Will Spotify be as big as Netflix?


Spotify – the world’s largest online music streaming service has just officially launched in Vietnam from March 13. But the story below mentions Spotify is about to release shares and investors are hoping the service can thrive like Netflix.

When Spotify appears on the list of the New York Stock Exchange in the coming weeks, the music streaming service will be valued at more than $ 20 billion, showing investors’ confidence in the bright people. to establish Spotify as Daniel Ek from Sweden.

If Netflix can upset Hollywood, Spotify can change the music industry. At least that is the hope of fund management in America. There is reason to believe Spotify will be on par with Netflix, even though music is a very different category from movies and the competitive field in which Spotify is embarked presents challenges that Netflix has never faced.

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Launched 10 years ago, Spotify is a commercial music streaming service that offers limited digital management from record labels Sony, EMI, Warner Music Group and Universal. This service provides users with quality recordings and offers many musical suggestions based on interests, habits … Spotify’s music store has more than 35 million songs and more than 30,000 newly added songs. Every day, more than 2 billion playlists are available with 2 million playlists created every day.

Daniel Ek – founder of Spotify. Photo: Reuters.

Currently, the service has 159 million users and 71 million paying monthly subscribers (while Apple Music has only 36 million subscribers). The rest of Spotify users have to watch ads to listen to free music. In a recently published letter, Daniel Ek wrote that Spotify can “connect people around the world in a culture of sharing that broadens our understanding”.

Spotify’s total revenue last year was nearly $ 5 billion, but Spotify still lost $ 1.5 billion, higher than the $ 650 million in 2016. Spotify’s loss of revenue mainly comes from the payment of royalties. According to Hargreaves Lansdown Financial Services, Spotify has spent $ 10 billion in royalties on artists, music labels, and publishers and is forced to pay at least $ 2 billion more over the next three years. this problem.

Hargreaves analyst Laith Khalaf said: “Only four music companies hold the copyrights of 87% of the songs on Spotify, which gives them a legitimate but somewhat excessive bargain from Spotify revenue “.

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Licensing agreements signed so far “are in favor of the owners and the costs incurred are covered by Spotify.” But Par Jorgen Parson – member of joint venture Northzone (Sweden) An investor in Spotify predicts that the power vortex is shifting and there is reason to lessen the terms of the contracts.

Spotify has spent $ 10 billion in royalties on artists, music labels, and publishers and is required to pay at least $ 2 billion more over the next three years on this issue.

In fact, if Spotify could negotiate to lower royalties, the Company still faces a long separation from major brands, completely different from Netflix – a company that has reduced its dependence. to original Hollywood content by producing them. However, fans want a full music library of all kinds and more genres.

So there is a competition here. Three of the “four big tech companies” – Apple, Google and Amazon, have direct competitors with their own Spotify. Apple Music is currently the most successful product, offering services at a price comparable to Spotify, but Apple Music is pre-installed in the group’s best-selling smartphones, tablets and smartwatches. this technology.

Apple Music has fewer subscribers but has a big advantage, since Apple doesn’t need to profit from its music streaming service, while Spotify does. Apple could suffer indefinite losses in Apple Music in order to sell more iPhones and to generate gross sales; Google can expand the market’s influence with Google Play Music All Access, and Amazon can use Amazon Music to sell more things.

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Par Jorgen Parson agrees: “Apple is a formidable danger. But Apple Music is tied to its phones. And let’s not forget Apple has only 20% of the market, and Spotify is everywhere.”

On the artists side, with 46 million monthly listeners and more than 1.5 billion times to listen to the song Shape of You, Ed Sheeran is a typical artist of the Spotify generation. The release of Sheeran’s latest album Divide is an opportunity to demonstrate just how influential Spotify is.

Irish band Strypes performed a special movie for Spotify in 2016.

Warner Music, the company that manages Sheeran, has turned down exclusive offers and marketing partnerships from online music services like Spotify, Tidal and Apple Music to double the profits. Accordingly, Sheeran’s album was released in all music services at the same time, but the singer was displayed on the Spotify homepage and added to almost all influential pop music lists. .

As a result, all of Divide’s songs reached the top 20 in the UK and nine of them even ranked in the top 10. However, while Spotify’s enormous influence could help famous artists hit the ground. less famous people like DJ Gareth Emery complained “the artist only gets breadcrumbs”: “Even with more than 1 million monthly listeners, I can’t rely on Spotify for income.”

Chieu Anh / The Guardian
* Source: Saigon Businessman

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