[pembrook]

This is the same problem Netflix & Amazon have been successful in combating. The answer is to become a content owner by competing with the big labels directly.

All Spotify needs to push the big labels back on their heels is to sign a few top 40 artists of their own.

I might be wrong but I remember reading something like 90%+ of streams on music services are of songs currently on the charts. Capture the popular culture like Netflix has and the labels will start rolling over on rates.

[hobofan]

> This is the same problem Netflix & Amazon have been successful in combating.

I would say that the jury is still out on that. Lack of Blockbuster movies has always been one of the weak points of Netflix, and they are still in the process of getting started with producing content there (with "Bright" being one of the first of their movies trying to be a Blockbuster).

On the other front, they are highly dependent on existing content that people love, and more and more of that is being owned by Disney and pulled from the platform as they are gearing up for their competing service. If they also fail to keep the other big right holders on the platform then soon all they have will be Netflix content (which is probably their 5-10 year plan anyway since that makes them more profitable).

I'm not sure a Netflix Originals-only catalog will go over well with the subscriber base. Despite some of their first original content having some good hits (e.g. House of Cards), I think over time their hit-rate pretty much adjusted to the levels of traditional cable channels like HBO/Showtime with a lot of mediocre content.

[noxToken]

If Netflix went to in-house only, then they could significantly (I assume) drop the price. Part of Netflix's big expense is licensing content. If all of the major players are pulling content, then the licensing costs for all of that content disappears as well.

[hobofan]

With shared accounts, the price is already pretty low at ~3-4€/person/month. I don't think that a price drop would adequately compensate for a significant loss in content at such a low price point.

Yes, in the long run producing their own content will be cheaper. Mid-term buying proven content will probably come out at around the same price as producing new content that the viewers may or may not like. They have better viewer analytics and better ways to globally monetize the content than traditional content producers though.

[guelo]

Doubtful since they're pouring every extra dollar they have into making originals.

[dna_polymerase]

Also they have pretty high debt accumulated, so they really need some cash.

[bonesss]

Hrmmm... 110,000,000 subscriptions x $5 = $550,000,000

Netflix sees that math every single month, and charge more that $5, and can always raise their rates again. They have something better than cash, they have recurring cash payments.

Also, Netflix is running less debt than its hollywood contemporaries who have no such subscriber base, no industry leading tech, no well-oiled IT machine, and no massive pool of user data showing the intensely valuable and intensely detailed interactions between hundreds of millions of people and their content with a decades head start on the competition.

[klarrimore]

Exactly. We have new streaming video services with their own exclusive content popping up almost daily.

[BinaryIdiot]

> This is the same problem Netflix & Amazon have been successful in combating. The answer is to become a content owner by competing with the big labels directly. > All Spotify needs to push the big labels back on their heels is to sign a few top 40 artists of their own

No way that's going to work. Music is VASTLY different from video. In video it takes more time and resources to produce each one and replays are rare. In music everything is super cheap to produce and replays are off the chart.

If Spotify became their own label and signed 100 of the top artists, their old songs are STILL with the previous label and will likely never leave. Spotify still NEEDS those songs or it's SOL.

[hobofan]

> If Spotify became their own label and signed 100 of the top artists, their old songs are STILL with the previous label and will likely never leave. Spotify still NEEDS those songs or it's SOL.

As I pointed out in a sibling comment, I think Netflix actually has the same problem. There is a significant presence of long-running shows that people love to watch on Netflix: Friends, Breaking Bad, Modern Family, How I Met Your Mother, etc.. A big favorite "It's Always Sunny In Philadelphia" just left the catalog - presumably due to the acquisition of FX by Disney - and "Archer" will likely soon follow for the same reason.

A lot of those are not new and people still watch them (either to catch up on a missed cult hit or to rewatch their favorites), and the will continue to do so for the next 10-20 years. As long as that's the case Netflix also has to continue to make deals with the existing rights holders or substantially shift their core offering.

[BinaryIdiot]

> As I pointed out in a sibling comment, I think Netflix actually has the same problem. There is a significant presence of long-running shows that people love to watch on Netflix: Friends, Breaking Bad, Modern Family, How I Met Your Mother, etc..

