists as a bargaining chip for existing labels.

My only issue here is that I'm not sure if existing labels will begrudge a new competitor on the block (and then try to kill Spotify). It doesn't seem to me like Spotify being a fellow label gives them much more that the existing labels would want, but maybe I'm just not thinking of it.

According to my memory and a little research [1], the record labels have some stock stake in Spotify. Personally I think this is Spotify's best bet: if the labels can derive stock gains from helping Spotify (plus licensing fees), they have skin in the game so they won't try to sabotage Spotify. I'm of the opinion that instead of trying to produce music (and fight the record labels), Spotify is better off getting into a complimentary position: make it easier for fans to find out about concert, purchase tickets at fair prices, and buy t-shirts. All stuff that Spotify can probably do better than the record labels, and which won't cut into label profits.

[1] http://www.swedishwire.com/jobs/680-record-labels-part-owner...

> If like me you like composing playlists instead of playing one full album at a time then not having the vast majority of your music available on a single service is a huge deal breaker.

I have this problem with Spotify. About 80% of the music I like is on Spotify. Private label, soundcloud, older forgotten bands, and foreign music is often missing.

One thing that stands out to me that differentiates Netflix vs Spotify is what happens when a license expires and content gets removed.

With Netflix, my reaction depends on if I watched the content before it was removed.

With Spotify, it's almost always rage.

Why? I often listen to music more than once but I often don't watch movies more than once.

It would definitely be a good direciton to go in, but I suspect a major potential problem for Spotify will be the possibility that the major record labels pull their tracks off Spotify in retaliation.

This was less of an issue for Netflix as Netflix streaming already had an extremely limited selection of third-party licensed content.

IIRC the original content was in response, not in spite of 3rd party content pulling out of Netflix.

The problem with this approach is that there's so much music out there because it is way cheaper to make music than it is to make films and shows. Even if spotify was somehow able to sign the top artists, they just couldn't keep up with the influx of new artists coming up every single day.

Music lovers also tend to be very particular and nuanced about their taste in music. Therefore, if I as a consumer don't find my music on spotify it means I'd have no reason to subscribe nor come back to spotify.

Also I can listen to the same album over and over for hours on end, but once I've watched a TV series or movie I am unlikely to revisit it again for a decade. So exclusive TV/movie content has a "novelty appeal" that music doesn't.

I think we might be seeing a shift in how people consume music that Spotify is (better?) positioned to take advantage of.

First and foremost, I agree that Spotify will struggle if they try to compete with other services on providing all artists.

It seems like listeners (or perhaps a subset) are listening by genre rather than by artist. I know genres and waves of music are nothing new, but with the lower barriers to creation as well as to consumption [1], we are seeing the number and frequency of new genres and sub-genres increase dramatically.

Anecdotally, I find myself using radio based music a lot more. E.g. I have a Synthwave station on SoundCloud that I listen to. I think this style is further exemplified with the popularity of sharing Spotify playlists. This is also why I think Spotify in particular are ahead -- the very people who would listen to Spotify published content are the people that already use Spotify.

In fact, I think this style better fits a lot of people who would use a streaming service in the first place. A lot of the people who want to listen to their favorite artists question the idea of paying for a subscription to maintain access to their favorite albums.

Of course, if Spotify goes this route, they are not alone. They would have to compete with services like SoundCloud and BandCamp. I think they could find success by toeing the line between major label content and indie content.

[1]: e.g. a "bedroom musician" can make their album over the course of a few weeks and then that album gets bought and listened to by someone thousands of miles away within minutes/hours of release. No printing copies, shipping, stocking, ticket purchasing, etc.

Genre is a discovery hack. If you listen to "Reggae", that may be only because you know you like Bob Marley and the Wailers, but you don't necessarily already know that Peter Tosh plays similar music, or that Desmond Dekker is similar, but is actually considered Jamaican (First Wave) Ska. It won't be able to predict if you will also like or dislike Rage Against the Machine or Elvis Presley, or individual songs that an artist plays out of their normal genre.

If Spotify can solve discovery, by using actual human listening patterns, playlist contents, machine classifiers, or whatever else they may have at their disposal, it is much less important that they have licenses for all the most popular songs. The popular songs are the easiest way for the system to determine what kind of sound any given listener will like, but tuning the radio and auto-playlists to respond to likes, skips, and dislikes should be able to reveal the songs that people will like, from artists nobody has heard of [yet].

I think they're almost there. When I go to radio mode based on my "Liked from Radio" playlist, I want to also be able to specify between "I'm passively listening, so just play music I probably won't want to skip" and "play only new stuff, so I can actively train your algorithm". As it is, it mainly just plays things that are already on my list, and I have to skip ahead on everything I have already liked when I'm trying to train it.

The key issue is that if Spotify is the music discovery engine, people won't discover music that isn't on Spotify. You have to license to them, or you don't acquire new fans. It only helps them that broadcast radio has consolidated itself into a uniform ball of only the greatest hits by only the biggest stars.

Starting their own label is biting the hand that feeds them, though. They need the libraries that the major labels have in order to stay in business.

Perhaps when they're not competing as heavily with Apple and to a lesser extent Google they could start their own label and the major labels would just have to deal with it, but I don't think it's a realistic course of action until then.

I don't feel we're at the point of saying 'it's turning out well' for Netflix. For sure on the awards side of things and quality shows etc... but haven't they raised billions upon billions in debt to make these shows?

Their execution on doing their own content has been great. However the long term value of these movies / shows still has to prove out in profits at some point.

I’ve never heard anyone talk about Hulu and Chill

>"Starting their own label is exactly what they need to do to remain competitive. It's exactly what Netflix ended up doing and I think it's turning out pretty well for them."

This seems to be a common refrain that Spotify can just "pull a Netflix." And this is very unlikely.

Firstly no matter how much opriginal content they could create, if they don't have back catalog it's going to be a total non-starter for the mainstream. A streaming service that has no Beatles, Pink Floyd, No Motown, No AC/DC etc is going to shed users pretty quickly.

Also music and movies occupy very different spaces in peoples lives - emotionally, socially, where and how they're consumed and shared etc.

People need music for their commute, for their workouts, for their parties, at bars and for their workdays. People only need movies when they're home or maybe stuck on an airplane.

Lastly Spotify needs to stay in the record label's good graces. If they were ever to be viewed as a competitor or a thread to any the big 3 record labels it would be reflected in punitive price increase when it came time to renegotiate their licensing deals.

How many shares do we think it would take to purchase a major record label at this point? What about a perpetual license to their content (since buying a label could be seen as anti-competitive)? This would certainly help avoid some of the down-side risk to the business. That said, their IPO didn't exactly help the company clear the working capital they'd need to do this.

Not only are there numerous labels with "must have" back catalogs, they now all know exactly how much money Spotify has.

Well there's no such things a "major record label" anymore. When people say "the Big 3" each of those three is global conglomerate. The result of years and years of consolidation.

Using the smallest of these 3 Time Warner Music Group, the company did $2.87 billion in revenue in 2013[1].

Let's say that Warner was actually interested in a sale. Let's say that the multiple they were looking for was 5x. Where is Spotify going to get the 15 billion dollars for that sale? Certainly not from this direct listing. And even if they had that cash what happens when you buy a 3,500 employee mega corporation? You actually have to run it and run it well.

[1] https://en.wikipedia.org/wiki/Warner_Music_Group

Wow, the big three put together did a laughable amount of revenue compared to an average tech major, surprised they haven’t been bought yet.

Where does the fear of these labels come from?

Why doesn’t someone just buy them for the catalog, and fire everyone in the dying parts of the business?

De-risk your revenue model, and gain leverage vs other streaming services.

> A streaming service that has no Beatles, Pink Floyd, No Motown, No AC/DC etc is going to shed users pretty quickly.

I could mangage quite well without all these.

Just one datapoint but...

The same reasoning would also have applied to Netflix when it was a younger company, though (i.e. back catalog, staying in the good graces of licensors, etc.).

Tidal has already been doing most of the stuff people are proposing here. It's a controversial topic but I don't think there is good evidence that music streaming services, from a business standpoint, shouldn't also be in the business of producing or sponsoring musicians.

Spotify should not "pull a Netflix". Spotify should "pull a Bandcamp".

Rather, Bandcamp should start a streaming service. I've had a payment model in my pocket for years that I think would work really well for them.

This wouldn't make much of an impact because the statistical distribution of music listening time has an extremely long tail, i.e. the most popular songs are far more popular than even other very popular songs. In a given market, something like 90% of listening time will come from the top few hundred tracks, and 99% will come from the first couple thousand. Those top couple thousands tracks are already well-served by alternative distribution channels (youtube, "indie" labels, etc), so there isn't much room for disruption there. Starting a service to fight for that 1% of listening time will not move the needle.

source: I used to work in the data side of the music industry.

You can already stream everything on Bandcamp.

Why the assumption that "to pull a Netflix", they will have to get rid of the back catalogue? Netflix has plenty of third-party content. I would assume that Spotify's music licences are highly variable cost, ie almost entirely pay-per-stream. All they need to do is to get people to stream less licenced content and more own-produced.

Because people expect broad coverage in their music service. When I ask alexa to play a song and she doesn't know it, I am like wtf? But I don't care if Netflix doesn't have every Matrix movie, I just watch something else.

Not just watch something else, if they don't have that matrix movie, you might watch it somewhere else. People don't make movie playlists and consume 35 movies in a row. Switching from one service to another to make up content gaps is OK when you're talking about a 2-2.5 hour block of time. It's not something people are going to do to listen to a mix of artists at a party.

> Not just watch something else, if they don't have that matrix movie, you might watch it somewhere else. People don't make movie playlists and consume 35 movies in a row. Switching from one service to another to make up content gaps is OK when you're talking about a 2-2.5 hour block of time. It's not something people are going to do to listen to a mix of artists at a party.

You nailed it. Music has a fundamentally different mode of consumption from music. People consume music in so many different ways and contexts. Music doesn't always demand your attention like a sensory-engrossing medium (like movies). But when music demands your attention (like having to change providers to hear a specific song) it introduces friction that is unnatural to that medium.

.. unless the music labels object to the conflict of interest.

Spotify has a lot of competitors biting at it's heels, they're certainly the largest (and IMHO, best) at what they do, but they've by no means locked up the market.

They're not exactly at the mercy of the labels, but they probably can't afford to piss them off either.

The labels themselves are large shareholders in Spotify, so they would have to balance the monetization of their own artists with Spotify's label artists.

This could lead to cartel-like behavior among the stakeholder labels and crowd out the smaller players, but that's basically been happening in the industry for a long time so I'm not sure how big the impact would be.

>"Why the assumption that "to pull a Netflix", they will have to get rid of the back catalogue?"

If they start poaching artists from the labels who own the back catalog or if the labels start to see Spotify as a competitor instead of customer there will a reckoning when it comes time for Spotify to renegotiate their licensing terms with the labels.

And then of course there's the risk of becoming a record label. For every Bruno Mars that blows up there are 30 or 40 other artist that failed to break. And each of those flops costs money and requires resources such marketing, A&R people etc.

>"All they need to do is to get people to stream less licensed content and more own-produced"

People want to listen to what they want to listen to when they want to listen to it. That's the whole value proposition of streaming for users. If someone has a specific record or song in my mind you aren't just going to persuade them to try some "non-licensed" content instead. It's not a sports drink.

>"I would assume that Spotify's music licenses are highly variable cost, ie almost entirely pay-per-stream."

No its most certainly not pay as you go. In fact the labels demand a certain percentage up front.

  Netflix has plenty of third-party content.

I agree they have plenty in the sense that they have many more hours of it than I have time to watch.

However, in my experience in the UK, if you pick a well known film at random and look it up on Netflix, there's only about a 5% chance they'll have it.

