Monday, December 12, 2011

Why Spotify, Rhapsody & Others Can Never Be Profitable

Online music/digital media guru Michael Robertson today wrote a guest post in industry-leading blog, Gigaom, with the provocative title "Why Spotify Can Never Be Profitable: The Secret Demands of Record Labels." Click on this link to read it.

This is a "must read", because it gives an insider's view of how record labels structure their deals with online music services on a "take-it-or-leave-it" basis. And, the piece is definitely striking a nerve, because it already has been tweeted over 2,500 times! Bottom line -- those leading online music services -- despite their frequent bravado (especially Spotify) -- have little power.
Ahh, and there's one more critical thing -- despite the onerous terms the labels demand from those services, they hold back critical music content. Case in point -- last time I checked, neither Spotify nor Rhapsody has Coldplay's latest album or The Black Keys' latest album. And, these are just two examples.

(NOTE -- pure online "radio" services like Pandora -- where the user cannot select the precise tracks -- are exempt from most of the realities identified in Robertson's piece because they benefit from the licensing scheme of the Digital Millennium Copyright Act (DMCA); however, Robertson is not bullish on those services from a business perspective either; here is his earlier piece about the economics of Pandora.)