Has Spo­tify an­swered its roy­alty prob­lem?

Tehran Times - - ART & CULTURE -

NEW YORK (Reuters) — In its much-an­tic­i­pated fil­ing to go pub­lic last month, Spo­tify re­vealed rev­enue growth was outpacing costs, sug­gest­ing the mu­sic stream­ing ser­vice was strik­ing deals with the mu­sic in­dus­try that de­feat the cen­tral ten­sion in its busi­ness model.

Spo­tify launched in 2008 and is now avail­able in more than 60 coun­tries, but a big ques­tion mark over its model re­mains whether it can find enough sub­scribers and other rev­enue to pay for the moun­tain of roy­alty fees to record la­bels and artists.

The fil­ing by the Swe­den-based firm for a di­rect list­ing as SPOT on the New York Stock Ex­change showed rev­enue rose 39 per­cent to 4.09 bil­lion eu­ros ($5.05 bil­lion) in 2017.

Cost of rev­enue - which mainly con­sists of roy­alty paid to mu­sic record la­bels and mu­sic pub­lish­ers - rose 49 per­cent in 2016, but just 27 per­cent last year, the com­pany’s doc­u­ments showed.

Spo­tify pays fees to mu­sic pub­lish­ing com­pa­nies such as Sony/ATV Mu­sic Pub­lish­ing, Warner Mu­sic and Vivendi’s Uni­ver­sal Mu­sic Group who act for artists rang­ing from Justin Tim­ber­lake to un­known in­die bands in ex­change for a com­mis­sion.

To pay for that, it has some 71 mil­lion pre­mium sub­scribers glob­ally, about twice as many pay­ing cus­tomers as its clos­est ri­val Ap­ple with 36 mil­lion as of Fe­bru­ary. In­clud­ing those who lis­ten to ad­ver­tis- ing-sup­ported streams, Spo­tify has about

159 mil­lion monthly av­er­age users. Nearly 60 per­cent of Spo­tify’s monthly users were ad-sup­ported sub­scribers in 2017. How­ever, at a head­line $9.99 a month, pre­mium cus­tomers gen­er­ated

90 per­cent of to­tal rev­enue from lis­ten­ers in the same pe­riod.

There may still be prob­lems ahead. Many in­dus­try fig­ures say the stream­ing rev­o­lu­tion, led by Spo­tify, has crip­pled the com­mer­cial logic of record­ing mu­sic as a pro­fes­sion. Ra­dio­head and Tay­lor Swift have been among high-pro­file dis­si­dents; both have re­turned to the ser­vice.

In Jan­uary, U.S. copy­right au­thor­i­ties de­cided to in­crease over the next five years roy­alty pay­ments mu­sic stream­ing com­pa­nies like Spo­tify and Ap­ple must make to song­writ­ers and mu­sic pub­lish­ers, a trade as­so­ci­a­tion for mu­sic pub­lish­ers said.

(Reuters/Chris­tian Hart­mann)

Head­phones are seen in front of a logo of on­line mu­sic stream­ing ser­vice Spo­tify in this Fe­bru­ary 18, 2014 il­lus­tra­tion pic­ture.

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