Is that really true though? As video content gets older it usually gets watched less, becomes cheaper and gets re-aired everywhere it can. Once you watch it many don't re-watch. I'd love to know if there were statistics on this either way!

Music, on the other hand, doesn't show its age nearly as much and old music is constantly replayed even in the latest TV shows and movies. Seems to be music is almost timeless whereas video is not. But, again, I'd love to see some data around these topics to valid (or invalid) what I think to be true.

[wils1245]

I bet it’s different for various niches. Consider young families. Disney absolutely dominates children’s content, and very old content still resonates with kids. My niece and and nephew were obsessed with Toy Story, Finding Dory, Frozen, etc. I bet Disney’s streaming service will be the first one families buy.

[hobofan]

I sadly also don't have any data to support my claims. :/

> As video content gets older it usually gets watched less, becomes cheaper and gets re-aired everywhere it can.

That has been the traditional behavior in scheduled broadcasting, but I'd wager that the lifespan of shows is significantly extended when they are available on-demand. In general, there are probably a lot of social shifts/effects related to video consumption that appeared with Netflix for the first time (e.g. binge watching), each with their own economic effects.

[komali2]

Alternatively, as less people stop listening to the radio, songs from the 70's, 80's, 90's, and eventually the early 2000's will need a venue to be played on.

If less people listen to the radio, AND less people buy music directly through itunes or whatever, the only option the big 3 will have is to work with streaming services.

[pembrook]

But if the majority of plays on Spotify are of the current hit pop songs at any given time, Spotify still has the power even if they don’t own the old songs.

Go look at the most played songs on Spotify of all time. It’s not the Beatles and Michael Jackson’s back catalog. We’re talking Chainsmokers and Imagine Dragons and Ed Sheeran.

[seanmcdirmid]

AmazonPrime’s most played list has more than a few oldies in it, especially around Christmas. The non-young crowd is also much less into new music and crave the older stuff actually. A streaming service can totally survive on those users alone, probably. If I could get it at some discount, I would totally pay for a streaming service that didn’t have any songs made within the last ten years. I could live on songs made in the 60s alone (and that’s way before my time).

[usrusr]

Most played in terms of number of plays, but probably far behind in terms of unique users who actively selected the song at least once?

The catalog deep dive is where streaming services offer unique value, putting a hit on repeat is what people could do just as well by buying the single/licence.

[hbosch]

Well, lets also not forget that Spotify has been slowly steering itself from a pure "music playback tool" to a "music discovery tool", and a trusted one at that. They are heavily promoting things like Discover Weekly, Podcasts, playlists like RapCaviar and their various "n+Moods" and "n+Vibes" playlists.

There was a great article[0] posted here some time ago, I think, that likened the algorithmic discovery "products" of Spotify plus the effortless access to individual songs as creating a sort of thin spread of musical diversity (the auther's e.g. Muzak), generic and accessible enough to be replicated by almost anybody. A great example of this, today, is Cardi B[1] – this is a person who honed her personality through social media and reality TV, linked up with a music camp, and is now the third person in history with her first 3 commercial songs in the Billboard Top 10[2]. Her biggest hit, Bodak Yellow, uses a flow lifted from another rapper named Kodak Black (and she has done this multiple times[3]). The thing is, though, she was groomed to be a hit.

Once Spotify achieves a critical mass of listeners that trust their algorithms, and rely on their tastemakers to deliver fresh music, Spotify could easily slot in musicians that they themselves hold the contracts for. Their pockets are just as deep as a record label, and their listener data is far richer. I have no difficulty imagining that Spotify could replicate a Cardi B-esque pop zeitgeist. "Tastemaking", even if the word makes you cringe, is what will define the winners and losers of the streaming wars. It's why Apple hired away Zane Lowe – an relatively bland DJ personality, but an incredibly gifted ear and a cache of trust – and why Spotify relies more on Playlists and Discovery every day.

Remember, they didn't even have the Beatles until Christmas 2016! That shows a decent picture of how much the majority cares about back catalogues. I don't think it's unreasonable to think that Spotify themselves couldn't produce a top 10 rapper, or a top 10 country singer, or a popular podcast, just based on the level of engagement in their playlists.

