Featurrre: Discovery Quarterly, Spotify Figures Out How To Make Money
----------
Musicians rejoice! Spotify records its largest ever quarterly profit.
July 23rd, 2024
Today, Spotify, the world's most dominant music streaming platform, announced their highest ever quarterly profit of $297 million. This is cause for celebration because this same quarter last year they reported a $328 million loss. In fact, the concept of Spotify as a company making money for themselves is a relatively new paradigm. Since becoming a publicly traded company in 2018, Spotify never made any money until halfway through 2023. Think about that for a moment. For over four years, quarter after quarter, the Swedish streaming machine lost money, often to the tune of hundreds of millions of dollars.
Wait a minute, so who has been making money from Spotify? And how’d Spotify turn things around for themselves? Were the royalties they paid to artists too high?
That last question killed us to write. We chuckled, in a painful, unfunny way. As if the $0.003 they pay to artists per stream is too much. That’s an oversimplification, Spotify actually does not pay artists individually per stream, instead all streaming eligible revenue is mixed together in a giant pot and then portioned out to rights holders at a percentage based on their share of the total number of streams on the platform. Spotify refers to this model as “streamshare”.
Nitty gritty details aside, let’s get back to basics and all celebrate Spotify's record profit, because everybody in the Spotify economy has reason to celebrate, right?
Well, here’s how Spotify got themselves to these record profits:
- Laid off 2,300 of its employees in 2023, 25% of its workforce.
- Raised the price of their subscription service, twice.
- Stopped paying royalties to songs with less than 1,000 streams.
- Introduced a new publishing bundle that allowed them to pay less to rights holders.
So... by giving a big fuck you to employees, artists, and consumers. Better known in business terms as efficiency.
But where there are losers, there are most certainly winners! Like Spotify shareholders who saw their shares increase by 10% just on today's news, up 70% on the year. In 2024 alone members of Spotify’s C-suite have sold more than $250 million worth of their shares. Joe Rogan got a cool $200 million for an exclusive podcast deal. Meghan Markle and Prince Harry bagged $20 million for their exclusive podcast, a show that was canned after a year because no one listened to it. Spotify is working for these people. We’re happy for them, well played.
We love to bash Spotify because they make it all too easy, but in reality the streaming economy is here to stay. And there is certainly value and possibility within streaming. We embed Spotify tracks into all our show reviews because we believe it supports our goal of drawing new interest to the artists we cover. And we don’t like to complain about things while not proposing any kinds of solutions. This guy on Youtube has some interesting ideas about investing in infrastructure for artists, but our recommendation will be a simple one.
Buy merch.
For simplicity's sake, let’s say a band sells a shirt for $25 that cost them $20 to make. Selling one shirt nets them $5, the equivalent of 1,667 streams on Spotify. Simple stuff. The more direct way a fan can support an artist, the more impactful it is for the artist.
Thanks for reading, Rrrat Pack. Happy streaming. Buy merch.
