MBW Reacts is a series of analytical commentaries from Music Business Worldwide written in response to major recent entertainment events or news stories. MBW Reacts is supported by JKBX, a technology platform that offers consumers access to music royalties as an asset class.
It’s been a curious week for those of us with a blue-tick Twitter account.
When I say ‘us’ btw, I don’t mean ‘me’; my personal reasons for fleeing the bully-bird’s cage were plenty, but can essentially be summed up in two chirps:
- (i) I’d seen enough hot takes and phony remonstrations to recognize the tawdry rules of Twitter’s numbers game. If I’m to spike my evening cortisol with interactive nonsense, I’d rather do so playing PlayStation;
- (ii) Ultimately, I put food on the table for my kids with words, and I didn’t want to habitually piddle those words away to enrich gazillionaire Silicon Valley bros (Jack, Elon)… for nothing.
So when I say ‘us’, I mean ‘us’.
As in, Music Business Worldwide, and any other business whose online presence continues to carry Twitter’s once-prized blue verification shield.
You may have read in the media that Elon Musk is now selling blue-tick verification for a monthly subscription price.
What you might not have read about is Musk’s stick to this carrot: like a canny gangster, Twitter has begun robbing its users’ technical security, before, seconds later, offering to replace it… for a tidy sum.
On Wednesday (March 22), Team MBW received the following email from Twitter informing us that our Music Business Worldwide profile no longer enjoyed two-factor authentication.
(If you weren’t aware, two-factor authentication = receiving a unique code each time you log on to a service in order to ensure no one dodgy is hacking into your account.)
Guess how one reinstates mobile/SMS two-factor authentication on Twitter? Yup: Start paying Elon for a monthly subscription.
This is Musk playing hardball: “How much do you value the security of your Twitter account? Are you willing to risk being hacked and unmentionables being tweeted out in your name? If not, pay up.”
So, begrudgingly, we’ve had to.
There’s a wider business lesson to be learned here: Elon Musk’s stone-hearted decision to start selling an essential service benefit that we’ve long grown accustomed to having for free.
That idea, in turn, has brought to mind the Good Ship Spotify, and a fascinating slide from one particular presentation at SXSW in Austin last week.
Said presentation came from Rob Jonas, CEO of Luminate, the entertainment market monitor and insights provider that was once known as MRC Data and Nielsen Music. (You can listen to Jonas’s full SXSW presentation through here.)
The relevant slide within Jonas’s presso is the one you can see above, based on Luminate data. It delivers some jaw-dropping information.
First of all, check this: There are 67.1 million audio tracks sitting on music streaming services today that, in the 2022 calendar year, attracted 10 or fewer streams apiece, globally.
That 67.1 million figure represents just under half (42%) of the entire catalog of tracks available on worldwide music streaming services as you read this (based on ISRCs).
(The entire catalog of music on these streaming platforms is comprised of 158 million tracks in total.)
Prepare yourself for the next statistical haymaker: Nearly a quarter (24%) of the 158 million audio tracks on music streaming services monitored by Luminate in 2022 attracted ZERO plays that year.
That’s approximately 38 million tracks. 38 million! Zero plays!
Not one single sausage finger pressed a forward-facing arrow underneath the artwork of any of these songs, on any streaming service, anywhere, at any time, in the entirety of the 365 days of 2022.
It’s almost enough to make you cry.
Not me, though. It made me think of Spotify.
As our regular readers may recall, in November MBW published an article that revealed some startling stats about the amount of money Spotify pays Google each year for use of its cloud storage facilities.
Spotify doesn’t publish a precise figure for what this Google cloud storage costs it annually. But SPOT does publish, in its annual SEC-filed report, the monetary yearly increase in its company costs for ‘usage of cloud computing services and additional software license fees’.
What this means: MBW is able to figure out the minimum amount that Google’s cloud storage services (plus other software licenses) are costing Spotify annually.
To repeat that: The below chart represents the minimum amount Spotify is spending on these services each year. The reality is likely far (i.e. multiples) more expensive.
(We’ve been able to update the below figures for FY 2022, as Spotify filed its latest annual report, for last year, in Q1 2023.)
Question: If Spotify is now shoveling a handsome nine-figure fee over to Google each year for cloud hosting services, where is the revenue coming from to cover that bill?
Answer: right now, that revenue is coming from Spotify’s three sole income streams: (i) Advertising; (ii) Subscriptions; and, to a much lesser extent, (iii) On-service marketing fees paid for by the music industry.
In other words, these hefty cloud hosting costs are directly eating into Spotify’s margin at a time when analysts across Wall Street are baying for Spotify to increase… its margin.
But what if Spotify was to take a leaf out of Elon Musk’s book RE: two-factor authentication?
What if Spotify also started ruthlessly passing on the cost of a utilitarian technological benefit to its individual B2B clients (aka artists) – but this time, for the cloud hosting costs required to keep music available in its library?
Especially if it started directly billing, under threat of takedown, the millions of artists behind those 38 million tracks (still an unbelievable stat) that attracted ZERO streams in 2022?
And, by extension, the artists behind the 42% of tracks that attracted ten or fewer streams last year?
No pay, no stay (unplay-ed).
As things stand, Spotify can’t technically do this, at least directly.
Its monetary relationship with said B2B customers (nine million artists and counting) can only take place via middlemen, in terms of distributors and record companies.
The most important sector, volume-wise, of those middlemen? DIY distributors, whose self-uploading clients are responsible for the majority of new music pushed onto streaming services’ vast catalog (158 million tracks and counting).
If only there was a way for Spotify to have a direct distribution relationship with artists, so that it could ‘Do An Elon’ and start billing said acts, one-to-one, for essential B2B services.
Oh yeah, there is: Spotify launched a direct DIY distribution product for artists in 2018, only to shut it down in 2019 under pressure from the major record companies.
Four years on from the last time Spotify abandoned its own music distribution operation, is it time for Daniel Ek and co. to have another crack at this market?Music Business Worldwide