0. https://thebaffler.com/salvos/the-problem-with-muzak-pelly

1. https://noisey.vice.com/en_us/article/evpbxj/cardi-bs-bodak-...

2. https://noisey.vice.com/en_us/article/bjyvad/cardi-b-makes-h...

3. https://genius.com/a/how-kodak-black-influenced-cardi-b-s-bo...

[bogomipz]

>"Once Spotify achieves a critical mass of listeners that trust their algorithms, and rely on their tastemakers to deliver fresh music, Spotify could easily slot in musicians that they themselves hold the contracts for."

You mean become a competitor to the 3 labels for whom they depend on for their business? Not a chance. If the labels see them as competitors instead of customers they will pull their card and not renew their licenses.

[hbosch]

I don't see the scales to be tipped as heavily as you're suggesting. Spotify alone can make or break an artist, even a "Big 3" one. If you want listenership, you absolutely need to be on Youtube, Apple or Spotify (or a platform like Soundcloud). There are zero relevant distribution channels for today's young listeners that are not streaming services.

Chance The Rapper is one of the biggest names in hip hop, and a relatively big personality in pop culture as a whole. He's fully independent. He signed an "exclusive" 2-week-long distribution deal with Apple for his last album, Coloring Book. Apple got exclusive streaming rights (for 2 weeks), and the artist got $500,000 cash – not an advance – as well as free marketing via Apple. This is the type of deal and the type of artist that will start changing things for the better.

There is a great report published by stat trackers BuzzAngle Music[0] from the past year. Here are some important numbers:

• Song Consumption for 2017 YTD was up 29.5% over 2016 YTD (1.5 billion song project units in 2017 YTD vs. 1.2 billion song project units in 2016 YTD).

• Audio streams reached 179.8 billion, up 58.5% over 2016 YTD.

• Subscription streams grew 69.3% and accounted for 78.6% of total audio streams in 2017 YTD, up from 73.6% in 2016 YTD.

• Overall album sales were down 13.9% compared to 2016 YTD (74.0 million in 2017 YTD vs. 86.0 million in 2016 YTD).

• Digital album sales in 2017 YTD were down 24.3% over the previous year (34.5 million in 2017 YTD vs. 45.6 million in 2016 YTD).

• Song sales (downloads) in 2017 YTD were down 23.8% compared to 2016 YTD (313.3 million in 2017 YTD vs. 410.9 million in 2016 YTD).

So now say you're a Sony exec and you're looking at these numbers. Can you afford to have ANY of your top talent pulled from Spotify? Consumption and streaming are rising and pure sales are falling. Megastars like Taylor Swift and Ed Sheeran are immune from these trends, basically, but if you want to stay culturally significant you will soon need streaming more than streaming needs you. That's my opinion.

0. http://www.buzzanglemusic.com/us-2017-ytd-report/

[bogomipz]

>"Spotify alone can make or break an artist, ..."

Really? Name one artist that Spotify has broken exclusively.

>"Chance The Rapper is one of the biggest names in hip hop, and a relatively big personality in pop culture as a whole. He's fully independent."

That's great but until there are enough Chance the Rappers Spotify needs the big 3's catalogs.

I'n not sure why you felt compelled to list all those statistics, nobody is suggesting streaming hasn't grown in popularity.

>"Can you afford to have ANY of your top talent pulled from Spotify?" Yes you certainly can. The streaming markets has no shortage of players now - Amazon, Google, Apple, Pandora, Deezer etc. Spotify needs the labels more than they need Spotify.

[hbosch]

>Really? Name one artist that Spotify has broken exclusively.

