Maybe Spotify IS the Problem
The latest layoffs are just a fraction of a fifteen year miscalculation.
The holidays are here. So this is the one time we’ll not so subtly suggest that you give a gift subscription of The Cadence to someone on your list who cares about Music x Tech x Brands as much as we do. 🎁
There’s a recurring question on the always enjoyable podcast, 24 Question Party People, in which host Yasi Salek asks her musician guests about their “Sliding Doors moment.” Since nobody remembers this 1998 film, Salek then has to explain it’s the one where Gwenyth Paltrow misses her train and lives out one life. Then the film rewinds, and she catches the same train and lives an entirely different life.
This premise isn’t nearly as profound as the filmmakers seemed to believe. However, an honest-to-goodness butterfly effect did take place in 2008 when Spotify and the major labels forged what has revealed itself to be the defining deal of the past 15 years — all the music in their catalogs for $10 a month.
On Monday, Spotify laid off 1,500 people, about 20% of the company’s worldwide staff, including several regular Cadence readers. This is devastating news for those people and yet another collective groan from the music tech space that has also seen sizable job losses at Amazon Music, Bandcamp, Soundcloud, Byte Dance and dozens of smaller companies in the past 18 months.
And yes, these layoffs are, in part, the result of larger layoffs and economic malaise around the world. But the Spotify news, in particular, seems part of a chain reaction that began when the fledgling company and its Napster-traumatized major label partners decided that $10 all-you-can-eat was what the market would bear in a time when everyone was stealing everything anyway. What couldn’t have been predicted at the time was that while the majors were selling low, the emerging smartphone market would prove consumers’ willingness to buy high.
We’ve long contended that it was the ease of streaming music directly onto a network-enabled device (along with the difficulty in putting pirated MP3s on an iPhone), and not, as many have insisted, Spotify’s bargain basement price point, that ushered in the era of streaming.
Did anyone know this in 2008? If so, they clearly weren’t in a position to make decisions at the majors. What if the app store had launched a year earlier, prompting consumers to toss out their bootlegging machines iPods sooner? Could that insight have allowed the music business to create a more equitable product-market fit? One where music streaming platforms could actually self-sustain by streaming music?
But that’s the thing with sliding doors. You don’t know you’re walking through one until you’re on the other side. By the time this all played out in the early ’10s, it was too late to choose another path. The deal forged by Spotify and the labels as the music industry was entrenched. Competitors entered the market with prices set to compete with Spotify. And unlike Spotify, these mega-corporations like Apple and Amazon could sustain endless losses on their music streaming services.
To compete over the past decade, Spotify has had to rely on low-interest investor money to chase market share while trying to find new revenue streams within the limited scope of audio — podcasts, audiobooks, Car Thing.
While Spotify was purchasing The Ringer — whose founder, Bill Simmons, popularized the term “Sliding Doors moment” — for $200M as part of its pivot-to-podcasting, its competition was manufacturing civilization-altering hardware and defining the global supply chain, respectively.
Yet despite those odds, Spotify has succeeded to a surprising degree. The fact that this little startup, which grew out of Sweden’s Pirate Party in the mid-’00s, still leads the music streaming conversation is itself something of a miracle. But that doesn’t actually mean that the overall industry is better off for it.
Perhaps Spotify’s original sin of a business model has been an anchor dragging down the whole of the music streaming economy. If Spotify disappeared tomorrow, would Apple and Amazon increase their prices significantly? They could certainly risk it in a way Spotify never could.
Is it possible to see a future where users pay a more reasonable monthly rate for unlimited music? And that money flows into more jobs and more money for artists?
OK, forget that last part. Nothing is gonna save artists. But at least Apple and Amazon already pay a bit more per stream, and if some of the talent departing Spotify lands at either of the two, then their duopolistic power could at least generate more job security for those inside the walls.
The oligopolistic music streaming market, as it was conceived, was destined to fail. Could an all-powerful duopoly do better? Maybe we’re due for another sliding doors moment — one where we leave Spotify behind.
TAKEAWAYS
Salient statements from this week’s music news.
1. Spotify CEO Blames Layoffs On Fake Work, Pushes Out CFO Who Cashed In $9.4m In Stock
In other news, billionaires are still billionairing.
Takeaway: With his comments. Ek joined the ranks of tech executives who blame “fake work” – work that doesn’t serve customers, grow the company, or contribute directly to the bottom line – for recent massive layoffs.
2. Tidal Is Cutting 10% Of Its Staff As Parent Company Block Seeks To Reduce Headcount
Bloomberg reports that the cuts impact around 40 people at the music streaming company across various departments, including the curation team that builds playlists.
Takeaway: The move comes as Tidal’s parent company, Jack Dorsey’s Block, recently told investors in a letter that it plans to cap the number of people at the company at 12,000.
3. Bipartisan Live Event Ticketing Legislation Advances in Congress
The U.S. House Energy and Commerce Subcommittee unanimously passed the STOP Act, moving it forward for House vote.
Takeaway: Now that both the House and the Senate have ticket reform packages waiting to be voted on, ticket reform may be closer than ever.