Not the sort of library that will have users throwing away their personal collections.

> A streaming service that has no Beatles, Pink Floyd, No Motown, No AC/DC etc is going to shed users pretty quickly.

I disagree. I think for most people music is fungible; they just want something to listen to. I think Spotify can afford to have gaps in it's library. Sure, if a large enough portion of the music industry cut them off it would be an issue, but I don't think they're in imminent danger of that.

I think you underestimate the annoyance and frustration users feel when content disappears from their library. This is especially noticeable in playlists: when half of your favorite workout playlist suddenly disappears, it's not something you'll ignore easily.

People pay Spotify a monthly subscription for the convenience of being able to listen to the music of their choosing, at the time and place of their choosing. Anything that jeopardizes that convenience is going to be a problem.

It’s already happening, and it’s less of a problem than I thought it would be. Some of my playlists are 200+ tracks. A few songs go missing from time to time. I can never remember which tracks have gone, I just know something’s missing as the flow from song to song is off.

It’s extremely irritating, but not enough to make me go elsewhere as I can’t see any other service not having the same problem.

Yeah, it's already happening, that's why I brought it up. Right now it's not a huge problem, because it doesn't happen too often or on a large scale. Like you said, it's usually a couple of songs in a larger playlist.

Now, imagine the scenario comparable to what @bogomipz said above: "no Beatles, Pink Floyd, No Motown, No AC/DC". I'm betting all of us would be a lot more frustrated and irritated than we are right now. Maybe you won't do anything about it. Maybe I won't, either. But it sounds plausible that a lot of people will, whether they switch to a different service, come up with a solution of their own or simply revert to piracy.

I’m curious. Do a lot of people actually use a single music streaming platform? As an avid music lover, I get my new doses from various services. Spotify is the only one that I pay for. I mainly use it to discover the latest mainstream stuff from genres I don’t typically listen to. But the Beatles? Come on, why isn’t that saved in your hard drive somewhere?

Because it’s included in my Spotify subscription. Why would I pay ~200 dollars to “own” all the Beatles albums when music ownership is basically worthless?

Why would I save music on my hard drive when I have music streaming services?

I don't think most people are avid music lovers, and many people probably don't even use a computer for music at all, just their smartphone.

I don't think they would switch to another service, because another service is likely to suffer from the same problems of rotating availability. The only service I know of that doesn't suffer from that is piracy, which I don't think people will go back to on any significant scale.

In case you’re not aware, there’s a setting to show unavailable tracks greyed out in your playlist, so at least you can tell which ones are missing.

Where is that setting on iOS?

Best I can tell, this feature is only applicable if the track is not available in the region you're in, and/or for tracks that are 'local music' that haven't been syncned to the device you're playing on.

If a song is removed from Spotify entirely, it just disappears from the playlist.

I'd love to be proven wrong, however, and start to see all the tracks that have disappeared in the past!

Absolutely agree with your point. Happened to me a couple of times when the music just disappeared and I could not really understand the reason. Good, I am paying for a student (4.99 instead 9.99 per month), but it's still money and I expect the promised services to be fulfilled.

There are so many people that listen to their ONE favorite artist all the time...I don't think that music is as fungible as you think.

Indeed. Since the rise of ClearChannel in the '80's, the industry has been reducing the variety of popular music down to the chords, and repeats trite elements like the 'millennial whoop"*, as far as they can. Content for them is very much a simple commodity. The number of really successful songwriters is tiny.

For those interested in this one, small-scale phenomenon: https://qz.com/767812/millennial-whoop/

Spotify's catalog is so spotty that it is borderline useless for me. Most small indie labels still do not publish to Spotify

If you are the kind of person that will sometimes strongly desire to listen to only one song/style/artist, and that desire is so strong that nothing else satisfies it, then Spotify not having your track can be a big deal.

If I can't build a decent playlist because Spotify's lack of coverage, that's going to be a big deal to me.

The mainstream is not sensitive to nor do they care about the logistics of music distribution. I wish there was a way for Spotify to ignore these bullshit distribution deals because the only people who care about them are megalabels and their A&R reps. I don't know of a single artist making bank off streaming...

Spotify is mass market music platform, it's not meant to be an indie publishing platform, and it doesn't even make economic sense for indie artists to publish on Spotify.

It's like complaining about the lack of techno (especially remixes) on Spotify, that's what Beatport is for.

What does Spotify not fitting your niche case have to do with its mass-market appeal?

I don't know what music you listen to but i have a pretty broad and eclectic taste and still find Spotify to be amazing for discovery.

I have never been happy with Spotify/Pandora as discovery system. Nothing beats an hourlong mp3+tracklist with real DJs pushing real buttons :/

Most people listen to top 40 music and artists, and not much else.

Most people on Spotify don't make their own playlists at all, and just rely on the ones that Spotify supplies in the Browse tab, or listen to albums.

From a quick scan of the friend activity pane, if Spotify only had music from the past 5 years, 80% of my friends would still be able to listen to their music.

People complaining about gaps in their library are a definite minority.

Indeed. 99% of Spotify users that I know, prefer to play Spotify playlists instead of listen their own playlist...

If this were true, Bandcamp and Soundcloud would be killing it.

A streaming service that has no Beatles, Pink Floyd, No Motown, No AC/DC etc is going to shed users pretty quickly

Last I checked, Spotify has those artists. Have you actually used Spotify lately?

Read the context.

I did. The context is Spotify's back catalogue. Which includes the Beatles, Pink Floyd, Motown, et al.

It could easily stop including those if the record companies think Spotify is competing with them instead of helping them. I think that's the point being made: that back catalog is leverage that will stop Spotify from ever rocking the boat the way Netflix has.

They aren't saying Spotify doesn't _currently_ have those artists, they're saying that they wouldn't survive as a music streaming service _without_ them, as no one only listens to the latest and greatest, as many do with TV/Movies.

Thus, Spotify can't directly attempt to go in the same direction that Netflix did, as the other labels would see them attempting to compete and could possibly pull out, destroying any reason to use Spotify in the first place.

Yeah i disagree. In 20 years, the Beatles and ac/dc will be less relevant and easier to live without. If Spotify start their own content channels now, and i imagine they have, the situation could easily be reversed, where they have exclusive rights to the content that others want.

Time will tell but i feel like this can go either way.

>" In 20 years, the Beatles and ac/dc will be less relevant and easier to live without."

If you made that statement I'm guessing that you don't realize that the Beatles have been relevant for 50 plus years now and AC/DC for 40 plus years.

They are so enduring because they are classics. It's amusing that you believe that when yet another generation discovers these artists they are somehow going to become less relevant.

Both of those artists that you used in your example were long time hold outs to allowing their music to be streamed. And it was huge news for Spotify when they were added to their catalog.

It's worth mentioned that Beatles tracks were streamed 50 million times in the first 48 hours that they were available for streaming.[1]

[1] https://www.pastemagazine.com/articles/2015/12/beatles-songs...

They have been relevant, yes, but that doesn't mean their primary audience isn't aging. If you truly believe the Beatles and AC/DC are gaining more followers than they are losing, you are woefully out of touch.

Spotify was excited to get them because it means older people might join. A larger audience, that's it.

You are flat out wrong.

65% of those 50 million streams in the first 48 hours were by people under the age of 34. See:

https://www.thewrap.com/beatles-songs-stream-50-million-time...

So yeah, catalog is king.

And you don’t think those folks weren’t streaming because they were heavily pushed towards it? First 48hrs is completely irrelevant, I want to see sustained numbers. I’m not saying the later numbers don’t show them leading still, I’m just saying your choice of facts doesn’t support the argument you are making.

>"And you don’t think those folks weren’t streaming because they were heavily pushed towards it?"

It's very bizarre that you don't understand the magnitude of the The Beatles. They are not something that requires a push.

So here's some number regarding the first 3 months of their catalog being available on Spotify:

"24 Million Hours Of Beatles Music Has Been Played In Their First 100 Days On Spotify

The company revealed today that in just over three months, people around the world have played 2,793 years worth of Beatles tunes.

Yes, that’s right — years. When that figure is broken down, it can be better understood as about one million days, or over 24 million hours. Considering that the average Beatles song is less than five minutes long, those 24 million hours multiply into several hundred million plays."

In fact, a conservative estimate of total Beatles plays on Spotify is still over a quarter of a billion. [1]

[1] https://www.forbes.com/sites/hughmcintyre/2016/04/08/in-thei...

Your original point was that millennials and younger love the Beatles on Spotify. How does this new reply show that?

I’m not sure why I’m bothering because you continue to miss the point and instead use multiple logical falicies to try to belabor your point. I get it, you have an obsession with this and you want to convince the world you’re right, doesn’t make it so.

I’m happy to be proven wrong as I have no skin in the game, but so far, you’ve not done so.

>"Your original point was that millennials and younger love the Beatles on Spotify"

No my original point was the value of back catalog.

While its unfortunate that you aren't able to follow the conversation, it's even more unfortunate that you insist on making comments when you have nothing of value to add.

Again with the ad hominem. I tried to have an intellectual debate, but alas, have a good day and best of luck!

Would you please do a better job of respecting the civility rule here? You've broken it frequently. That's a problem.

https://news.ycombinator.com/newsguidelines.html

I will yes and I realize I should have just have flagged the OPs comment rather than respond at all. Cheers.

Please don't stoop to personal attack regardless of how wrong or annoying another comment may be.

https://news.ycombinator.com/newsguidelines.html

> It's very bizarre that you don't understand the magnitude of the The Beatles

I don't find it bizarre at all.

They are basically unplayed on UK broadcast radio nowadays and indeed for the past 30 years. I don't know if that is due to restrictive licensing or just lack of interest.

I am mid-40s and have never knowingly listened to an entire Beatles song. I've just asked my wife and she has never owned one of their CDs.

I don't know if they're even on YouTube. Edit: yes, their most popular song has 123 million views versus 3.2 billion for Gangnam Style.

My only peers who seem interested in the group and seek-out their music are musicians themselves.

I’m not totally stupid (just a little...), of course they have been relevant for a long time, but i think their ability to be a differentiator in what people choose to pay for exponentially deminishes as time passes. They will matter to some for sure, but i doubt it’ll be enough to really make or break the offering. Also, maybe in 20 years they’ll manage to license the content?

They'll be able to buy a bunch of those classic catalogs with the money investors are pouring in

Why do you think Spotify has to ditch every other label when they start a new label? I think you're overblowing the power of music labels.

Indie and emerging artists aren't going to sign with a label if it means their music isn't available on Spotify, the #1 streaming service.

Music labels may have modestly more leverage, but it is not impossible for Spotify to start their own label while also maintaining relationships with existing ones.

Inversely, Spotify can buy super-low on fast-growing artists because they can juice the distribution channels for that artist.

Spotify already is a label. Right? A bunch of artists have done "Spotify Sessions".

Publishing recordings of live performances is pretty different from having a division of the company dedicated to supporting the careers of an artist roster

I believe they are testing this in the 'generic' categories of music. Think elevator muzak - people want the ends and don't care about the means, so they can white label artists who make albums like "Ambient sleeping tones" or "Rain sounds" and algorithmically crowd out independent artists doing the same thing, thus getting a cut of the royalties in addition to the distribution fees.

Edit: Like Aldi does for groceries

Or compete with Netflix. If Viaplay can do it, perhaps Spotify can also.

They should just buy a significant stake in every major label with their ipo money

If they start a label, I would hope that it doesn't try to compete with smaller record labels. It should compete with the big dogs and help out smaller ones similar to bandcamp. Idea: bandcamp + spotify...

If they start a label, the smaller labels will be the first one to feel the heat. Spotify would need to swallow them all to garner power so it can fight the bigger fish.

If Spotify start a label and is successful with it, the Music industry will most likely end up worse state than it is now.

