Help Us Spotify; You’re Our Only Hope! (Part 14 of our Online Music Services Series)

September 30, 2011 by Rick Sanders | Category: Blawg, Blog, Online Music Series | Tags: #onlinemusicseries, Apple, copyright, Grooveshark, internet, market dynamics, Rhapsody, Spotify

The Planets Align for the Music Industry. Will it Be Enough?

In our last post, we examined the overlapping music-licensing regimes to explain, in part, why it took Spotify two years to get licensed in the U.S. We also looked at the music industry’s unhappy history with the internet, which also helped explain Spotify’s licensing struggles.  We now look at what Spotify means to the music industry’s future. A lot might be riding on Spotify.

For all the technology firms looking to make money from music, consider how few of them even get as far as Spotify in being able to present the music industry a comprehensive internet-based scheme. A couple spring to mind: Rhapsody in 2001, and Apple in 2003.* This means that, when Spotify came calling, the industry actually had little practical experience on which to base a very perilous decision: how much to charge for music. Since the royalty rate is by far the biggest cost incurred by online music service providers–Rhapsody is said to pay 60% of its revenues in royalties, Pandora 50%–the royalty rate demanded by the music industry pretty much dictates the price of the product. Set it too high, and the service … Read More»