Netflix and Spotify Are The Same Crippled, Struggling Company
Ownership is important and with streaming platforms, we’re just renting.
I’ve been harping about NFT’s, ownership of masters, first-party data, and increasing artist equity for the past few years now. Yeah, I really just tagged 4 of my own pieces because I have the receipts.
In this piece, I want to touch on all of these topics so bear with me as it might be a bit disjointed but I’ll do my best to paint a complete picture of what direction I see the music industry going in the next few years.
The most important thing to consider before we get started is this:
Ownership is important and with streaming platforms, we’re really just renting.
As consumers, we’ve become spoiled with convenience on the cheap. I have two-hour free delivery through Amazon. An unlimited amount of music for $12/month through Spotify. All the movies and shows I want to watch for $15/month through Netflix. At one point in our lives, we’re going to look back on this era like Andy in the office.
I’m telling you right now - we are living in the good old days because THIS SHIT IS OVER for music. It already happened for TV and movies. How many streaming platforms do you pay for per month? And compare it to how many you had in 2012.
Here’s mine:
I went from spending $28/mo to $75/mo over a ten-year period for more or less the same content. And with inflation going crazy, this number could pump to $100/mo. That’s not a small amount of money!
We’re leaving the good old days and while the future won’t be as favorable to the consumer, it will be more equitable for artists.
Content is King.
So - what happened with TV? Netflix was able to build an incredible streaming service because they invested in the space early AND were able to leverage their existing relationships with film & TV studios (remember when they were delivering DVDs to your mailbox?) to broker long-term deals for the rights to have the movies and shows on their platform. The important part here is that Netflix was given the rights for a fixed amount of time. Netflix did not own the content - they leased it. They gambled and dominated the better part of a decade. But as time passed, rights holders saw how financially lucrative streaming was and eventually invested in building their own streaming platforms.
Once the leases neared their end, we saw the launches of HBO Max, Disney Plus, Peacock, etc. Netflix was proactive and saw the writing on the wall. They pivoted from just being a streaming service into becoming a film studio as well. They invested heavily into creating their own exclusive content and bought more time to hedge off their inevitable demise. They also took a page from HBO and went after the stand-up comedy niche.
But that wasn’t good enough! Even with all this effort from Netflix, they just got absolutely rinsed after reporting a loss of 200,000 subscribers during the first quarter of this year. Their stock tanked 35% because their business model isn’t viable long term. Netflix is now alluding to cracking down on shared accounts and rolling out an ad-supported tier like Hulu.
Spotify has started following the footsteps of Netflix - that’s why they’re going to fail. Their big focus has been on acquiring podcasts that they can place ads on as well as a number of companies in the podcasting space. You can read more about the acquisitions here.
Is creating a monopoly on podcasts the way forward? Who knows. Spotify been embroiled with controversy because of the Joe Rogan podcast which has led to artists like Neil Young taking a hardline and pulling their music from the platform. Netflix faced similar issues with Dave Chappelle’s stand-up specials. Kudos to both Spotify and Netflix for not capitulating to the woke mob. If you don’t like the content, don’t consume it. Don’t push for censorship because of your own frailty.
Creating your own content or dominating the podcast space is not a strong enough pivot from either company for long-term success. Content is King and Netflix & Spotify are looking like the court jesters right about now.
You don’t own anything and you’re better off for it!
This is what politicians and the media have been espousing for years. We don’t own land or media. We rent everything. There is power in ownership and to suggest otherwise is clown behavior. There is this ongoing false narrative that streaming platforms financially screw over artists but the reality is that the rights holders are making more money than ever off of streaming.
Sony saw a $229 million increase in streaming revenue in 2021 alone - a 36.9% increase compared to 2020. Universal Music raked in an extra BILLION dollars from streaming in 2021 as well. As the rights holders of the music, they’re getting paid out. The amount that makes it to the artist is based on their deal with the record label.
There is money to be made and it's the owners who get paid.
Driving Equity for Artists
Rappers are a driving force for innovation in artist equity. Kanye has been pushing the Stem Player which I wrote about at length here. At the time of publishing, I estimated Kanye had earned $20-25m on DONDA 2 despite not being available to stream anywhere. That was over a month ago - he’s probably made much more since then.
Snoop Dogg just bought out Death Row Records and one of his first acts as the owner was to pull all of their releases from streaming services. Now you can’t listen to the original of Gin N Juice when you’re trying to turn up with the lads. My purchase of The Chronic by Dr. Dre on vinyl seems justified because that album isn’t available to stream either.
But Snoop’s next move as the owner was to turn Death Row Records into a NFT label. Now if you want to listen to Snoop Dogg’s music or anything signed to Death Row Records, you have to either own the NFT or the physical record - both of these have higher returns for Snoop and Death Row Records than streams. I have no idea what his moves for the metaverse will be, but Snoop has always been an innovator. That man does EVERYTHING - it’s the reason why he’s been a household name for almost three decades.
If more artists who own their masters follow suit, streaming platforms won’t be able to keep up. Imagine the outrage if Taylor Swift pulled her music from streaming.
Are NFT’s and the metaverse the way forward for artist equity? Who knows. For big artists - yes. For smaller artists - no.
One thing is certain though: streaming has always been an intermediary - not an end game.
What’s Next?
I wish I had an answer here but right now it’s truly the Wild Wild West in the music business. I am so excited to see what happens next. I look forward to revisiting this piece in a few years to see how things play out.
Some predictions:
Piracy will come back to levels rivaling the Napster era.
Spotify is going to struggle over the next 5 years and will shift focus to expanding into new markets.
Spotify will also look into using artificial intelligence to produce music that they have full ownership of and plug it into their own playlists.
Ownership is going to become normal again, but probably not the norm.
Artists will focus on building communities via Discord like the video game streamers and then monetize the platform.
Artist merch will boom in the next 3 years.
Netflix stock will rebound, but public sentiment won’t.
I won’t get hired by any of the companies I’ve written about despite the fact that they very desperately need this sort of vision lol