Can you imagine if most new artists start signing with this supposed new label. If it happens Spotify will be a monopoly soon enough and artists will be in a way worse state than they are now.

Making a TV series or a movie is not the same as making Music. Artists sign with a label and they are more or less stuck with them.

Isnt that actually in the same vein as what Tidal did/is doing? They even had exclusives, and I dont really think, its working out for them. Worth remembering, that most artist dont make real money on streaming, they make money playing live, merch etc.

I like Spotify too. But in the end, it will just be another MegaCorp controlling music, especially when shareholders are involved. So I'd rather see the delicate balance between all parties maintained as-is.

This Exponent episode on Spotify is excellent and they discuss how they don't have quite the same power as Netflix but still more than people appreciate - http://exponent.fm/episode-144-90s-alt-forever/

I use Spotify more than Netflix at this point.

http://www.swedishwire.com/jobs/680-record-labels-part-owner...

This should be considered when making points about what the Record Industry will allow spotify to get away with. They own a lot of the shares at play here.

It's funny that you described it as less scalable, but proceeded to detail many great ways for the company to scale. Great ideas all around.

starting a new label would be a massive undertaking. maybe partner with Google and snag popular YouTube channel sign and distribute only within the Spotify ecosystem.

HERE'S THE PROBLEM: Spotify doesn't pay shit to artists. They will have to increase the level of financial contribution to artists if they take this avenue.

Actually, they pay way better than most other streaming services: https://torrentfreak.com/artists-think-instead-spewing-spoti...

Quote: “I can tell you that Spotify has made me about 30% more than iTunes, Pandora, Amazon, Xbox Music, Google Play, eMusic, Rhapsody, Rdio, Deezer, MediaNet, Simky, Nokia, and MySpace Music combined in that period. Even if you tack on my checks from ASCAP to that long list, Spotify is still ahead,”

It's fine if you're a huge artist like Beyonce, but I've read plenty of accounts from artists who bemoan Spotify's distinct lack of useful payout.

You get paid proportional to your plays, so even if you're a successful drum and bass artist, you're going to struggle to be supported by your fans via Spotify than via something like Bandcamp.

That's one of the reasons I went back to buying my music from Bandcamp/Beatport. I'll contribute significantly more to the artist than I ever would via streaming, and that's important if I like their work and want them to keep producing.

> Spotify doesn't pay shit to artists

I thought that Spotify didn't pay ANYTHING to artists. They pay to labels, who then pay to artists depending on their recording contract.

How is Netflix not at the mercy of major movie studios? Their originals, while popular, are not a proven business model. No tech company to my knowledge has proven that taking content 'in house' improves the bottom line, yet. Pandora attempted to get into tickets and I don't think that went well although I am not sure a true stratechery style analysis of that has ever been done to my knowledge.

I think a different interesting comparable is Uber. Both have really promising revenue growth stories, but (unlike Netflix) have no control over content/supply costs. For both Spotify and Uber ~80% of that gross revenue number goes straight to either record companies or driver commissions and rider subsidies. And the 80% does not diminish with scale.

Uber's 2017 gross revenue was 37B to Spotify's 4B, but the valuations are 50B to 30B. Think Spotify's valuation is a little overheated?

Spotify could do what Netflix started doing and produce their own music... Netflix used to be at the studio's complete mercy too.

Why has Apple not started their own label? They have enough cash to buyout almost any artist.

Maybe something to do with https://www.apple.com/newsroom/2007/02/05Apple-Inc-and-The-B...

I honestly hope they don't take that approach. One of the biggest benefits of spotify is that they have damn near everything. If suddenly music becomes fragmented across a bunch of different services (like video), spotify loses their value.

This seems to be an area where they are limited compared to Apple.

In my view, Spotify have pretty much "won" the streaming war. They beat Apple to the market with their streaming offering, and they have a good product that people love.

The one area Apple has Spotify beat is in its understanding of the music industry. Apple's acquisition of Beats seemed ridiculous at the time, but getting Jimmy Iovine on your side in a music war is like having Goku on your side in a Universe Survival Tournament. When you've got the likes of Jimmy Iovine and Zane Lowe committed to your cause, you're going to know how record labels work, how the industry works, and given that Iovine recently came out to say that streaming services are similar and need to diversify to succeed I'd be inclined to agree with him.

Apple have failed in the past by trying to make its music exclusive and by having artists on its payroll try to attack Spotify (to backlash on both sides). It makes me think that Spotify could wrap things up by doing what you say, but licensing its own songs equally to all other streaming services. Instead of doing what Apple did, promote availability by ensuring their music is played on competing services.

Of course, to do this Spotify will need their own Iovine, and that's no mean feat. They'd need world-class talent behind them to find musicians, produce them, and market them in the way that Apple potentially could. If Spotify can build that dream team and create their own means of production then, in my view, they've won.

And in Sweden, home of Spotify, the other big news is that NYSE raised Switzerland's flag.

https://www.thelocal.se/20180403/spotify-swiss-or-swedish-wh...

Mistaking Switzerland for Denmark is understandable, mistaking Switzerland for Sweden is just wrong.

They're basically the same country right? I mean their flags are both crosses and their names both start with Sw...

Not a mistake. It's a nod to the tax havens.

It's not even a correct Swiss flag. The Swiss flag is rectangular.

Maybe my perception is off, but it seems like we're getting lots of tech IPO's in a relatively short time. Stitch Fix, Dropbox, Blue Apron, Snap, and Roku to name a few.

For a long time we weren't seeing too many big tech IPO's. Did something fundamentally change in the market to lead to this, or did all these companies just happen to make it to "market maturity" around the same time?

Remember what the stock market charts looked like last time? Stockpile some cash, invest when it falls out.

Are blue apron and stitch fix tech companies? I thought they were just sending out boxes of stuff to subscribers, with a website/app for taking orders?

Is Spotify a tech company? I thought they were just sending an audio stream to subscribers with a website/app for searching?

Spotify is a tech company by all measures. Their core value propositions - recommendation engine, UI/UX, scaling responsive applications - those are pretty 'tech' problems.

And exactly the same can be stated for Blue Apron and Stich Fix, thus the point of my rhetorical question. Just because the two in question aren't as sexy as Spotify or Dropbox shouldn't exclude them from being considered a tech company.

I'd argue that the logistics of shipping perishable food is significantly more difficult than streaming an audio file, and recommending clothing to meet an individual's specific style/size/gender/budget is a lot more complex than applying publicly available [1] Netflix-style collaborative filtering to recommend music.

[1] https://www.netflixprize.com/assets/GrandPrize2009_BPC_BigCh...

Blue Apron and Stitch Fix aren't selling software/hardware as a customer-facing value proposition, so they're definitively not tech.

You definitely have to draw the line, or else every big company in existence is a tech company. Banks hire thousands of software devs.

Is E-commerce tech? Amazon has built out a ton of technology to scale their fulfillment operations and wouldn't be the company they are without it.

We are getting closer to the day where every company is a tech company. Marketing requires tech to do what is very complicated bidding and A/B testing. Most companies involved in sales are using CRM to understand how to better reach customers. This list goes on and on, as tech is embedded into everything people do these days.

That’s the point. Using tech isn’t what makes you a tech company, and never has been. Banks, airlines have been running cobol and what have you for ages.

When your product is software/hardware, then you’re a tech company.

Just so you know, 1.recommender systems != collaborative filtering. 2.RBMs are good only for certain situations like explicit ratings (where users provide direct feedback), its a really hard problem in implicit recommendations (which are most sites). See Bayesian Personalised Ranking Algorithm. 3. >I'd argue that the logistics of shipping perishable food is significantly more difficult than streaming an audio file. Thats exactly the point. I am not measuring hardness. But that looks a supply chain problem that a software engineering problem.

I used to work at Blue Apron...sending people boxes of perishables is actually a very tough problem to solve and there was extensive tech powering the warehouse side of things. We had a fairly large engineering team working on these problems.

At the end of the day who really cares what is and isn't a "tech company"? Every company has a tech aspect to it these days.

How's that different from, say, the logistics of grocery stores? Yet Wegmans isn't considered a "tech company."

Most grocery stores use off-the-shelf tech for this sort of thing; our business model made a lot of that not feasible and there was a decision made early on to build it ourselves, if anything because the tech we developed could have its own value down the line.

If Wegman's was writing software like this (maybe they do! I have no idea) then I'd happily consider them a tech company.

But like I said, it's a silly thing to argue about anyways.

I used Wegmans as an example specifically because Wegmans is known for doing a lot of their own R&D to improve their operations. I don't know if they write some of their own software, but it wouldn't surprise me if they do.

If your company is in SF and funded by VCs you are tech by default, otherwise you aren't tech.

It matters because of the multiples you get on the market.

> At the end of the day who really cares what is and isn't a "tech company"? Every company has a tech aspect to it these days.

Because the way a tech company grows and a non-tech company grows are very different. Nike extensively uses software but you wouldn't call them a tech company, because their growth is limited by sales of their apparel, which is a physical good. 'Real' tech companies aren't typically limited by the distribution of their product (other than scaling issues and the like). There's (generally) nothing physical produced so there isn't a resource problem - growth can be much greater and faster.

That's right, 'real' tech companies such as Apple, Intel, Samsung, and many others can sell as many products as there are bits streaming across the network.

Fair enough.

I'll add the caveat that the product they sell or use for revenue needs to be the tech they are developing. So, once again, Nike sells athletic apparel, and while they use tech to do so, I wouldn't consider them a tech company. But Facebook and Snapchat don't sell a product (other than user info) but depend on the tech they develop to make money.

It's a fine line, but I think we can see what might divide tech and non-tech companies.

Others have already talked about Blue Apron. The NPR podcast How I Build This released an episode on April 1 with the Stitch Fix founder, Katrina Lake which was quite interesting.

Stitch Fix has quite a team of data scientists working on their recommendation system. They typically send about 5 items per shipment, so they need to be very confident the 5 will fit, you'll like them, and you'll like the price.

With Spotify or Netflix, the user can browse around and can skip between songs or shows quickly. If their recommendation engine wasn't phenomenal, it'd still be a viable product. Stitch Fix typically has 1 shot per month to sell you stuff you care about.

> Did something fundamentally change in the market to lead to this, or did all these companies just happen to make it to "market maturity" around the same time?

One successful IPO will beget a whole raft of follow-ons in similar segments to profit from the 'atmosphere' as much as possible. Until the first one that bombs, then it is immediately game over. So there tends to be a bursty nature to this IPO thing.

Thanks. I don't follow IPO's too closely and was less than 10 for the .com bubble filled with IPO's. I'm still learning the general patterns.

This leads me to believe that a Hawkes process would be an excellent way to model IPOs.

I think they are dumping their stock on the public before the market takes a downturn. For most of these stocks the only way to go is down.

Snap is certainly fitting that pattern. Down 48% in the 13 months since IPO.

If the only way is down, no one would have bought at current prices.

If the only way is down, the price would have corrected itself to the down level already. So there is no only way down anymore.

The alarmist in me thinks there is a huge crash coming and companies are seeking to allow stakeholders to quietly cash out in the public markets. Given the numbers on some of these companies they definitely wouldn't be acquired for the amount they would want. An IPO while they're hot seems like a better yield.

Pivotal also filed their S-1, though I don’t recall any date estimates on that one.

My thoughts are after almost a decade of growth, the popular opinion (right or wrong) is we are due for a market correction. I think that these companies want to cash out at the top of the curve.

A decade of growth....?? Where were you in 2008?

How long ago was 2008? It's 2018, so about ten years. Now what's another word for ten years. It's on the tip of my tongue.

