Spotify reportedly number two revenue source for record labels, still far behind iTunes

Posted:
in iPod + iTunes + AppleTV edited January 2014
On-demand free and subscription-based music streamer Spotify is now reportedly the second largest source of revenue for the world's major record labels but lags far behind Apple's market-dominating iTunes.

The claims, which have not been independently confirmed, come from a source close to the company who notes that even at number two, Spotify has a huge gap to overcome to reach a level of success enjoyed by iTunes, reports Business Insider.

According to Business Insider Intelligence iTunes paid out an estimated $3.2 billion to music publishers in 2011 which is in line with the numbers given out during the company's quarterly conference calls. Apple's second quarter 2012 was unusually profitable and saw almost $1.9 billion in profit from iTunes, nearly double from the year ago period.

"iTunes is way up here," the source said with a raised hand, "and everyone else is way down here."

A report in 2010 suggested that Apple was in talks to buy Spotify, but the rumor ultimately bore no fruit.

Spotify was founded in 2006 and became a popular service in Europe before crossing the pond to launch in the U.S. in July 2011 with the slogan "any track, any time, anywhere." At the time the company had a catalog of 15 million songs but that number has swelled to 18 million and grows by about 10,000 to 20,000 tracks per day.

Recent estimates from analytics firm AppData found that about 23 million people used Spotify last month. During the D10 conference in May, Spotify founder and CEO Daniel Ek said that there are about 10 million users in the U.S. alone, over 3 million of whom are paying subscribers.

Also at D10 Spotify Director, Napster co-founder and former Facebook president Sean Parker alleged that Apple attempted to keep the service out of the U.S. as it directly competes with iTunes.

"If we [Spotify] continue growing at our current rate in terms of subscriptions and downloads, we?ll overtake iTunes in terms of contributions to the recorded music business in under two years," Parker said at SXSW.

Spotify
Spotify's new Radio feature grants Free users access to mobile music streaming. | Source: Spotify


There are three tiers in Spotify's payment structure: Free, which includes limited ad-supported music listening; Unlimited, which plays tracks ad-free for $4.99 a month; and the $9.99 Premium that allows customers to stream to smartphones and save tracks for offline listening. A new radio feature much like Pandora was introduced alongside the latest update to the Spotify iOS app in June and removes the mobile listening ban for Free level users.

The music startup continues to grow and is looking to raise $220 million at a $4 billion valuation for 2012 following last year's $100 million at a $1 billion valuation.
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Comments

  • Reply 1 of 37
    nagrommenagromme Posts: 2,834member


    I think this is not quite what musicians mean when they say, “You know what revenue I make from Spotify? A bunch of number two!”

  • Reply 2 of 37
    jasenj1jasenj1 Posts: 910member


    Spotify is great. I have a free account and listen to it non-stop at work every day. Sound quality is way better than XM in the car. I believe the free streams are supposed to be lower quality than the paid people get, but I've been very happy. The radio feature works well, too. I get songs that are generally close to the band I've chosen and it's a good way to discover new music.


     


    +1.


     


    - Jasen.

  • Reply 3 of 37
    dasanman69dasanman69 Posts: 12,973member
    Is there a limit to how many songs one can purchase? Buying more than 10 songs a month will make .it. Sounds like Spotify like Amazon "has it all wrong"
  • Reply 4 of 37
    toysandmetoysandme Posts: 189member

    Quote:

    Originally Posted by jasenj1 View Post


    Spotify is great. I have a free account and listen to it non-stop at work every day. Sound quality is way better than XM in the car. I believe the free streams are supposed to be lower quality than the paid people get, but I've been very happy. The radio feature works well, too. I get songs that are generally close to the band I've chosen and it's a good way to discover new music.


     


    +1.


     


    - Jasen.



    How much data would this burn in the course of a day?

  • Reply 5 of 37
    crakdcrakd Posts: 1member


    Yeah as a musician I don't think anyone realizes how far. I get about 10 cents a month from spotify. itunes anywhere from $25-300. 

  • Reply 6 of 37


    Here's hoping Spotify continues to grow and do well. I love the service too as it's a great compliment to iTunes. I also hope that Apple feels the heat from Spotify and looks into working out some kind of streaming service with the labels.


     


    Apple's movie and music catalogue has gotten so good that I'd be fine paying a reasonable monthly fee to have all-you-can-eat subscription access to everything in the iTunes store.

  • Reply 7 of 37
    solipsismxsolipsismx Posts: 19,566member
    I've don't use Spotify but I hear great things from others who swear buy it.

    If is interesting that it, not Google or Amazon's attempt at selling music, is the 2nd source for revenue after the iTunes Store.
  • Reply 8 of 37
    richlrichl Posts: 2,213member


    From a consumer's point of view, it's a great service. However, we're starting to see more and more competitors to it.


     


    Hopefully Spotify can convert an increasing number of users to their premium service. That's when artists will start seeing a decent return.

  • Reply 9 of 37
    jragostajragosta Posts: 10,473member
    [quote]On-demand free and subscription-based music streamer Spotify is now reportedly the second largest source of revenue for the world's major record labels but lags far behind Apple's market-dominating iTunes.
    The claims, which have not been independently confirmed, come from a source close to the company who notes that even at number two, Spotify has a huge gap to overcome to reach a level of success enjoyed by iTunes, reports Business Insider.
    According to Business Insider Intelligence iTunes paid out an estimated $3.2 billion to music publishers in 2011 which is in line with the numbers given out during the company's quarterly conference calls. Apple's second quarter 2012 was unusually profitable and saw almost $1.9 billion in profit from iTunes, nearly double from the year ago period.
    "iTunes is way up here," the source said with a raised hand, "and everyone else is way down here."[/quote]

    Wrong. Globally, physical media sales are still much larger than iTunes, making Spotify a distant third.

