The Spotify logo is green, but fades to black. Financial capitalism turns off the light in the most unusual contexts. The company based in Stockholm (Sweden) that dominates the market for streaming musical —it controls 34.8% of the business compared to giants such as YouTube Music, Apple Music, Amazon Music, Tencent Music and NetEase—, has risen 124% on the stock market this year and during the third quarter it obtained 32 million euros of income of operation, it counted 574 million active users and total sales grew at an interannual rate of 11% to 3,357 million euros, and, therefore, it should travel in Formula 1. Well no. Go back to black. It lays off almost 1,600 workers (out of a total of 9,400). In fact, he already fired 6% of the staff in January of this year and another 2% in June. “The latest staff cut [17%] It will cost between 130 and 145 million euros, and next year it could translate into savings of 300 million,” predicts Tim Nollen, an analyst at the Macquarie Stock Exchange, who estimates that it will end with annual revenues of 13,317 million dollars. . The excuse for the company when it comes to taking out the scissors is textbook: the rise in interest rates has increased credit expenses and the economy has slowed down.
Something is wrong with that letter, perhaps it is too obvious. A Barclays report proposes a good title for the song. “Spotify needs to think more like a communications company than a technology firm.” It is true that Amazon, Alphabet, Meta and Microsoft have also laid off thousands of people this exercise to protect profits. However, behind it, something is out of tune when a rising company sheds thousands of workers so quickly. “Spotify is following a favorable long-term trend: it is improving its platform, taking advantage of a large digital advertising market, expanding its audio offerings and lowering its cost structure,” describes analyst Monness Brian White, of the house Monnes, Crespi and Hardt. “But the competition is fierce, the margins are tight and the darkest days of this crisis are yet to come.”
In the times of zero money, the company behaved like a new Great Gatsby in its podcast investment. He paid 25 million dollars for only 12 episodes of Prince Harry and the Duchess of Sussex and the experiences of Michelle and Barack Obama must have been equally expensive. He also dedicated himself to audiobooks. It was easy to grow up. The days of wine and roses always bring a hangover and thorns. Now, the costs are much higher. So much so that Californian activist investor ValueAct acquired a stake in Spotify in February and expressed concern that expenses had “exploded.”
Copyright
The company, in the voice of Daniel Ek, the billionaire co-founder of Spotify and its CEO, announced a change starting in 2024 in its royalties which in principle should involve the redistribution of $1 billion over five years to emerging and professional artists. Ek has approved three changes, which were already being heard in the sector. The songs will need 1,000 listens annually to collect royalties. Certain styles of “noise” tracks like white noise or sleep sounds will need to be at least two minutes long—up from about 31 seconds—to see any money, and will charge a new fee to labels or distributors deemed responsible for artificial broadcasts ( click farms, in slang) with the trick of increasing views and payments. Spotify seeks more revenue in a market that grows at 11% annually. It also maintains the goal of achieving 600 million users. “So the rise in prices will also be a way out,” says Diego Morín, analyst at IG Spain. That's another central idea. Music consumers in streaming They are willing to absorb higher prices. This is the narrative defended by industry figures such as Robert Kyncl, CEO of Warner Music, who has advocated for platforms to be much more aggressive in what they charge. They can increase monetization. Goldman Sachs estimates that the phenomenon of superfans alone could generate revenues of 4.4 billion euros, although it does not detail the timing. But what will happen if clients reject it or artists see their profits in danger?
There is nervousness among the creators. That income, although it may seem low, provided by having less than 1,000 listens a year, can be vital for small labels to cover their expenses and continue producing music. “It seems much more likely that Spotify has relied on major record labels, since this change will increase the money that enters its coffers,” criticizes Amelia Fletcher, an academic at the University of East Anglia (England). “There is a real risk that this could lead to a rupture between two parties. This year the limit is 1,000 streams, but the next one could be 5,000 and then 50,000. “We cannot allow this to happen.”
But regardless of the title of the Barclays report, technology continues to be its refrain. During 2023, the presentation of Spotify Wrapped results was a massive marketing exercise. From Barcelona football to a presentation concert in London starring Sam Smith. What is Wrapped? “A personalized experience”—according to a company note—where users will be able to connect with their favorite artists. And even people are classified by their habits. The “Alchemist” is the one who spends the most time creating his own playlist (list of songs) and the “Robot” is the one that is guided by the algorithm. In the background, a hum: the immense amount of data they handle and that consumers give up for free. Maybe monetizing should be a double-sided vinyl.
Taylor Swift and the money factory
Who doesn't want to be Taylor Swift? Person of the year for Time magazine, young, brilliant in her profession and a billionaire. The compendium of success according to Western canons. The most listened to artist in the world—according to Spotify data—with 26 billion views this year. She is also one of the richest. Bloomberg estimates his fortune at 1.1 billion dollars (about 1 billion euros), his last tour (The Eras Tour) generated 780 million in the United States, according to Forbes, and the documentary that includes his concerts added 97 million dollars in sales. of tickets only during its opening weekend. The singer of the 12 Grammy Awards has a real estate assets of 150 million dollars. And, of course, Wrapped's proposal—interacting with idols—takes advantage of the moment. “Hello, this is a special message from me to you, basically a thank you note,” Swift says in a video uploaded to the platform. “It honestly seems like you've been listening to a lot of my music this year. It doesn't matter what time it was; I am very, very grateful to be on your Spotify Wrapped.” The star throws a multimillion-dollar kiss into the air.
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