I said almost a decade

Take a look at the 10 year S&P 500 chart:

http://www.macrotrends.net/2488/sp500-10-year-daily-chart

It bottomed out in early March 2009. The period from March 2009 to right now can roughly be described as "growth." We describe it as "growth" because the overall movement is upwards. 9 years and 1 month is "almost a decade" because a decade is 10 years and 9 is pretty close to 10.

Getting in quick while they can. Surviving a 5 year down turn on borrowed money is challenging.

I just don't see how this can be a successful company long term. If the labels see any profit they will demand more fees at the next deal negotiation. To become music's Netflix they would have to produce their own music which people want to listen to, which is a lot easier said then done. The easiest route is probably to become Tidal and give the company away to a few big artists in exchange for exclusives.

Thats fair, but accessing free music is a lot easier than free tv. If they can get people to pay anything for music, thats at least better than zero for labels.

I think the music industry still isn't quite sure what to do about pirating. Seems their solution is "send spec-op soldiers to kick down doors of people in other countries" still.

More than likely it won't come to this. Most musicians want their music everywhere, and give it away for (almost) free. Spotify/radio/etc are the marketing, and concerts/festivals/movie licensing/etc are the product. Unlike movies, there's insane repeatability of music, meaning it can be everywhere.

I wouldn't be surprised, though, if less-popular tracks for artists moved to another service. You want to hear The Chainsmoker's radio singles? Play them non-stop on Spotify! But if you're a huge fan and want to hear back tracks, demos, etc, you can pay them $10/mo on a Patreon-like site. Basically, charging more for a closer relationship to studios you like, while their more popular music is released for free.

The equivalent would be to start their own label and sign artists. It's hard, sure, but not impossible. They have the same advantage Netflix did - an intimate knowledge of people's musical tastes and habits. Plus they have already shown willingness to diversify into other areas - merch, concerts, original shows, videos etc.

The thing is, Netflix now is very different from Netflix 5 years ago -- most of the content is the one they produce. Music doesn't work this way, many people just want to listen to old music while it's rare for people to rewatch old shows and movies. There are many albums I have listened to tens of times, and I don't think I have ever watched a film more than three or four times. If the labels pull the artists to make their own Spotifies, Spotify will be left with pretty much nothing, in a situation much worse than Netflix

>To become the music's Netflix they would have to produce their own music which people want to listen to, which is a lot easier said then done.

What Spotify has going for it is that indie artists can easily (or at least relatively easily) put their music up on Spotify, which bypasses the record labels. Now, not all of that music is going to be good but that is a way they are already bypassing record labels.

They could look at purchasing Bandcamp, which has done a great job of promoting and selling independent music.

Bandcamp lets me download lists of people who've bought my music and of people who follow my profile. This is because they understand the business is mine, and they're simply a service provider for that business. Even their subscription system runs right through the musician's own Stripe account, so you can always take your subscriptions elsewhere.

I don't have any reason to trust that a VC-fueled monster like Spotify understands this. If Spotify bought Bandcamp, I would remove my music from it.

VC-fueled behemoths like to make people dependent on them. I can't trust my business to a company that gets most of its money from outside investors instead of the people who use the service. Their incentives are fundamentally misaligned with my interests.

Apologies if I come across as harsh but as a consumer, I would prefer my consumption activities to remain as private as possible. In light of FB news, I don't think even some Options > Privacy Settings on Bandcamp would be sufficient since most people wouldn't do it. I hope Bandcamp is opt-in for this info.

It is opt-in if you pay for it, but almost no one leaves it unchecked. There's also the option to not require an email for free downloads.

Often these are people I've sent from somewhere else, and we talk regularly. It's not like with Facebook where it's a faceless corporation unless you're spending enough on ads to get an account specialist.

They generally knew me before they gave me money. I'm not collecting any data on them other than the email. I don't even run analytics on web pages I control. I wouldn't even know what to do with it that would tell me anything I don't already know, or that I couldn't get by just asking.

It's opt-out, I normally leave it checked, you get the option clearly when purchasing music/items. The artist can then send updates/you get follow notices, the volume is pretty low at the moment for me at least.

That's still generally seen as opt-in among marketing types, though I can understand the perspective where pre-checking the opt-in is a kind of opt-out.

Please dear god no.

Bandcamp is maybe one of the few examples of a service/shop that actually benefits artists and fans. Having them bought out by some VC tech behemoth will almost certainly see their offering ruined.

Off topic.

Bandcamp's site loooks like it was designed by a schizophrenic person.

A lot of music sites in general seem to prefer form over function IMHO.

Discogs.com is a notable exception of course.

>To become music's Netflix they would have to produce their own music which people want to listen to

Didn't Starbucks try something like that? I think it was called Hear Music.

Or purchase some existing labels. Warner, which is about 20% of the global market, was worth $3.3b -- 11% of spotify -- in 2011 [1]

If I read that correctly, it implies the bulk of the recording industry is worth less than Spotify.

1. https://www.reuters.com/article/us-warnermusic/blavatniks-ac...

People tend to overestimate the size of the music and movie industries, apple and google could buy them outright with change from their couch cushions.

What that says about Spotify's valuation is another thing

This is something that has been bothering me. Doesn't it seem like stock prices are getting out of whack?

Yes although this mostly just applies to consumer tech companies.

Nearly all companies I’ve researched on the exchanges have historical highs going back a couple years. This is across multiple industries (tech, utilities, real estate, grocers). It’s a significant trend. As for whether it’s substantive (ie not likely to correct), well, I’ve seen many economists suggesting a correction “soon” for years.

The more worrying thing is the consumer reports I’ve read. They said people aren’t saving money in 401ks, nor even savings accounts. This could indicate high confidence in the market. Or, it could indicate a lack of income to save. I’ve read reports indicating the later and not the former - specifically reports of people working multiple jobs to afford the basics.

If that’s the case then luxury goods and services should be commensurately lower valued. But they’re they are not.

With a decade of low interest rates, people have been investing in the stock market hoping for a better return on their capital.

At some point all bubbles burst.

There aren't enough IPOs and companies to invest into, so the public markets are chasing anything they can get their hands on. Do these companies have value? Absolutely. Is the demand arbitrarily high because there's supply? Absolutely.

Meant to say "because there's limited supply"

Yeah, that makes sense I suppose. I just don't see the growth path for Spotify. Yeah, they have an excellent music service, but whats next?

Edit: and I as about growth, because I don't see how Spotify is currently worth 30B.

*ask

Apple and Google could, but I doubt Spotify has a few billions around to make any acquisition.

Well, as of today, one could seriously consider an all-stock acquisition and the numbers probably could be made to work.

That would be fun to watch if they tried.

I would not be surprised if the long term goal is to not just produce but to be THE market place for all music. They already promote tickets to concerts, why stop at promotion, they could easily displace ticketmaster, and with ticketmasters lack of goodwill I am sure lots of people would be happy for this to happen.

Start off by offering no fees for Spotify Premium members. Charge the event organizers the fee, or take it as a loss leader initially. The value add of Spotify is an unique avenue for promotion (e.g. visual displays of upcoming concerts when playing similar songs, which users are unlikely to see as intrusive ads).

> To become music's Netflix they would have to produce their own music which people want to listen to

Which would make them (like Netflix) one exclusive content provider (potentially among many) which is fine for them if they can get good content, but not great for users who may find music fragmented like streaming video. The great thing about Spotify now is that they have access to nearly everything. Netflix has a decent streaming library of TV series, but their movie archive is terrible compared to the red envelope DVD.com option (or Blockbuster in its prime). It would be a shame for that to happen to music, too.

The goal is to make the labels need them too. Plenty of people just won't listen to music if its not on spotify.

The labels have a large stake in Spotify. Your assessment misses this crucial fact. Getting into the production biz is still an open opportunity, though.

> According to Spotify's F-1 filing, 85 per cent of their streamed music is owned by the three major labels -- Universal, Sony and Warner -- and Merlin, a network for independents. The major labels also hold a sizable equity position in Spotify, as much as 18 per cent back 2009. This gave Spotify some help when it was renegotiating licensing deals last year. [0]

[0] https://ftalphaville.ft.com/2018/03/26/1522056334000/Canvass...

I'm not quite clear on why people are choosing spotify over google play music - to me the google option is superior in UI and offerings (including ad-free youtube).

Am I missing something? Is it just one runs better on iPhones or is more hip (like why people choose snapchat over instagram or something)?

It's the music discovery aspect of Spotify that is their game changer. They are constantly adding new ways to find new music.

Google Play has good options for music discovery too... I stick to them mostly for their "Radio" option which is very good at selecting music similar to a song I'm listening to.

That being said... I've been underwhelmed by the app's UI and performance and have given frequent feedback but haven't got any response and there has been no changes. Typical of Google... Its been so bad that I'm considering switching to Spotify soon. Its really annoying when you're trying to select some romantic music for dinner with your partner and the app keeps refusing to work.

Yea the radio features are pretty cool!

Another thing I really enjoy about spotify is their app's ability to pause a song on my laptop at work and press play on my phone when I get in my car and the song picks up right where I left it. And the remote control functionality during parties is great. They're also experimenting with some "auto-DJ" features which don't do too bad of a job for an algorithm :)

Spotify is a music company, they care about it in a way that I don't think Google or Apple cares, this reflects on the dedication to the core of their product.

For me it's:

- Better discovery

- Much cheaper (150kr/mo for 6 subscriptions, vs 100kr/mo for one with GPM)

- A desktop client (even if it's a crappy electron one)

- YTRed isn't available here anyway

Nitpick, but Spotify isn't an Electron app, it uses CEF [1].

[1] https://bitbucket.org/chromiumembedded/cef

Spotify was first for on-demand streaming in the modern era, even before Google or Apple Music. Its radio/recommendations are better than Pandora, and I haven't tried others.

I think Spotify's UI is fantastic, and its multi-device awareness is functional and intuitive. To your point, Google does have ad-free Youtube, but the ads don't bother me enough/I don't watch enough Youtube for it to impact me like it does with music.

Finally, I like diversity sometimes; giving not-Google money is a plus, all other things being equal.

> Spotify was first for on-demand streaming in the modern era

I guess that’s true if you define the “modern era” as “starting with Spotify”.

Help me out, I genuinely can't think of a music streaming service that came before Spotify.

I vividly remember being blown away by their product when it came to market. I remember because I had never seen anything like it and literally didn't believe it could be done at that time. I was waiting for a train and could just search for any song and play it right away from my phone, no downloading, no waiting, just instant music. I was very sceptical beforehand but was instantly sold.

Did I miss another service that did something even remotely similar before Spotify did it?

Pandora radio started in 2000 : https://en.wikipedia.org/wiki/Pandora_Radio

Myspace was a popular way to share music, if limited.

Youtube, again though this doesn't fully fit the definition.

Anybody know about soundcloud? I know I was using that before I heard of spotify but I'm not sure if it came out beforehand.

Pandora wasn't on demand until very recently. It was "station only".

Myspace def. was limited and didn't have full catalogs of all music in any scope approaching Spotify.

Youtube is video that has music, and can't be conveniently used on mobile or used for music discovery explicitly.

Soundcloud is actually the closest to what I meant, but it obviously isn't used for record-label music distribution en masse.

> Youtube is video that has music,

True.

> and can't be conveniently used on mobile

I disagree, but that's highly subjective.

> or used for music discovery explicitly.

It can be, but the YT Music app only was launched in 2015.

Spotify was light years ahead of Pandora when it launched in Europe. I used to VPN through Europe just to use Spotify before it launched in the US. It was a popular work-around for the tech literate in the US circa 2006. People went nuts for the service, though the cachet of it being difficult to access may have helped.

Spotify launched in 2008. Rhapsody launched in 2001, then added content from major labels in 2002.

I previously used (and really enjoyed) Rdio, which launched before Spotify came to United States (2010 vs 2011). But Spotify was around before that in Europe.

