Philosophical Notes: Troubles and Opportunities In Streaming Land

A lot of software is built around a fixed cost + volume model. It takes some serious brainpower and programming effort to create the application you envision, but then your costs are to some degree set (fixed in accounting lingo) and if you get enough volume you become profitable and with more volume you become more profitable. Spotify, which is the big streaming player, is to some degree built around this idea. Only it doesn’t seem to be working out. Basically, to get lots of subscribers, they’ve had to set the price very low and that means new subscribers are pretty close to breakeven and as they get bigger they don’t get much more profitable. Or maybe they even get less profitable.

This isn’t good for musicians and others in the industry. But it may be a wake-up call that Tidal or Qobuz or another platform needs to modify the terms of the deal to succeed. Charging $10/month may simply not work, so maybe someone can figure out a quality model for real music lovers at a higher price that can generate profitability and therefore continued investment. This has been a pipe dream in the past, but at least Spotify’s dominance is no longer assured? Maybe we could even get a new player?

Ted Gioia has his usual intelligent and data-driven analysis of the situation. Highly recommended.