You're really gonna have to go easy on me and realize I'm using the name Spotify as a means to blanket address all streaming services. Artists break on streaming almost exclusively these days, and I feel like you are with me on that. But in the interest of specific artists:

Spotify's playlist RapCaviar catapulted rapper Lil Uzi Vert from the underground into the stratosphere[0]:

“XO Tour Llif3” also made history on the May 6 Billboard Hot 100 as one of five hip-hop songs in the top 10, only the second time that Billboard’s preeminent chart featured five rap songs (Kendrick Lamar’s “Humble” was No. 1; Lamar’s “DNA” No. 4; Future’s “Mask Off” was No. 5; Kyle’s “iSpy” featuring Lil Yachty No. 6; and “XO Your Llif3” No. 10). Strikingly, these songs were getting little to no airplay on the nation’s hit-driven radio stations, traditionally, along with sales, the most powerful factor in determining a song’s Hot 100 placement. “Let’s be honest,” says a top major-label executive: “No cool kid is listening to top 40 radio.” Instead, those kids are glued to streaming services."

An underground hit on SoundCloud first, and then Spotify single-handedly turned this kid into a superstar. Lil Uzi Vert became one of the hottest rappers of 2017 due to Spotify's featuring of his single on a highly influential in-house playlist.

And more about streaming breaking artists, in general, from the same article:

"And in numbers that sometimes strain belief, users are opening their Spotify or Apple Music apps and streaming hip-hop and R&B tracks at nearly twice the rate as the next most popular genre (rock), according to the research company Nielsen."

>Amazon, Google, Apple, Pandora, Deezer etc. Spotify needs the labels more than they need Spotify.

People don't subscribe for the catalogues. The catalogues between services are so similar as to be completely negligible. If you pull your catalog from one service, you don't hurt the service you hurt yourself – all those subscribers simply won't listen to your music. Those are your customers now, whether you like it not.

I guarantee this is how a conversation goes between two people, one with Apple and one with Spotify, when talking about a new song rising in popularity:

A: Hey, did you hear That New Song by Artist? B: No, is it on Spotify? A: Nope, they are a Sony artist and only on Apple now. B: Oh, okay, have fun.

Artist – That New Song now has 0.5x listenership. Meanwhile, Universal is still streaming on both services and will completely own the charts.

Labels aren't in competition with streamers, they are in competition with each other. If one major pulls their catalogue from 1 of the big streaming services, they will lose any semblance of relevancy as now the other 2 major labels will own all charts and social listening. That's IMO.

0. http://www.vulture.com/2017/09/spotify-rapcaviar-most-influe...

[JohnJamesRambo]

The algorithms of Spotify are what keep me there. I leave but always have to come back, that's how good the Discover Weekly is.

[pc86]

> replays are rare

Tell that to my wife who has seen every Office episode at least 20 times.

[h2onock]

I’ve binge-watched a few series’ through several times.

[BurningFrog]

But in that world any other player would equally NEED Spotify's artists.

[nunez]

It’s really not though because music is a loss leader for amazon, apple and google, but it is spotify’s entire business. The only other major competitors out there are either in major cahoots with the big 3 (tidal, pandora) or gone (soundcloud, grooveshark, rdio).

Netflix has this problem too but they “solved” it by making their own content. Amazon are Google are doing the same thing. That’s the direction I see Spotify going, though I wonder why Apple hasn’t done this yet.

[fragsworth]

Music is quite a bit different, in that people spend lots of time curating their own playlists and they listen to the same songs repeatedly. It is incredibly annoying to have songs that you want in your playlists but can't get, EVEN if you pay for multiple services.

Making their own content for video has the advantage that most people are OK with opening a new browser tab or an app to watch a specific movie or show.

With music, however, you don't want to run multiple conflicting music players, especially when they don't sync up playlists and seamlessly work together.

I wonder how that will pan out. It's a significant difference.

[notatoad]

Yes, i don't think the original content strategy will work out for streaming sites the way it has for netflix and amazon. I'm not willing to open one app to listen to one album and then another app to listen to a different album. I'll use the service that has all the music i want to listen to. Whether that's piracy or youtube playlists or spotify. If any streaming service starts getting too many exclusives, it's going to just kill the entire streaming market.

From my perspective, all the streaming services should be working together to create a healthy marketplace for independent music, and providing every opportunity they can for musicians to avoid signing a big-four contract. If Warner and Sony, and UMG get their act together and create a joint venture streaming service that's the exclusive host of the content they own, Spotify, Google Music, and Apple Music are screwed.

