This is actually one of the most awful businesses to be in(currently).
Record labels take most of the revenues. (Over 75 percent). They have the pricing power since just 4 record labels control 80 percent of total music (and they kinda cartelise too 😐 )
Switching costs are high(because you’ve already taught Spotify/Apple music’s algorithm your taste and you’d not want to train the new provider’s algorithm from scratch) so tough to take customers from existing services.
The advanced economies are very well penetrated and in emerging economies like LatAm and Asia, ARPU(average revenue per user) is very low making those markets not very attractive.
Audio ads in general are much less appealing to advertisers(audio contributes to 25 percent of total media/entertainment hours spent but only to 8 percent of ad spends)
The competitors like Apple music, Amazon music are deep-pocketed behemoths who can run this service as a profit-neutral or slightly loss-making venture forever since they make money elsewhere and this would serve as one of the tools in retaining customers in the Apple/Amazon ecosystem.
Apple has an inherent headstart because it’s pre-installed in millions of devices.
Since Apple/Google own the app stores, they charge a 30 percent fee for in-app purchases so other providers(like Spotify etc) will have to redirect to a web page for purchases(paid podcasts, tickets, merch etc) while Apple can give a seamless one-click purchase option in Apple music.
In the spirit of full disclosure, I’m looking at investing in Spotify soon😅