I define modern era as "doing anything approaching what spotify does regarding playlists, on demand music and discovery".

I was a longtime user of Google Play (Songza before that) on iPhone. I loved the playlist but the app was incredibly buggy. I was using the free version so I had ads. Often the ad wouldn't play and then freeze all playback, or the ad would play and then the music wouldn't start again. This made me very hesitant to pay a monthly subscription.

I've switched to Amazon Music (free with my Prime membership) and although the app works well, the curated lists aren't as great.

My point is that maybe other people have started with the free Google Play (Music?) app and had the same experience and looked for options elsewhere.

I've recently tried out every major service: Google, Spotify, Apple Music, Tidal, and Amazon Prime.

They are all insanely buggy. I was a Spotify user for about 6 years before this and it was buggy, and is getting buggier as far as I can tell.

I've only been using the Amazon Music for a few weeks now but I haven't encountered many bugs. It just doesn't seem overly feature rich. Although the one very annoying thing I have encountered is that my Alexa device doesn't seem to have a list of all of the possible Playlists. For a time, there was one called "Top Prime Hits". I could play it on my phone, but when I asked Alexa "Play Top Prime Hits" it couldn't find it. I now have to pair my phone, play it on my phone and set output to my Alexa. Seems to defeat the purpose of voice with Alexa.

Also, I think there might be something in diversifying the companies you use online. It's a bit scary how much of ones life is wrapped up in about 5 companies these days...

Google know enough already!

As someone who just made this choice, let me add some insight.

- My friends use Spotify

- Larger library

- Well made playlists

- Social feed

In the end, they are very similar products. I feel that Spotify has a huge head start on Google here, and it shows. The more mature product is Spotify. I think Google can't really compete in terms of curation and popularity.

Really, the edge cases of "music that is not on Spotify" ends up being so small that Google's upload your own music feature doesn't tip it in their favor. At least in my eyes.

Larger library? They all use the same base library afaik.

I thought this as well. I used both for a while and never found instances where spotify had a lead.

Spotify "Over 35M" [1]

Google Music 40M [2]

Apple Music 45M [3]

[1]https://press.spotify.com/us/about/ [2]https://play.google.com/music/listen#/sulp [3]https://www.apple.com/apple-music/

Are there any specific artists that you've been able to find on Spotify but not on GPM? I haven't run into this problem yet (except one time when Mick Gordon maybe forgot to renew or something his Wolfestein soundtrack? It was fixed within a week though)

I am friends with several small music publishing groups (I hesitate to call them record labels) and every artist is excited to get their album up on Spotify...and that's it.

Many of the self publishing activity that Soundcloud was/is famous for has moved over to Spotify.

New releases from smaller acts seem to be Spotify FIRST right now.

Yep, playlists are one of the reasons I use Spotify. The fact that you can search other playlists that other users made on Spotify and easily get curated lists relating to every genre makes the entire experience very nice. It's nice to just type in a genre or mood and get hundreds of playlists that fit the bill.

For example, I like some noir movies and the jazz within that genre. There isn't a specific genre that most music playing devices would realize but Spotify has lots of user made playlists that has the type of music I want. Compared to Google's lackluster results

https://play.google.com/music/listen?u=0#/srst/noir+jazz/EAY

I don't really think that iTunes or Google Play has the same thing, I may be wrong though.

Can you give an example of the larger library?

Yeah I like the social feed. Wish you could get to it on mobile though.

GPM has a lack of some international artists.

This Taiwanese artist is on Spotify but not Google Play Music.

https://open.spotify.com/artist/2JBUyLiFvpFPWdZGqIGYLD?si=uq...

https://play.google.com/music/listen?u=0#/sr/crowd+lu

Nothing except youtube, but that's just cheating.

Same with this one.

https://open.spotify.com/artist/0tNjyz75Px29Yuf1sjs25G

https://play.google.com/music/listen?u=0#/sr/cosmos+people

Google Play Music has Jay-Z, as far as my research shows. (unfortunately I can't check as I have Spotify due to their network affect roping me in through a family plan) Is it really fair to say Spotify has a bigger library outright?

Spotify claims to have 35m songs and GPM 40m. Not that that means much, either. The killer feature GPM has over Spotify is that you can upload your own tracks to fill the gaps wherever their library is lacking.

Spotify has Jay-Z as well.[0] I would say it's hard to really quantify which library has the larger selection as most of the differences would be completely obscure music that no one listens to. However, I haven't seen any artist on GPM that isn't on Spotify while the opposite can't be said.

Spotify has the ability to upload music as well, however that is contingent on you having premium.[1]

[0] https://open.spotify.com/artist/3nFkdlSjzX9mRTtwJOzDYB?si=j1...

[1]https://community.spotify.com/t5/Desktop-Windows/Can-you-upl...

I'm not going to dig around for metrics on this, but my intuition is that Google covers a larger base of "established" musicians whereas Spotify seems to be dominating new releases from smaller artists.

Google Music, Pandora, iTunes, are seemingly there to cover bases. The momentum appears to be towards releasing your music on Spotify first for your friends to listen to.

>"Larger library"

Uhm no they are all licensing the same content from the same 4 entities.

I use Google Music on an iPhone and iPad with a Chromecast Audio at home and could not be happier with the setup.

Across all platforms Spotify is consistently pretty good. I didn’t feel the same way with Google Music. The UI and performance would be problematic sometimes. The no YouTube ads is nice.

Some people on HN like areas especially might care about diversifying who they give their money and/or attention to. Spotify has an advantage there too.

I use both, and am in a gradual transition to GPM. However, I keep Spotify around because:

* My TV has spotify and not play music. I could get a Chromecast but why? * Spotify exclusives are still a thing. * The daily mixes are still better than anything Google has for recommendations. It's surprising google is as bad as it is for music recommendation. * Google keeps things close to their chest for popularity. I like knowing if an artist's top song is 100 times more popular than their next, for example, or how many people follow a playlist. Spotify lets me know who runs a playlist, whereas that's hidden for GPM.

(Spotify has moved closer to their own playlists, which saddens me a little. I always hoped there would be room for curation from personalities. I miss DJs.)

I use Spotify because it works on my TV and PS4 whereas GPM does not. I would happily use GPM but I don't want to buy new hardware to do so.

I use GPM, but that's because of the bundling with Youtube Red. I would prefer Spotify for a desktop app, nicer looking UI IMO, and so Google doesn't know my music prefs. But for now, ad-free YT is too nice to give up.

What operating system? I found Google Play Music Desktop Player to be pretty awesome (although it's just a browser underneath but it has much better integration with the rest of the system through themes, media keys) also native last.fm, lyrics, etc.

https://www.googleplaymusicdesktopplayer.com/

- Spotify’s UI is much cleaner IMO

- Better iOS app

- Native (well, Electron) MacOS app

- Playlist folders - niche feature but a big one for me

- Amazingly good music discovery on Spotify (not properly compared with Google but they get it so right a lot of the time even for niche genres)

I do wish Google Play could address some of these (most of all playlist folders! big one for me and how I organise music) as I do love the ability to store your own music along with cloud music that GPM gives, and it would be enough for me to switch with just a couple of changes.

Google's service was late to the party and feels like an afterthought. And Google has a pretty big history of shuttering products that don't get big, so I wouldn't want to trust to keeping my music there. (Spotify could of course fail, but is unlikely to stop offering a music service short of them going bankrupt).

I tried Google Play Music for a time, kept having trouble where songs would stop playing in the middle. Sometimes it would stop playing one song and skip to another track, other times it would just stop playing entirely. I don't want to hunt down the app and try to massage it into playing the song I want, it just needs to work, which Spotify gives me.

Amongst many of the other things listed by others here, a big item for me is integrations between all your logged in devices. One killer example: I can listen to a playlist through my ps4 while gaming (a unique feature in of itself), pull out my phone and pick another song in the playlist on my app. It tells me just below the play button where the music is currently streaming.

Spotify has one mission: music. They do it really well. Google has a hundred hands in a hundred industries and only do a few of them very well. Google could shut their music service down for no reason at all. Spotify on the other hand has just gone all-in on ensuring they are a lasting institution.

In the same light, Spotify is incentivized to crush the music app space. They need the best UI, the best discovery experiences, etc... whereas Google’s product is like the rich family that funds their son’s strange lifestyle business: It can live or die and the world keeps spinning. They do not need to innovate or be better... and they really aren’t.

My wife used Spotify before we met. My sister uses it. My step mom uses it. All my buddies use it. I can count dozens of people around me that use it. It’s almost becoming a verb now: “Spotify it”. On the contrary, I only know one or two diehard google fanboys who use their music product.

So I guess at the end of the day.. to answer your question, yes you’re missing something!

That’s true for most things. While everyone thought Google Drive or One Drive or Some other drive company will kill Dropbox because making syncing storage isn’t rocket science, they were wrong.

A nimble team of people focused on solving one core problem, whose entire livelihood depends on it working well, triumphs the giants.

We can assume Microsoft and Google has enough middle management that they’ll fk it up along the way for sure. Too many agendas and failure doesn’t mean much.

Therefore it’s in the best interest of giants to acquire companies that fit their mission and scale them with their marketing power. YouTube, Android, docs, are all good plays by google.

I hate that we've managed to fragment the tech markets again. Various websites I visit have exclusively Spotify or Apple Music playlists embeded, nothing modal that can be imported anywhere else.

Those websites will be looked at one day the same way we see Java and Real Player plugins today.

> I'm not quite clear on why people are choosing spotify over google play music

Simple answer: I'm a tech literate person (I read HN and a dozen other sites) and I hadn't even heard of "google play music" until now.

So that's one reason.

The other is likely that Spotify is pretty aggressive with marketing here (Sweden). E.g. get a phone contract and you get a year of spotify etc. But the most important reason is probably that after manty years on a product you get some lock-in. Now I wouldn't switch if the product was 10% better or if the price was 10% lower unless many of my friends switched and I could also port all playlists etc.

I like Google Play Music, a lot, but:

    - Google. Privacy.
    - trying to shove the Android/Material UI on iOS, such
      an impedance mismatch... I *hate* that.
    - no dedicated client on desktop (so, no offline mode)
    - the UI in the browser sucks (again, alien, and basically
      *negative* information density if it could be so)
    - uploading/downloading is a crapshoot[0] with official tools,
      and the API is unofficial so hacks[1] may be short-lived.

So, again, I like GPM (and GPMAA) a lot, but only on Android.

The only thing I miss in Spotify from GPMAA/Apple Music+iTunes Match is the digital locker for seamless syncing of music I own.

FTR, despite having a native UI and digital locker, I moved from Apple Music to Spotify because discovery and reliability were terrible.

[0]: official tools behave similarly to this: https://github.com/simon-weber/gmusicapi/issues/140

[1]: https://github.com/lloeki/ruby-skyjam

Assuming that a Google Music PO reads this thread:

--Spotify's ML features are way way way way way way better than Googles --Everybody else uses Spotify, which means I can share it

The latter is obviously the thing Google won't win, so shouldn't try

Google Music has superior UI? SMH.

In any case, I switched to GPMAA when it was launched and had the $7.99 a month rate locked in.

Then, GPMAA started adding tracks to my playlist, etc. at random. No, Google, I don't want your suggestions to be auto-added to my collection. I simply want to listen to what I want to listen.

I want to get away from Spotify but there are no better options. Amazon Music seemed promising for a bit but their catalog isn't as comprehensive and their app is just wonky. E.g.: the app won't sync / display song time when streaming over Bluetooth to my car audio. Deal breaker for me.

Maybe they have enough capital now to adjust the Discover Weekly algorithm, which provides a weekly recipe of 30 songs that have no basis in what I listened to or have in my playlists. I do get to discover Millennial sleepily-singing voices to a disco beat and a 'laid back' riff that promises to stay in the background (thanks to a faux garagey sound). Is that what Indy means?

