Why Spotify can never be profitable: The secret demands of record labels
Even though Spotify is a "piracy killer" (at least in Sweden, if not elsewhere), I think the labels will be more than happy to bleed it dry and leave its lifeless corpse on the side of the road as they search for the next Big Thing to strangle, bleed dry and leave behind.<p>Two reasons:<p>1. The major labels, like most of the big content producers, are extremely interested in short term gains, even if it means losses down the road. As long as something is still "down the road," it won't affect this year
s/quarter's/month's profitability.<p>Take a look at Hulu. It's a shadow of its former self. It used to be a solid site with great content, but those controlling the content have decided it's not making enough money fast enough. The fix? Remove content. Move it around. Chop it up. Stagger releases randomly. Put X season on Hulu but have Y season exist only as a selection of clips or have it go missing entirely.<p>See also: Netflix. Because the major studios are unwilling to trade DVD dollars for digital dimes, they've gone about pricing themselves out of the market. Netflix is also a "piracy killer," but the studios are too concerned with getting the money up front to pay attention to how much content is being leaked out the back.<p>The studios also seem to think that people will follow them to their own sites or digital offerings, but the content they offer is generally crippled by DRM or requires the installation of proprietary software or another set of logins and passwords and people in general just do not have an interest in setting up yet another account just to watch a couple of Lost episodes.<p>2. Even though everything mentioned is a "piracy killer," the simple fact is that, for many people, the service (Spotify, Netflix, etc.) becomes the end product. The services don't lead towards more sales of other physical or digital goods. This doesn't fit into the major labels'/studios' plans at all. They want to sell more of their stuff, not necessarily collect royalties from someone else's service.<p>So, if they manage to drain Spotify completely or at least force it to give up its US operations, it won't hurt them much. By that point, another service will come along and they can pile on and bleed it dry as well. The plan, I suppose, is to keep riding these little income spikes until it's 1994 again, or something.<p>They must still harbor the belief that, once the other options dry up, people will head back to the brick-and-mortar and purchase content in physical forms that carry much higher profit margins.