WRKO>Audio & Video on Demand>>Gady Epstein (The Economist, Spotify)

Gady Epstein (The Economist, Spotify)

Jan 12, 2018|

Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

This segment of the financial exchange brought you in part by the US virgin rounds economic development authority hurricane German Maria were devastating to be out there already well on the way to recovery. If you're looking to star relocate or expand your business the US Virgin Islands is one of the most competitive business locations in the Caribbean. Take advantage of the incredible tax incentives that are fully sanctioned by the US government. For more information visit USD IE DA dot org again that US VI EGA dot or. So while having rescued your recorded music. Spotify upend the industry gamble but I joined by guy Epstein from the economists talk about his article and I gotta tell us start with you know just look at history here and talk to us about really how music sales have changed. Since the 1990s. Right well so recorded music. Industry's sales. In 1999. That was when Napster went starting them you know I'll start to become popular people stop paying for music. And there's been a steady decline that was a decline between fifteen years after that. And sells basic. And actors right yeah and really even more inflation adjusted basis race just couldn't nominal terms that's it it was actually the worst. So I can help recover that a little bit people started paying but. But I can also broke the element of individual tracks the people about the song like. Does streaming has gotten people paying for music and wave that has expanded the amount of money. People putting into the music industry. So the labels are very happy and now you know artist or start becoming happier too because. Those dreams are trying to get a lot of streams these are actually getting serious to. And so for some of the dozen knowing talk about what Spotify rule is in this industry I mean clearly the leader like Howard saying compared to Apple's got their own streaming service YouTube pandora you know what they look at terms of subscribers and revenues. Right okay so Spotify and apple. Are very similar model of a Spotify does offer like at port it for you music. The subscriber thing is pretty much the same across. And he service where you pay ten dollars a month. And you get the same catalog and so you could also. Are available to use a subscriber. YouTube and and the other little different. YouTube in particular is. The royalties are much lower for the industry the industry really doesn't like you to. People. That they complain that you know people basically use auto play. Two to start to its use YouTube as sort of back background music kind of deep for you DJ right. And there's not much advertising revenues and in general the music industry don't like advertising supported. Music and it doesn't generate as much money subscriber. So the industry who really likes a subscription streaming like Spotify and apple music. I have but still clearly Spotify has attracted a ton of customers apple music has you know done similarly. But. As you point out your article I mean Spotify is extremely unprofitable here I mean when they lose buster 400 million dollars. Right now with the operating affects a lot more bill must. Something like 600 billion dollars account debt service right they're about took the route of this publicly. That at that they're not gonna have the same kind of financing costs going forward. So they're the loss is going to be only like in the couple million dollar per. That the way that they reduced that is there's coupled. One is there a particular lesson loyalty. They've negotiated the reductions. With the music labels so the pay a little bit less than that Opel. But. To really make big money they're gonna do other kind of formed the business debate we re selling music is what they do and that is. Not inherently higher margin business it will mark as to what they're gonna have to do is have got great data on there. On who listens to what and where. Yeah I was gonna say they're Dana data analytics must be I mean huge you've got millions of people listening to all sorts of different music different times of the day you would think that people be willing to pay for that sort of information. Exactly and they already you know are using that help. To work with in a concert promoters toward ticket sellers. Big giveaways some of that information directly to artist and maintain good relations with them into help and use the platform better. But they can package that data and probably tell. And extract price sport that's one picnic that another is that they have the power of the playlist. Which you know they can't you know if you have secured a spot by platelet. You're listening who's going to you know go that route and get deposed quite a lot some estimates maybe as much to 200%. More streams. And that's for you know that's for artists that minority be somewhat established. So what does that sort of certainty that it didn't. But with a start charging that let's turn well are those. Exactly can't you can't probably wouldn't. Charge in the in the would have up they've run into problems have been charged just pick the playlist re elect the payola scandal in the radio industry yet but they are testing on the frontier. Something called clearly mark cult sponsored so yeah. So you are you know you might help your playlist of songs you can opt out of the picture on them that you're using the reservists yet. It might be a song come up to actually has sponsored. And that's something that could make money and there's another way to playlist could help them. They typical label themselves and start signing up and coming artists. And then maybe pay down a lot less and royalties but a lot more than they get themselves right now under a contract with the label. And become. You know a label that competes with the industry. I think that's. That's like that would be pretty tough tough reached to walk while still keep in those other bigger labels at the tournament and. Right I think it's not just you know any time soon. I think that they're gonna grow their core business due to excel did. But long term he could see that right I mean just the way that Netflix from. Being a distributor to hospital content maker yeah. You know I didn't I don't think that it's not easy to do. But Spotify in the position where they can help break artist. You know get and that's something that I'm the most important thing a label doesn't break in artist. And Spotify has some power that regarding could could wield its and a. That's a really interest in parent also win now what's the timing of their IPO. They have their highly incentivized under the terms of their financing to do it by the end of this quarter or so but it by the end of march absent that it's not a certainty but. Look where that. While I appreciate Jonas daily various article on Spotify and their potential future growth year have a great weekend. Crypt we hear it. I don't use Spotify and just because. I'd edged don't listen to music that would yet. But. I love their big I I love where they have the potential to go in the long term I had not considered that parallel between Netflix and Spotify until I read this article and I think it's a right really important. You know important thing to point out right this is how Netflix started to set hate. Will license all your staffers streaming online none of the other and you know the producer at NBC Sony noting he's doing. They start doing and then they said we got all this money spend beacon do this or cells we learned how to do it for and what if instead aiming you know paying someone else we say hey let's get our daughter's house that's and yet there's going you can really see at that takes off we'll say.