For pre-selected music that I listen to frequently, I use playlists with Spotify.

For truly discovering music with algorithms that work, I use Pandora.

I do notice there is NOT a lot of overlap at times, due to bizarre licensing restrictions and deals.

And I can only say that Discover Weekly and the Daily Mixes are absolutely spot-on for me.

It works great for me when I'm not experimenting. But if I listen to an album of a genre I don't normally listen to my next weeks playlist gets pretty spoiled.

You can switch to a private session if you don't want to affect your recommendations, just a heads up.

Woah. Thanks for pointing this out; never thought about that.

I am a closeted hobbyist musician in a rather small niche (contemporary christian music in Spanish LOL)but I don't want to live off my music. I just want to be heard by somebody. And today, trough distrokid plus spotify this is sooo posible. Which wouldn't have been in my wildest of dreams 20 years ago when I wanted to start a band with my friends. Or even 10, when I toured with a small time ska band. And since my goal is being heard and not profit I would be glad to pay for listeners.

And I don't think I'm the only one.

> a rather small niche (contemporary christian music in Spanish LOL)

I would have expected this to be a very large niche? How do the Latin American / Spanish markets treat Christian music?

Well, at least in Mexico there is no christian radio nor a big christian music industry (no Top 20 charts or any of that). So that means touring and doing the old church pilgrimage and hoping that your style of music isn't offending to some people. The chances are bigger if you land a ministry on a big church but that's not my case.

How do people find your music?

They don't.

Well, I have only released a single and plan to release an EP later this year and I'll figure out what to do. I'm thinking Facebook ads since I figure there's where my audience will be, but I don't really know.

I wish I was more photogenic so I could do the YouTube thing but, alas, I'm not.

That's where I think Spotify comes handy, because it has helped me to discover awesome artists that I wouldn't otherwise and I wish it could do the same for my music and other small artists.

People have been able to listen to music over the Internet for about twenty years at this point. Why do you think you can only do it with Spotify?

I don't know, I'm just a happy user of Spotify. Distrokid allows me to publish on every platform with a click, most of which I have't used.

And from the big ones (Apple, Google, Amazon) I feel like Spotify is the most motivated to make the music thing work. I think discovery is the key here. For the others is a small side hobby.

And also you'd be surprised by the digital music scene in latin America. Most people still fill their android devices with pirated music. Spotify is one of the cheapest legal option.

I doubt the current $150/share is sustainable given the waste, fraud, abuse, and royalties. I'm forecasting a wave of layoffs before next quarter's earnings. I'll concede the product is good and the UX is nailed. There just isn't enough innovation or growth to support the need for 5000 employees. Those of you who were users of the product 5+ years ago. How much has really changed? None of the recent acquisitions have provided any valuable gain to the company's core competencies. The company culture is a shell of what it once was, with a leader of HR hellbent on neutering the minds of employees to hire unqualified -but- DIVERSE! candidates.

>"waste, fraud, abuse"

Please give credible examples.

I personally have supported them since beta (when they charged more) so I will probably pick up a share or two. They are certainly worth NFLX money. Music is insanely easy to produce, it is certain they will start courting artists directly, and if they can find an acquisition that fills the DIY punk music scene that was Soundcloud they will be just fine. They need more DIY content to go along with the curated big label stuff. And by DIY I mean letting every small Bandcamp DJ and artist on there. Might as well swallow everything right?

The experience on the platform was always stellar and just keeps getting better the more data they collect. It's a good example where big data isn't creepy at all, it's amazing. They constantly filter my preferences and show me the key types of songs I like to listen to, impressive in itself but the song radio aping Pandora is also impressive and way more interactive than Pandora itself.

Basically I'm mega bullish Spotify and am not even going to front like I'm not. You don't need to buy it but I doubt it goes anywhere bad. /end-activist-investor-rant

You don't mention The Beatles, Led Zeppelin, and the 100's of other artists that Spotify streams millions of times. I feel DIY punk music and music that is "insanely easy to produce" is not going to make much of a dent in the massive demand for the classics/popular bands. Also, as a musician of 20 years having recorded multiple records, I don't agree good music insanely easy to make. The plethora of mediocre music out there is not good music, it takes a lot of skill and equipment to make something sound good in the studio. Sure, maybe some folks want a DIY underground sound that's not polished, but the average folks out there want a clean sound, that's what sells/drives listens. Just go on the Top 100 spotify playlist, there's basically no DIY stuff on there, its all the poppiest of the pop, heavily produced.

Do the young really care about the back catalog anymore?

I'm not just being snide. Think about Elvis. When was the last time you heard something from Elvis on the radio or in your stream?

It's definitely a sliding window. Elvis is not so important but stuff from the 1970's to the 2000's remains popular with kids.

Heuristic: parents pass on their teenage music preferences to kids but don't pass on their own parent's teenage music preferences to their kids?

I'm as bearish as you are bullish. Spotify is getting squeezed with record labels on one side and Google/Apple (now at 38M subs compared to Spotifys 71M subs) on the other.

I also do not think the Spotify situation is anything like Netflix. First, Netflix is an add-on service for most people that compliments other video services. OTOH, few people will have multiple music streaming services. This leads to a few issues for Spotify:

1) If Spotify starts its own label, and the other labels pull their music in retaliation, Spotify is done.

2) Back catalogs and current big name artists/content is a must in music streaming - a completely different situation than Netflix was ever in. DIY punk will not carry Spotify, neither will becoming a niche DIY label.

Given Spotify's current loses I just don't see how they turn profitable. Can Spotify turn the 90M non-paying users into subscriptions?

The old ways are going away.

Where is the relevance of the label system now that producers can master and release tracks directly digital with no pressing time at all? Gucci Mane is great example of a hugely popular artist who released track after track as fast as he could grind them out, for years (decades now! go count how many mixtapes the guy has made). This is the new normal, hyper creativity and high speed production. Pop cylces are like 100x as fast. You're telling me some old white dudes in suits can A&R faster than teenagers can hashtag and invent there way into new genres and music with their laptops. Yeah right. Dinosaurs.

It was dead with Mp3s and the internet and it's just still gasping along like all the old media giants. Smaller and smaller labels are able to survive these days, finding more and more niche audiences. Music has gotten more diverse in the last 17 years and you can tell. Genres launch and burn out in months now, or develop a cult fan base and continue on for years (ICP still tours this is like my perfect example of trash that still has fans).

I'm not saying Spotify is the king but people using "the labels" as a threat, come on, we all know what disruption means. Bandcamp and Soundcloud and even Youtube have runaround the label system.

The one thing I'll grant you is that maybe subscription fees aren't enough to keep the infrastructure going. This is possible. But the big pile of data is certainly worth something now and in the future, and the ability to scoop trends might be the sword that tames whats left of the big labels monopoly.

Labels control the back catalogs, other than that I agree with you that the old ways are changing. The problem is nothing you said gives Spotify some unique advantage over Apple on the streaming side or something like cdbaby on the publishing side. Spotify can't just be some 'small' label and survive, and I'm also not sure what artist only wants to be on Spotify.

Music streaming has been completely commoditized. It's an add on feature to both major phone software makers. What can Spotify uniquely bring to the table that will give it the money to survive?

So, I'm part of a secondary market. I was looking at their valuation in November and considered picking up some shares, when insiders / investors were selling shares at a $15bn valuation. Now they opened at $30bn.

Where did the increase in share value come from? Just the liquidity of going public?

Spotify Revenue (Euros)

2017 4.09 billion

2016 2.95 billion

2015 1.94 billion

Net Loss (Euros)

2017 1.2 billion

2016 539 million

Impressive revenue growth, but I can't understand the valuation given the losses.

I love their product though.

The value, well it is "investor demand"

The going public part -- well that was foretold with their last round of financing (it was a condition) and this was a strange way to do it.

You may love the product but will it last is the question. If I were going to bet I would say that 5 years down the road someone buys it for pennies on the dollar or it goes bankrupt due to toxic debt.

I wonder what the short position is on it.

> this was a strange way to do it.

This was done partially because the company itself isn't raising money. If the company executives believed they would need a large cash cushion, they would have tried to raise some cash in the deal, so they must believe they can reverse course before the cash crunch

It wasn't about raising money - they had their hand forced by the last round of debt/equity deal that they did:

https://www.recode.net/2018/1/3/16847786/spotify-tpg-tencent...

Not that it is a great article but honestly that looks like a very messy transaction. It also looks like Spotify got the raw end of that deal. The whole thing is just crazy and I'm not sure how anyone can make sense of those numbers.

I know they didn't go through a traditional IPO model, but from what I understand there's always a certain amount of days imposed by the SEC to restrict short selling on novel securities.

Found this idea interesting and looked into it and found this:

https://www.investopedia.com/ask/answers/05/062905.asp

Looks like it's allowed, but difficult

Also if I remember correctly, an increasing share of the losses are financing costs.

They're not operating as a sustainable business at this point. They will most likely need the VCs to continue throwing money at them.

Who knows, maybe it'll work. I personally wouldn't bet on it though.

30 / 4 = about 7x ARR. That's a very high SaaS valuation multiple, but not ridiculous vs comparables like loss-making Salesforce (9-10x).

Spotify presumably is being valued like this because investors are betting that their strong customer growth will allow them to find new ways of generating profits - such as signing their own artists directly to cut out license fees, much like how Netflix started funding their own shows.

If customers were unsatisfied with Spotify, then their churn would be higher - for instance defecting to Apple Music, which by many measures is "better" because of Apple's heft and reach into their devices.

Should be noted that those are gross revenue numbers... ~80% of their gross revenue goes to the record companies and that percentage is constant as Spotify grows (i.e., there's no economies of scale to it).

It's similar to Uber, who had $37 billion gross revenue for 2017, but pays out 80% of that in driver commissions and additional subsidies to riders and drivers.

Seems like a problem for both industries; they'd need to hit insane scale (hard in music streaming for Spotify to 5x) or take control of the content/supply base to hold down costs.

Can it be a problem for Spotify that it will be hard for them to increase the revenue they extract even from the most loyal customers? If streaming music becomes a commodity and price sensitive people switch to competing services what will happen? Some companies like Apple are in nice position, because they can just sell more stuff to the loyal customers. Phone, pad and watch instead of just phone. And then more expensive variants of these.

Is there something Spotify could do to differentiate, something that matters even for those who don't value the sophisticated playlists? Should they go the Netflix route and start producing their own music? Or would it make sense to produce some other audio content? Think programs like "Serial" [1]. Or maybe some radio drama [2]?

[1] https://serialpodcast.org/ [2] https://en.wikipedia.org/wiki/Radio_drama

Streaming music kind of already is a commodity and the main thing that keeps users tethered to a service are playlists. I'm sure Spotify could eventually raise prices a bit but obviously only so much.

I think their biggest threat would be Amazon getting their music service in order and baking the current paid version into the cost of a Prime membership.

Contrasting this offering, where there were no underwriters and things proceeded spectacularly, with the Dropbox IPO, where the underwriters added negative value, speaks profoundly to the future role of private markets in the capital markets for technology companies.

Disclaimer: I bet my career on private markets supplanting public ones, in respect of certain technology companies, many years ago.

I don't get this argument. Don't the underwriters provide an obvious service that will always have utility for some private companies: risk management?

My understanding is that the underwriters are gatekeepers, not risk managers. If your stock underperforms, you have to pay them back, but if your stock over performs, they keep the extra.

In theory the service they provide is valuation, but in this day and age of instant information, that really isn't necessary anymore. Back in the day when it took a few days for a person to execute a trade, maybe they provided valuable insight, but now, with stock trades for retail investors taking seconds from "I want that" to "I have that", they don't really have better information anymore.