    Industry revenues for physical media were $7.5 B last year globally.
    http://www.grabstats.com/statmain.asp?StatID=78

    iTunes might eventually pass physical sales, but we're not there yet. And it is unlikely that Spotify will pass physical sales for a long, long time (if ever).
  • Reply 10 of 37
    jeffr1jeffr1 Posts: 1member
    Spotify only makes sense for the major labels that have an ownership stake, and get an undisclosed percentage. The revenue for non label artists is close to nil. .oo something cents per play. An independent musician friend pays her mortgage through iTunes sales but says she gets almost nothing from Spotify, despite tons of plays. So if you support Spotify, you,re not supporting independent musicians, just perpetuating the labels dominance. Let's hope Apple wins this one, for music's sake.
  • Reply 11 of 37
    djsherlydjsherly Posts: 1,014member

    Quote:

    Originally Posted by Jeffr1 View Post



    Spotify only makes sense for the major labels that have an ownership stake, and get an undisclosed percentage. The revenue for non label artists is close to nil. .oo something cents per play. An independent musician friend pays her mortgage through iTunes sales but says she gets almost nothing from Spotify, despite tons of plays. So if you support Spotify, you,re not supporting independent musicians, just perpetuating the labels dominance. Let's hope Apple wins this one, for music's sake.


    Spotify makes complete sense to me as a consumer. Someone is getting $120 a year from me for a service I want and enjoy. Behind that $120 is none of my business. I don't give a shit about how much the foxconn employee gets paid to make my iPhone. What's the difference?

  • Reply 12 of 37
    al_bundyal_bundy Posts: 1,525member

    Quote:

    Originally Posted by toysandme View Post


    How much data would this burn in the course of a day?



    probably 150MB per day, but if you have a paid account you can download music to your iphone and not use any data. same with slacker.


     


    great for those of us who take the subway to work 

  • Reply 13 of 37
    al_bundyal_bundy Posts: 1,525member

    Quote:

    Originally Posted by Jeffr1 View Post



    Spotify only makes sense for the major labels that have an ownership stake, and get an undisclosed percentage. The revenue for non label artists is close to nil. .oo something cents per play. An independent musician friend pays her mortgage through iTunes sales but says she gets almost nothing from Spotify, despite tons of plays. So if you support Spotify, you,re not supporting independent musicians, just perpetuating the labels dominance. Let's hope Apple wins this one, for music's sake.


    tell your friend to start playing live all the time. if i have to go to work every day what's wrong with others doing the same?


     


    honestly there is too much music out there. i still haven't listened to a lot of good stuff from the 60's and 70's that i want to listen to. its too expensive to buy all this music a la carte like itunes sells it. that's why i love spotify

  • Reply 14 of 37
    jasenj1jasenj1 Posts: 910member

    Quote:

    Originally Posted by toysandme View Post


    How much data would this burn in the course of a day?



    I have no idea. I listen on a wired network. I haven't tried the phone app. I'm a desk jockey.


     


    - Jasen.

  • Reply 15 of 37
    fazzterfazzter Posts: 120member


    I love Spotify it is awesome. I am a paid subscriber. On the other hand, itunes gets zero dollars a month from me. image

  • Reply 16 of 37
    porchlandporchland Posts: 478member


     

    Quote:


    Originally Posted by faZZter View Post


    I love Spotify it is awesome. I am a paid subscriber. On the other hand, itunes gets zero dollars a month from me. image



     


    Quote:


    Originally Posted by MeniThings View Post


    Here's hoping Spotify continues to grow and do well. I love the service too as it's a great compliment to iTunes. I also hope that Apple feels the heat from Spotify and looks into working out some kind of streaming service with the labels.


     


    Apple's movie and music catalogue has gotten so good that I'd be fine paying a reasonable monthly fee to have all-you-can-eat subscription access to everything in the iTunes store.





    I am baffled that Apple has not come out with any content subscription packages to try and blunt Netflix, Hulu, Amazon Prime, Spotify, Pandora, etc., from taking away iTunes Store purchases.

  • Reply 17 of 37
    tallest skiltallest skil Posts: 43,399member
    porchland wrote: »
    I am baffled that Apple has not come out with any content subscription packages to try and blunt Netflix, Hulu, Amazon Prime, Spotify, Pandora, etc., from taking away iTunes Store purchases.

    Maybe Apple believes in people actually owning their content.
  • Reply 18 of 37
    porchlandporchland Posts: 478member

    Quote:

    Originally Posted by Tallest Skil View Post





    Maybe Apple believes in people actually owning their content.


     


    Apple cares about innovation and profits.  I doubt that the people at the iTunes Store division are making business decisions about how to license media content based on whether they're carrying the torch for "people actually owning their content."


     


    (And it's all licensed; you don't own any of the content.  Some licenses are just more permissive than others.  Read your terms and conditions the next time you update iTunes.)

  • Reply 19 of 37
    jragostajragosta Posts: 10,473member
    Maybe Apple believes in people actually owning their content.

    You don't own the content even when you get it from Apple. You license it.

    For many purposes, it's almost as if you owned it, but you can't, for example, make copies like you could if you owned it.
  • Reply 20 of 37
    tallest skiltallest skil Posts: 43,399member
    jragosta wrote: »
    You don't own the content even when you get it from Apple. You license it.

    File's on my machine. I own it.
    For many purposes, it's almost as if you owned it, but you can't, for example, make copies like you could if you owned it.

    Of course you can. iTunes even lets you do that itself.
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