The Spotify logo is green but turns black. Financial capitalism extinguishes the light in the most unusual contexts. The Stockholm, Sweden-based company, which dominates the music streaming market – it controls 34.8% of the business compared to giants like YouTube Music, Apple Music, Amazon Music, Tencent Music and NetEase – is up this year the stock market rose to 124% and in the third quarter it achieved an operating profit of 32 million euros, recorded 574 million active users and its total revenue increased by 11% year-on-year to 3,357 million euros, and should therefore be on the road in Formula 1. Well, no. Go back to black. It is laying off almost 1,600 workers (out of a total of 9,400). In fact, he has already laid off 6% of the workforce in January this year and another 2% in June. “The recent staff cuts [17%] “It will cost between 130 and 145 million euros and could result in savings of 300 million next year,” predicts Tim Nollen, an analyst at the Macquarie Stock Exchange, who estimates annual sales of $13,317 million. The company's excuse is instructive: the rise in interest rates has increased borrowing costs and the economy has slowed.
There's something wrong with this letter, maybe it's too obvious. A Barclays report suggests a good title for the song. “Spotify needs to think more like a communications company than a technology company.” It’s true that Amazon, Alphabet, Meta and Microsoft have also laid off thousands of people to protect their profits. However, there is something wrong with an emerging company laying off thousands of workers so quickly. “Spotify is following a positive long-term trend: It is improving its platform, exploiting a large digital advertising market, expanding its audio offering and reducing its cost structure,” describes analyst Monness Brian White from Monnes, Crespi and Hardt. “But competition is fierce, margins are tight and the darkest days of this crisis are still ahead of us.”
In times of zero money, the company behaved like a new Great Gatsby in its podcast investments. He paid $25 million for just 12 episodes of Prince Harry and the Duchess of Sussex, and Michelle and Barack Obama's experiences must have been just as expensive. He also devoted himself to audio books. Growing up was easy. The days of wine and roses always bring with them a hangover and thorns. Now the costs are much higher. So much so that California activist investor ValueAct bought a stake in Spotify in February and expressed concern that spending had “skyrocketed.”
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The company, in the voice of Daniel Ek, Spotify's billionaire co-founder and its CEO, announced a change to its royalty system starting in 2024, which would essentially involve redistributing $1 billion over five years to emerging and professional artists should . Ek approved three changes that have already been heard in the industry. The songs must be listened to 1,000 times a year to collect royalties. Certain types of “noise” tracks, such as “white noise” or “sleep sounds,” must be at least two minutes long (instead of about 31 seconds) to be successful, charging a new fee from labels or distributors for artificial broadcasts be held responsible (click farms, colloquially) with the trick of increasing views and payments. Spotify is seeking more revenue in a market that is growing at 11% annually. Additionally, the goal remains to reach 600 million users. “So the price increase will also be a way out,” says Diego Morín, analyst at IG Spain. This is another central idea. Streaming music consumers are willing to accept higher prices. That's the narrative pushed by industry figures like Warner Music CEO Robert Kyncl, who has argued that platforms should be much more aggressive with their fees. You can increase monetization. Goldman Sachs estimates that the superfan phenomenon alone could generate sales of 4.4 billion euros, but does not specify when. But what happens if customers refuse or artists see their profits at risk?
There is nervousness among the makers. While these revenues may seem small with fewer than 1,000 listeners per year, they can be crucial for small labels to cover their expenses and continue producing music. “It seems much more likely that Spotify has relied on major record labels, as this change will increase its coffers,” criticizes Amelia Fletcher, a researcher at the University of East Anglia (England). “There is a real risk that this could lead to a rift between two parties. This year the limit is 1,000 streams, but next year it could be 5,000 and then 50,000. “We can’t allow that.”
But regardless of the title of the Barclays report, technology is still the guiding principle. In 2023, presenting Spotify Wrapped results was a massive marketing effort. From Barcelona football to a presentation concert in London with Sam Smith. What is packed? “A personalized experience” – according to a company statement – where users can connect with their favorite artists. And even people are classified according to their habits. The “Alchemist” is the one who spends most of the time creating his own playlist (song list), and the “Robot” is the one who is guided by the algorithm. There's a buzz in the background: the immense amounts of data they handle and make available to consumers for free. Maybe monetization should be done through 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 at her job and multi-millionaire. 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. Also one of the richest. Bloomberg estimates his fortune at 1.1 billion dollars (around 1 billion euros), his last tour (The Eras Tour) generated 780 million dollars in the United States, according to Forbes, and the documentary film that includes his concerts grossed 97 Million dollars in tickets on opening weekend only. The 12 Grammy Awards singer has a real estate fortune of $150 million. And of course, Wrapped's suggestion – interacting with idols – takes advantage of the moment. “Hello, this is a special message from me to you, basically a thank you,” Swift says in a video uploaded to the platform. “It honestly feels like you’ve been listening to a lot of my music this year. It doesn't matter what time it was; I'm very, very grateful to be on your Spotify Wrapped.” The star blows a million-dollar kiss in the air.
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