[rvshchwl]

That is basically what happened with Hulu. The service is owned by the major content providers, such as Fox and CBS, and all of the televised content is almost completely exclusive on Hulu now, as opposed to being on Netflix. As more and more shows started to get pulled from Netflix, Netflix had to rely on original shows to make sure that they have a full catalog of streaming content. They paid over $6 billion dollars in creating new shows for 2017.

Unfortunately for music, the exclusivity has started to show up in some cases. Artists that own the Tidal service don't allow any of their music on competing services, and Apple has been signing contracts with musicians to have new content show up on their service several months in advance before it does on other services (like Jay Z and Kanye).

[majormajor]

It's been kinda the reverse in video, if my recollection of the timelines is right. Netflix's big push into originals and dropping of licensed content started to happen 4+ years ago, well before Hulu seemed to have the budget to get big shows into their back catalog.

From Netflix subscriber numbers, it's also not clear that the lost content has dented their subscriber retention at all. The talk among my friends centers much more around new Netflix originals (or even Amazon/Hulu originals) than around back catalog stuff on Amazon or Hulu. I don't understand why -- I'm utterly uncompelled by 95%+ of what they're putting out, since I don't have the motivation to deeply investigate new Netflix shows/movies every week, and however they're advertising, it doesn't really reach me -- but it's what I see happening, much to my annoyance.

[mavelikara]

You argument works in favor of Spotify too.

If they sign on 100 top artistes, it will devalue the portfolio of music held by the top 3 - for reasons you explained. Thus, the top 3 are incentivized to collaborate with Spotify.

[joemi]

> or gone (soundcloud, grooveshark, rdio)

I can't speak for grooveshark or rdio, but as far as I know soundcloud still exists. I just added a song there and listened to some other stuff a week ago. Did I miss something?

[JonFish85]

Soundcloud exists, but is likely on life support[1].

1. https://news.ycombinator.com/item?id=14990911

[rozenmd]

They fired a fair number of developers in San Francisco, Berlin, shut offices etc - but are still running the servers AFAIK.

[kingraoul3]

What about iHeart? They do own half the physical radio stations in the country which is still how people find new music, you know.

[dragonwriter]

> They do own half the physical radio stations in the country which is still how people find new music, you know.

IME, lots of people find new music by genre/mood/etc. curated or “like this song/artist” algorithmic stations in streaming services, not terrestrial radio.

[kingraoul3]

That is not supported by the data. The lions share of new music discovery is still done via terrestrial radio, and the brand identification people have with their favorite stations is crazy high

[dragonwriter]

Where is the data showing this?

[kingraoul3]

https://www.digitaltrends.com/mobile/radio-still-beats-digit...

[nunez]

ClearChannel front; they own all major terrestrial radio in the US

[nkozyra]

I'm confused. I think you're saying the same thing as the post you're replying to. The direction would be to own (or "create") the content. In other words, Justin Timberlake or someone with equal clout moves from Sony to Spotify Records (for lack of a better name).

[notatoad]

The problem with that is it creates a war for exclusives. If their competitors start doing the same thing, spotify will just end up losing a lot of their content.

and personally, unless spotify continues to have the vast majority of the music i want to listen to, i won't continue being a subscriber.

[wolco]

But if they sign the top 30 and you listen to that kind of music you will have to subscribe.

Netflicks is creating there own content which would mean spotify would need to create new bands instead of sign existing ones which most likely would fail because they are all under contract.

[jon-wood]

It wouldn’t surprise me if Apple not being in that game yet is because of their long standing agreement with Apple Records (the Beatle’s label), who challenged their trademark a while back when they started selling music. I suspect getting into directly signing artists would breach whatever agreement was made and leave Apple open to a huge trademark suit.

