‘Something Needs to Give’ for Spotify Model. But What?

The company’s gross margin per user has fallen from $4.20 in 2013 to $3.45 in 2015: “Particularly challenging for a model with already wafer thin margins,” according to Mulligan. “It is rising rights costs that are keeping Spotify from commercial sustainability.

”It’s an alternative view to Spotify’s official line, which is that its model will be profitable at scale, so the costs (and heavy losses) of getting to that scale are worthwhile.Mulligan’s other point, however, is that Spotify is no longer a $9.99-a-month service in real terms: he suggests that its effective monthly retail price is now $6.49 thanks to promotions, carrier deals and student discounts.

“It is about time that the music industry stopped pretending that this isn’t the reality of the market and instead starts pursuing proper pricing innovation rather than by stealth via discounting,” he wrote.

Source: Music Ally

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