Pandora’s founding CEO Tim Westergren, who returned to the top job just last year, intends to step down as the streaming service’s leader in the near future. According to Recode, which cites “people familiar” with the plans, Westergren won’t go anywhere until a replacement has been found and is in place.
Is streaming music a good business?
Streaming has taken over as the dominant music format and is attributed with revitalizing the moribund business of record labels big and small. But for streaming companies, the answer is not as clear-cut.
European antitrust officials are preparing to hit Google with a potentially record fine by the end of August over some of the Silicon Valley giant’s search services, according to two people with direct knowledge of the case.
Margrethe Vestager, the European Union’s competition chief, is in the final stages of ruling on the case, said the people, who spoke on the condition of anonymity because they were not authorized to talk publicly. Any financial penalty is expected to be larger than the fine of 1.06 billion euros, now about $1.2 billion, then about $1.4 billion — at the time the highest ever — that Intel was forced to fork out for antitrust abuses in Europe in 2009.
As well as the fine, European officials could also force Google to alter how it operates in the region, and potentially elsewhere, to give rivals a greater ability to compete.
The case, linked to claims that Google diverted traffic from competitors’ services to favor its own comparison shopping site, is one of three investigations that the European Union’s executive arm has opened against the search giant. The other two involve Android, the company’s mobile software, and some of Google’s advertising products.
[Editor Charlie sez: This day has been coming since we first ran this spoof picture of Daniel Ek–but not everyone was laughing after they got their Spotify royalty statement. Mark Mulligan has parsed Spotify’s recently release financial statements and has some interesting admissions by Spotify–starting with a more accurate total of paid subscribers.
This tweet was widely reported as “50 million paid subscribers” by Spotify’s boosters in the press:
But Mark Mulligan points out–as did many privately–that the correct number was much less than 50 million, although Mulligan’s analysis results in an even more generous number than the whisper number (assuming “paid user” means the same as “paid subscriber” which it might not given Spotify’s premium deals like its partnership with the New York Times):
That would be the New York Times that did not cover Spotify’s $44.3 million class action settlement with Melissa Ferrick. Here’s an excerpt from Mr. Mulligan’s excellent post]
As Spotify nears a public listing or an acquisition by Alibaba or Tencent, it remains the benchmark for the health of the streaming economy. With the underlying fundamentals remaining largely unchanged in 2016 despite stellar growth, here are a few thoughts on how the economics of streaming might change:
An often repeated argument from record labels is that streaming services will hit profitability when they reach scale. So, when does that happen? 48 million subscribers can lay a good claim to being ‘scale’, but it isn’t driving profit. While the market establishes itself, streaming services have to overspend on product innovation and marketing (and then, later, on user retention). So, these costs will likely rise in relative terms. Meanwhile, rights are always going to remain largely in line with revenue (though the UMG and Merlin deals reward growth with some discounting, which is a welcome innovation). But even these deals will not change the fact that rights will be large enough to challenge margins and will largely scale with growth. Which means no truly meaningful scale benefits. So here are a few alternative ways in which streaming margins might be improved….
In proposing to buy WholeFoods for $14b, Amazon has surprisingly invited unwelcome serious antitrust investigation into, and public discussion about, Amazon’s core conflicted retail/MarketPlace business model and the many alleged predatory, discriminatory, and unfair standard Amazon business practices, that Amazon commits, not only in the grocery business segment, but in all other retail segments.
In stating “the parties expect to close the transaction in the second half of 2017,” that means Amazon expects no serious antitrust investigation of whether the transaction “substantially lessens competition,” and thus no “second request” from antitrust authorities requesting more information and questions to answer.
If a “second request” comes, which is likely, there is no way the companies can continue to “expect” the deal will be approved in 2017. That’s because such an investigative process effectively does not have any deadline for the reviewing authority, DOJ or the FTC, to either: approve, approved with conditions, or challenge the deal….
The combination of: the likely multiple alleged anticompetitive behaviors; the likely number of complaints and complainants; the online-offline complexity of investigating the complaints; the importance of this case as an online-offline antitrust merger precedent; the exceptional size, scope, reach, speed and non-transparency of Amazon’s online business; and the expected high-public profile of this transaction; all would auger for the reviewing authority to err on the side of caution and investigate the transaction fully.
Let me be clear here about what I am saying and not saying.
First, what’s obvious here is that the transaction will attract a lot of concern in private and publicly in multiple dimensions. That’s precisely because of the many serious implications this “Everything Store” proposed transaction will have for the future of competition in many markets, which in turn will delay Amazon’s transaction timetable.
…[M]ost of the antitrust concern will come with the exceptional market power that Amazon wields online, combined with the under-appreciated conflict in its business model where half of its retail revenues come directly from consumer-customers, and the other half of its retail revenues come from its MarketPlace offering where Amazon is the mall and gatekeeper for around 15 of its top 20 grocery competitor-customers, that have had to capitulate to Amazon’s market power and operate on Amazon Marketplace in order to reach all their offline customers online.
In layman’s terms, the problem Amazon’s retail intermediary model causes competitors is that it simultaneously is a direct retail competitor overall, at the same time it is the dominant online broker that has disintermediated its competitors from their customers when they are in the online world, and in that broker role, they are routinely criticized as not being an “honest broker” or as being a “non-neutral platform,” that routinely self-deals anti-competitively, because Amazon has market power to extract it with impunity, and no antitrust or regulatory accountability to speak of – to prevent it.
[T]his transaction review is the first genuine opportunity and powerful legal process for those alleging anti-competitive harm by Amazon to have antitrust authorities’ full ear in a confidential process where warranted.
Stuart Dredge over at Music Ally is reporting Spotify’s losses widened to $600 million last year. Read his article here.
I just wanted to point out that some significant portion of these widening losses are due to currency swings. March 29th 2016 Spotify announced a $1 billion US denominated convertible debt deal with TPG and others. Since that time the US dollar has risen considerably against most currencies. A disproportionate share of Spotify’s income is NOT in US Dollars. Therefore the vig on that convertible debt is now headed towards payday loan rates. Ouch!
This is good news and bad news for artists.
The good news is this may force Spotify to limit the free tier and convert more US subscribers to premium. They need more US dollar income to stop the hemorrhaging from the US debt! Remember artists’ royalties from premium subscribers are 8-10 times higher than free listeners. More premium subscribers is a good thing for artists.
The bad news is Spotify has already indicated they want to pay lower royalties to artists because they are losing so much money. This is completely fucked up. It’s not our fault the company is so poorly managed.
Stuart Dredge over at Music Ally is reporting Spotify’s losses widened to $600 million last year. Read his article here. I just wanted to point out that some significant portion of these widening losses are due to currency swings. March 29th 2016 Spotify announced a $1 billion US denominated convertible debt deal with […]