[tzahola]

"In 1978, Apple Records filed suit against Apple Computer (now Apple Inc.) for trademark infringement. The suit was settled in 1981 with the payment of $80,000 to Apple Corps. As a condition of the settlement, Apple Computer agreed to stay out of the music business. A dispute subsequently arose in 1989 when Apple Corps sued, alleging that Apple Computer's machines' ability to play back MIDI music was a violation of the 1981 settlement agreement. In 1991 another settlement, of around $26.5 million, was reached.[54][55] In September 2003, Apple Computer was again sued by Apple Corps, this time for introducing the iTunes Music Store and the iPod, which Apple Corps asserted was a violation of Apple's agreement not to distribute music. The trial opened on 29 March 2006 in the UK,[56] and in a judgement issued on 8 May 2006, Apple Corps lost the case."

https://en.wikipedia.org/wiki/Apple_Corps#Apple_Corps_v._App...

[dragonwriter]

Apple does directly sign non-label artists to exclusive deals with Apple Music, but so far that's mostly established artists, they haven't put money into discovering and developing artists.

[remir]

Apparently Apple is gearing up to create their own video content.

[usrusr]

Big difference between TV and music streaming, in a nutshell: a TV streaming library is defined by what they have, a music streaming library is defined by what is missing.

Serial TV is consumed like a novel, as long as the next episode is available, the availability of everything else is unimportant. Music is consumed in a much more random access pattern, like a lexicon: if the letter M is missing, it's broken. ("You want that particular song by Morrissey? Sorry. Be sure to check out these five Spotify Originals that have also been tagged with #sad" - no, people won't be willing to pay for that)

[cmurphycode]

It may be true that music listeners are currently much more annoyed when songs aren't available. However, I think it's wrong to say that TV and movie watchers were any different 5 years ago -- even today, people's number one complaint about Netflix is that famous movie X isn't on there.

Netflix worked hard to change that model by figuring out what people liked to watch and generating high quality content in the patterns they saw. Turns out, now everyone watches whatever show Netflix puts in front of them.

Do you think it's possible a similar phenomenon could happen for music?

I can tell you that since signing up for Spotify Premium, I've certainly been exposed to more new artists that I like, based on their recommendations. Since their library is currently still extensive (like how Netflix had a lot more movies back in the day), I'm very rarely looking for a song they don't have. I can imagine a world where the content holders get more scared (although that would be an impressively delayed reaction) and thus Spotify is pressured out of contracts (just like Netflix was). I'm guessing that Spotify is betting that if that is the case, they can rely on the fact they've been changing their listeners tastes to survive.

[usrusr]

I doubt that a streaming provider would be able to starve out interest in third party music. Most active choice music consumption is essentially a nostalgic act, even when searching for the latest hit that you heard at that party last night. Music preference could almost be considered involuntary.

An "original content superspotify" would have to dominate all channels to ensue that customers are rarely overcome be the desire (and the resulting dissatisfaction) for third party music, or restrict themselves to the subset of the market that is never exposed to channels not under their control. Both of these options are what I would consider a likely base for economic success.

[cracell]

I think the long term answer here is legislature that forces companies to license things for the same rate to anyone and that rate must be publicly published.

[umanwizard]

Not sure about other countries, but I'd be shocked if legislation like this passed in the United States.

[aaronblohowiak]

It has in the past - https://en.wikipedia.org/wiki/Compulsory_license

[zanedb]

Oh no.

Let's take a second here. What will happen if Spotify signs new artists and effectively becomes their own record label?

It will start off normally, but eventually (or possibly from the start) Spotify will not allow this music to be streamed anywhere else. It will be exclusive to Spotify, the same way Netflix has done with their originals.

Now what happens? Users are forced to pay for multiple music streaming services, just as happened with the video streaming industry.

This is already a huge burden on users of video sites (and makes piracy a much more appealing option), but is not even acceptable in the music industry. Users create playlists with their own songs, and will want specific songs.

Even with your 90% statistic, which may or may not be true, the other 10% is still very important. I'd imagine that hit songs are streamed more often comparatively but older songs are more important.

Hopefully this fracturing doesn't happen, but if so (as I said) piracy certainly looks more appealing. Especially with Google Play Music allowing you to upload your own music..

[geodel]

Netflix was/is competing with exclusive products like expensive cable channels or established studios' productions which are not available on vehicle radio, youtube and other free avenues. So Netflix is able to get comparable reach to cable TV. For music there are far more avenues to listen for free and unlimited times with some ads.

[user5994461]

Netflix is a joke outside of north America.