> My understanding is that the underwriters are gatekeepers, not risk managers. If your stock underperforms, you have to pay them back, but if your stock over performs, they keep the extra.

That's typically not true. The underwriter isn't guaranteed the difference. They're basically an insurer: the company is able to know (before the IPO) exactly how much money they can expect to make on it. In exchange for this certainty, the forego the potential upside (the chance that the opening price will be much higher, in which case the company is leaving money on the table).

In this case, Spotify isn't even raising any money (because this is a direct listing, not an IPO), so there's no point for underwriters, because... well, there's no uncertainty about how much money they'll be raising, since they're not raising any.

That's what I thought too, but someone from the investment banking industry corrected me the last time I said that, and pointed out that "banks never lose money", and that the company does eventually have to repay them.

Underwriters aren't gatekeepers by definition, because there's nothing preventing companies from foregoing underwriters. But almost every single company that goes public chooses to[0], because they gain significant value from the process.

There are a few exceptions - Google is the most famous one. But they're rare, and even Google ran into trouble with theirs - they literally had to cut the size of the amount they raised in half about a week before the IPO, because the demand was lower than they thought, and then ended up leaving a lot money on the table.

We forget about all of that today because Google is now a successful public company. But their IPO was unambiguously a disaster from the company's perspective - they would have raised much more money with a conventional process.

> That's what I thought too, but someone from the investment banking industry corrected me the last time I said that, and pointed out that "banks never lose money", and that the company does eventually have to repay them.

No, that's not true. If the IPO is undersubscribed, the company isn't liable for making the bank whole. If that were true, then yes, there would be literally no reason for a company to use an underwriter, because there's no requirement to.

> because there's nothing preventing companies from foregoing underwriters.

Isn't that like saying "there is nothing that prevents you from using highways"? Like sure, you don't have to use an underwriter, but, as you pointed out with the Google example, it won't go well for you if you leave them out.

> Like sure, you don't have to use an underwriter, but, as you pointed out with the Google example, it won't go well for you if you leave them out.

Well, the original claim was that underwriters provide negative value. There's a tradeoff, but clearly they do provide positive value, on net.

> If your stock underperforms, you have to pay them back

You're referring to the greenshoe [1].

Suppose a company is selling 100 shares at $100 per share. The underwriter will collect orders for 115 shares at $100 per share. This puts them in a natural short position.

A greenshoe lets the underwriter buy up to 15 additional shares from the company at $100 per share. If the price goes up to $105, they exercise the greenshoe. They buy 15 shares from the company at $100 and deliver them to the buyers to whom they sold shares they didn't have. If the price goes down to $95, they buy those shares (leaving the greenshoe un-exercised) and deliver them to the buyers to whom they sold the shares at $100.

[1] https://en.wikipedia.org/wiki/Greenshoe

> I don't get this argument. Don't the underwriters provide an obvious service that will always have utility for some private companies: risk management?

Yes, and furthermore, the Spotify listing is anomaly in a lot of ways due to the idiosyncratic terms under which they raised money previously, and the fact that the major labels (who are their primary vendors) had ownership stakes in them from the very beginning.

In IPOs, companies raise money, and underwriters serve as insurers to guarantee the amount that the company will raise. But Spotify isn't even raising any money today! They're just providing liquidity for existing shareholders. That's dramatically different from IPOs, so of course the underwriters are superfluous for this particular case.

I don't think it makes sense to generalize anything from Spotify, but certainly not the role of underwriters.

Well, that and aid with the capital raise. In this case, my understanding is there wasn't a capital raise so much as there was an opportunity for existing shareholders to liquidate their positions.

Edit: yep.

> The digital music company isn’t selling its shares on the stock market, meaning the company isn’t raising any money today. Instead, the event known as a “direct listing,” is a collection of transactions from existing shareholders (like employees and investors) selling shares directly to stock market investors. It took a while for the market makers to sort this out.

> In this case, my understanding is there wasn't a capital raise so much as there was an opportunity for existing shareholders to liquidate their positions.

Yup, Spotify was under contractual requirements to go public, due to the terms of their last fundraising round (or else they had to pay incredibly stiff penalties).

Underwriters serve a role for most IPOs, but Spotify is different because their listing wasn't about raising money - it was about fulfilling their contractual requirements to provide liquidity on public markets so that they could avoid the penalties they would otherwise face.

> Spotify was under contractual requirements to go public, due to the terms of their last fundraising round

Spotify was under obligation to do an IPO. Part of the motivation for this structure was avoiding that penalty language.

> Spotify was under obligation to do an IPO. Part of the motivation for this structure was avoiding that penalty language.

To be specific: they did a DLP, not an IPO. Underwriters make sense for IPOs, because the company is raising money. There's no point to an underwriter in an DLP, because the company isn't raising money.

They were not under requirements to hold an IPO; they were required to provide public liquidity to their shareholders. That's why they chose a process that involved no underwriting. And that's also why their case doesn't really provide any generalize lessons, because those types of terms are incredibly rare in growth-stage venture financing.

> They were not under requirements to hold an IPO; they were required to provide public liquidity to their shareholders

No, their SHA specifically said they paid penalties if the IPO happened after a certain date (roughly speaking). If no IPO ever happens, no penalty is owed. It's cheeky, but apparently it works. (In any case, nobody will sue after today's performance.)

> Don't the underwriters provide an obvious service that will always have utility for some private companies: risk management?

IPOs have (a) companies issuing stock, (b) private investors selling stock and (c) public investors pricing an asset never before continuously priced. All this happens simultaneously. If the ball drops on one, it drops on them all. Underwriting is a good way to manage that risk.

Private markets challenge that simultaneity. Instead of selling into the IPO, companies can sell some in the private markets and some after going public. Instead of having every insider sell on opening day, they can sell in private secondaries and then after the lock-up. That leaves element (c) isolated. That's difficult--Spotify still hired bankers--but it doesn't need underwriting.

Another way to look at it: three services were bundled into the traditional IPO. Bankers charged richly for the bundle. Private markets give companies the option, to dis-assemble the bundle and price and time them separately.

Spotify paid bankers roughly 40 million euros to run this direct listing and did not raise any additional funding in the process (because it's not really an offering). Dropbox paid bankers about the same amount in fees and was able to raise a bunch of capital in the process. I wouldn't necessarily call one of these events spectacular and the other not spectacular. They are just different...

> Spotify paid bankers roughly 40 million euros to run this direct listing and did not raise any additional funding in the process (because it's not really an offering). Dropbox paid bankers about the same amount in fees and was able to raise a bunch of capital in the process

Agreed--the comparison is enough to spring a reasonable hypothesis, nothing more. That said, Spotify is a large foreign lister; Dropbox is a small domestic seller.

I'm not advocating the death of underwriters. They're a necessary part of the ecosystem. What we're seeing here is a broadening of the options available to the ecosystem. That's new, and that's good.

biggest jump ball: Apple/Google/Amazon competing services. spotify deserves real credit for changing how people consume music, and I think that story will serve them well in the short-term, but their biggest risk is Apple/Google/Amazon who provide competing services that don't have any current pressure to turn a profit - Tim Cook basically said "we don't plan to make money"[1], a bad thing to hear from your primary competitor who also happens to be the most valuable company in the world. as i've said before on diff threads, I would not be surprised if Apple announces a big price decrease or other apple music news right before Spotify's first or second earnings report.

still, impressive for them to make it this far, if they can really find a path to profitability that also fairly compensates artists, I wish them the best! I think it's more likely that as apple/google/amazon force them to continue to operate at a loss, downward pressure on their stock will make them a good acquisition target for one of the big tech companies looking to compete with Apple Music (Amazon seems like a real possibility here - a spotify acquisition feels similar in size and scope to their recent WF acquisition, essentially another double-down on their "everything store" vision/story).

[1] https://www.fastcompany.com/40525409/why-apple-is-the-worlds...

Apple is not even close to a competitor to Spotify, they don't even have a web interface for listening to music..do you think everyone in the world is Apple product user?

I for one would not switch to Apple Music. No web app, no desktop app for Linux.

Google Play Music could be an option, at least they have a functional web player, but neither it nor the Android app are anywhere close to Spotify's apps.

1/ Spotify is not Netflix. There won’t be a Netfix for music.

2/ Netflix, with almost 118 million subscribers worldwide, has allayed concerns about its slowing growth by reminding analysts there are more than 700 million broadband households. Spotify, with 71 million paying users, touts an even larger number in its filing: 1.6 billion payment-enabled smartphone owners expected by 2021. #Growth

3/ Spotify delivers more than 70 percent of its sales to music rights holders, despite efforts to improve profit margins.

4/ Universal Music Group, Sony Music Entertainment, Warner Music Group, Merlin (the representative for many independent labels), which own 87% of the music on Spotify as measured by streams.

5/ It seems highly unlikely Spotify’s Cost of Revenue will improve much in the short-term: those record deals are locked in until at least next year.

6/ It means once the growth of Spotify starts to slow even a bit, it will has very serious trouble.

7/ Netflix is building its own studio to produce shows on its own. Spotify says it has no interest in signing artists, or paying for artists to record. (They don’t have the capital)

8/ However, it has another plan to reduce its reliance on its main suppliers: by making them less relevant. “The old model favoured certain gatekeepers. Artists had to be signed to a label,” chief executive Daniel Ek wrote in a letter included in the filing.

“They needed access to a recording studio, and they had to be played on terrestrial radio to achieve success. Today, artists can produce and release their own music. Labels, studios, and radio still matter, but in a cluttered landscape, artists’ biggest challenge is navigating this complexity to get heard. We believe Spotify empowers them to break through.”

(Ref 4/: Those labels own 85% of the music on Spotify as measured by streams. Progress of empowering: 15%.)

9/ This goal sounds like “the Podcast model” started in 2005, unfortunately, by their biggest competitor: Apple.

Spotify's Dilemma: https://allenleein.github.io/brains/2018/03/spotifys-dilemma

Not enough people talking about this: The fundamental challenge for Spotify is they have to make money while Apple Music doesn't.

Apple Music can run break-even as a platform feature, like the App Store was (at least in the early days). Or they could pay artists more with that margin and get more exclusives. Either way, it's a fundamental long term competitive disadvantage for Spotify.

I know it’s just an acecdote, but I don’t know a single person that uses Apple Music. Spotify already has a huge library and mindshare. It was too little too late for Apple IMO

Which is why you should never draw conclusions from anecdotes.[1]

[1] Apple Music is set to surpass Spotify in paid US subscribers this summer https://www.theverge.com/2018/2/4/16971436/apple-music-surpa...

Most of these users are converting from their shrinking iTunes business.

So what’s your point? Apple Music is still overtaking Spotify this year. And just like iTunes, they don’t need to make much money on it.

Only in the US, Spotify is huge in Europe and other parts of the world, where Apple Music is basically unknown.

Spotify is actually small in the world. All music service subscribers combined are a mere ~110 million.

Eddy Cue recent pegged the market opportunity at 2 billion.[1]

And Apple Music ramping the fastest.[2]

[1] https://www.cnet.com/news/apple-music-hits-38-million-subscr...

[2] https://twitter.com/asymco/status/973568200616050688?ref_src...

Comparing Spotify to other streaming services, obviously.

Apple music is basically a no-show in Europe and Asia.

And those numbers are only paid subs. Spotify has a ton of free, ad-listening users.

Congrats to them, but I don’t think I’ll ever understand renting music. I can understand Netflix’s success because movie content is much less replayable and more expensive, but music is relatively cheap to own your own collection. I love music, but I don’t understand the appeal of Spotify and Pandora—I’d rather take the cost of subscription and build out my library over time.

Think of it as a subscription to a larger library than you'll ever be able to amass yourself.

Sure, you'll collect all of your favorite music, but what if you want to branch out a little? What if you want recommendations that are tailored for you, based on your music taste?

For me, one of the main services Spotify provides is access to occasional music, stuff that I wouldn't bother to collect, but is nice to have on hand, either for parties or just curiosity. The other main service is their recommendation engine, which reliably presents me with interesting bands and albums that I didn't know about, but fit very well with my tastes.

I consider $10/month a bargain for those services.

(I still keep an offline collection of my absolute very favorite albums, of course)

Spotify is fantastic. Excellent usability. I can control the output of my iPhone Spotify app using the app running on my linux computer.

Spotify Connect is one of their real killer features. It just works so damn well, and independent of Airplay, Chromecast, Sonos and other locked-down methods.

I'm afraid about what will happen as more of these streaming services compete. It seems to be mirroring the Netflix/Hulu/Disney battleground -- subscription platforms which start differentiating themselves by owning exclusive content. Spotify has started this, and Jay-Z & Co have refused to give streaming rights to their competitors, such that Spotify doesn't have access to any Jay-Z, or, oddly enough, any Metallica.

The problem here is that I purchase these subscriptions so that I can have access to all of the music I haven't decided that I want to own forever yet. If this trend continues and streaming platforms become more and more exclusive, I will likely cancel my subscriptions, buy my music from the artists directly, and say goodbye to renting rather than owning music.

Metallica's collection is definitely available on Spotify... at least in the US.

Oh, thank you! I had it backwards. Tidal doesn't have Metallica, while Spotify doesn't have Jay-Z and friends.

> The company says that in 2018, shares traded on the private markets between $90 and $132.50.

> Losses for last year were 1.2 billion Euros ($1.47 billion), which compares to 539 million Euros ($661 million) the year before.

Well, there's the short of the year.

>Well, there's the short of the year.

I think you're missing SNAP.

~2x is a decent short for sure, but I have to believe that SPOT is going to tank like TWIT when their claims of profitability by 2019 fall flat.

May I introduce you to the Efficient Market Hypothesis (https://en.wikipedia.org/wiki/Efficient-market_hypothesis).

So nobody turned a profit by correctly shorting TWIT or FIT as soon as possible or by jumping in on FB when it plummeted to <$20 a share in 2012? Seeing that trend on FB specifically, instead of jumping in on the IPO, is the difference between 4x and 8x your investment by today's valuation.

Tech stocks are regularly IPO'd on pure hype, and the market will regularly turn on them when they don't understand the business model.

I can't tell if you're serious (Poe's Law), but very few economists find EMH to be credible. Did you even read the "Criticisms" section of that wikipedia entry?

I went further and read many books on both the EMH and behavioral economics, which is basically its polar opposite. I believe EMH to be true at a point in time. One of the inputs to the price is market psychology.

Nothing to celebrate. My CDs from twenty years ago still work. Why would I invest time in Spotify when one day all the music just disappears, or they raise prices, etc.?

If this is the future it doesn’t feel like progress.

This reminds me of the comment on the launch thread of Dropbox.

Spotify is a service, not a product. Unless you similarly eschew cellular service and grid electricity, I'm not sure what your point is.

What to come and look at my electric collection ? Just don't touch any of the capacitors.

If all the music you want to hear is 20 years old, then you're fine. The problem is that in the near future, and in some places the present, physical media will be sold along side vinyl as one of those things that people think only hipsters use.

So for any new music you may want to get, you're now forced into either purchasing a digital copy from a provider and burning copies yourself, or using a subscription service.

Eventually it becomes too cumbersome to manage your music in two places, so you reduce to one, and stop using your physical discs assuming you found replicas in your subscription.

But, to be honest, I've never had so much access to unknown artists' works for so cheap before. I can build whole playlists of very specific types of music and pay effectively less per month than one CD used to cost me 20 years ago for that one song I liked.

So I, for one, welcome our subscription overlords.

As of writing this the market price is $150, dropping from $165. But almost surely this is a win for employees who derail the 6 month lockup uncertainty.

I wonder how you'd value Google Play Music alone based on this type of comp. Anyone have an idea of what the number could be like w/ rationale?

Apple Music and Google Play Music are each approximately half the size of Spotify (by subscriber). Assuming that the revenues for each service are similar (on a subscriber basis) and overhead would be similar if they were spun out, then you are just valuing them based on the number of current subscribers. Given the low friction in switching services, subscribers are around the same value for each service. My guess based on this back of the napkin math then, is that $15B for would be the comp for each of Apple Music and Google Play Music, though you would need to consider any debt held by the companies (standing for Spotify, or as part of the spin-out by the other two).

That's just how I think the comp would work, I don't think any of those companies are worth those values, including Spotify.

> low friction of switching services

I don't agree with this. Most people build up a catalog of songs/playlists on one platform and moving to a new one and re-discovering all your music is quite a pain in the ass. This was one of the main reasons I was a late adopter of Spotify (I work in the Music Industry).. there was no easy way for me to take local libraries/playlists and create Spotify playlists from them.

How is Spotify raising capital from this if it's not selling shares directly? Will it wait until later to offer stock directly to the markets?

They aren’t raising any capital. This is an opportunity for the shareholders (and maybe for employees with stock options) to cash out.

Let the buzz fade away... wait for it to drop below $100 then look at your options. I don't understand why people still want to jump and buy shares the same day a private company goes public considering the hype, etc. Why would you lose that much that fast?

So i bought in, who knows where this will go though :)

One of my hopes it that just like NFLX, once the company focuses on producing / licensing it's own content they can do really well.

I'm interested in hearing what others have to say on this! Did you buy, will you buy? Why?

I don't know much about buying shares but I would like to buy in and invest. Care to give me feedback on that? Where did you buy in?

I don't know too much about buying shares, but anyone that knows less than even me should not be buying individual stocks (that too based on IPO day hype).

https://www.bogleheads.org/wiki/Getting_started

Absolutely. Buy index funds, don't worry so much about fluctuations, keep a long-term perspective.

I agree with the above two remarks. In my situation the money i “experiment” with at an individual stock level is not relevant to my end of work plan. I assume the spend is as healthy as buying a sports car, and while I’d love to be wrong, I’d encourage you to buy index funds and treat individual stock picks in the same manner.

Yeah i have no good advice other than to buy into the indexes. If you’re picking stocks it better be for fun, in my case that’s what it is.

>once the company focuses on producing / licensing it's own content they can do really well.

I think the issue is that music content is so much more than just streaming. Musicians want a label that can also help with promotion, touring, merchandise, radio play, tv/movie placements. I'm not sure Spotify has experience with that. Therefore musicians will have to sign one deal for (All Items - Streaming), and a Streaming License. Are the major labels going to agree to that?

Where did you buy? Did you sell already? The price is going down pretty much since the open...

~$160 - I’ll sit on these for years, the price here is likely irrelevant to the long term.

I hope you are right and good luck!

If you don’t mind answering, what price did you buy in at)m? I’m watching the stock right now.

Answered below.

I don't get it. They don't own the IPR so at best it's a thin revenue model on giant cashflow to agencies. All it's got is cost side risk and a thin skin of ui advantage.

Maybe it's me. I have no track record identifying winners or losers.

Since this is just shares changing hands and not bringing money into the company - what is the impact for Spotify? Does the company itself own shares? How much money has Spotify in the bank these days?

Their product is a lot more powerful than Soundcloud's (even though the target users might slightly differ).

I really hope they have a solid roadmap and wish them the best.

I’m not familiar too much with SoundCloud recently. But didn’t they almost go bankrupt before having last minute money raised?

Yeah, SoundCloud has an unsustainable ecosystem.

Does anyone have any idea how much Spotify is used for music vs. spoken content (e.g. podcasts/audiobooks)? Or in Soundcloud's case?

How much are the investment bankers earning on this?

Edit: Apparently I was wrong, they still paid a bunch of bankers for advice, but technically they aren't making anything by skimming off the top like most IPOs.

I think nothing.

It's a direct sale, so the insiders (including the employees, not just the execs) get to sell however many shares they want directly to public shareholders.

So the company doesn't make any money either, just the shareholders. I suppose at some point the company itself could sell shares, and then maybe a banker would get involved, but since it would already be publicly listed, I'm not sure they'd have to be.

They're actually making more from Spotify's direct listing than they did for Dropbox's full on IPO... So much for disrupting the business model!

https://www.bloomberg.com/news/articles/2018-03-26/spotify-l...

Interesting, is this just to let shareholders cash out? Im surprised they would do this without making any (or at least a little) money on it given the track record. Seems risky when they are still beholden to the lables for the most part.

I think it was somewhere around $30 million spent on bankers for the non-IPO. (Which I guess is less then what they would have spent on an actual IPO? Although in that case, the cash raised from the IPO would have paid for the banker expenses.)

Edit: this is where I got the $30 million figure from: https://www.bloomberg.com/view/articles/2018-01-16/spotify-w...

$30 million was the original estimate - I haven't seen an update since.

https://www.bloombergquint.com/markets/2018/01/16/spotify-wi...

$44-50 million based on one source: https://www.bloomberg.com/news/articles/2018-03-26/spotify-l...

I'm glad the DPO model was successful -- would be great if it, or something like it, became the default.

im curious why spotify does not enable artist sell merchandise and tickets on its platform. as a free user I would prefer to see ads for merch and events happening near my town from my favorite artists rather than annoying ads of products and services I have 0 interest in.

With no underwriting Banks to support the IPO the price is steadily going down since the open...

There is no IPO price. This is not an IPO.

Precisely... How much down did it close at the end?

There is no "down" because there was no IPO price to begin with. price_change = current_price - previous_price. There was no made up IPO price on Monday, so there was no made up level to defend.

The only previous price we had was the last private round. And I think the close was about 60% higher than their last funding round.

Open for regular investors to trade at 165.90, close at 149.01 = almost 10% down for the first day...

Today open at 140.00 another 6% gap down...

Maybe they'll make an Apple TV app now? Does anyone know why that doesn't exist yet?

If the original investors want to sell their shares, I'm not sure it's a good sign?

VCs usually aim for very high ROI. Even if your investment still increases in value more than market rate interest rates, for a VC it might be more valuable to sell them to preserve its own metrics (each year you keep the shares, your average ROI decreases).

today at the gym i heard some awesome songs so i asked what it was and they said "spotify radio". its impossible for me to recreate that list.

Google can kill them at any moment with Play.

Really? How?

Not enough for a native desktop app?

Congrats Spotify!

Company valued at $30 billion. Artists continue to receive almost nothing for their music being played.

Something doesn't add up here.

> Artists continue to receive almost nothing for their music being played

This is kind of FUD. There's a lot of royalties flowing out of Spotify. While it's true the payouts for many artists are smaller than they should be, 90+% of artists simply get very few plays on Streaming services and thus make no money.

And Spotify isn't the only one to blame here. Most music goes through a process like this:

Artist -> Label -> Distributor -> Storefront

Spotify is only the storefront.. but both the Distributor (the "big three" labels UMG, Sony, and Warner do their own distribution) and the record label take a cut. There's also additional overhead for the artist, such as paying out to producers, writers (if they don't write themselves) etc.

The labels are receiving huge payouts, their profits are on an upward curve now, thanks to streaming.

But as always, they exploit their artists and pay them a pittance. Blame the labels.

This has investment bankers quaking in their boots.

Not even remotely - they made out better on this than other recent IPOs.

They are paying 35 - 40 euros or ~$45 million at the midpoint. If they float $1 billion in shares today, that means fees are 4.5% of the overall “offering”, or almost exactly what Dropbox paid.

https://www.bloomberg.com/news/articles/2018-03-26/spotify-l...

1. Snapchat was listing, not raising capital. Until we see a similarly high-profile company try to raise equity (and I doubt we will), there's no reason to worry for IB.

2. If a client wants to buy/sell snapchat, the investment bank is still going to make broker fees on the transactions.

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