In the early 2010s, gadget functions began to change. Starting from what was originally just for calling and giving news via short message (cellphone) to a smartphone that can do everything (smartphone). Because it turned into a smartphone, all aspects in it began to change. One of the most dominant is the way a user enjoys music.

Usually, before there was a smartphone, a user would listen to music via radio or download media (illegal). However, nowadays, listening to music has become easier with the presence of music streaming businesses, such as Spotify, Joox to Pandora. Only enough to use internet data, gadget owners can immediately listen to their favorite songs. Plus, song updates are also fairly fast because they have worked with many singers in the world.

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Although initially underestimated, the online streaming music business users are quite large. According to data taken from Statista.com, about 125 million people have switched from tapes and CDs to streaming. In fact, this number continues to increase every year and is expected to reach 260 million users by the end of 2020.

If viewed from its development, streaming music is a lucrative way to generate coffers of money. Faster internet access also supports this business. However, is it true that Spotify, Joox, Pandora etc. can get big profits just by providing free music services?

History of the Music Streaming Business in the World

Many say that Spotify is the main pioneer of the streaming music business in the world. However, who would have thought that online music services existed long before that. Let’s review from the beginning, to be precise in early 1993. At that time, the Internet Underground Music Archive (IUMA) was launched as the world’s first streaming music. On this website, everyone can listen to and upload their songs for free.

A dozen years later, Last FM and Pandora respectively began to come up with newer and fresher methods. They invite world musicians to collaborate in creating an online media so that all music lovers can listen to their works more easily. Both of them were quite famous until finally, Sound Cloud and Spotify began to appear and became the choice of the 2000s generation.

After getting the first 10 million users, Spotify from Sweden began to expand the market. As a concrete measure, they set up a large branch in the United States. Suddenly, their existence began to compete with Pandora, which had a large enough market. Spotify comes with the largest song catalog in the world so many music lovers are slowly starting to switch.

Reducing Music Piracy Rates Music

The existence of the streaming music business is seen as a preventive measure against piracy. According to a report by the Institute for Policy Innovation, piracy in the United States has entered a dire state. Each year, piracy costs up to 12.5 trillion dollars and makes tens of thousands of musicians lose their jobs as singers. Not only that, the tax was also affected with losses reaching 422 million dollars.

Various ways have been prevented by the government, including calls not to piracy. However, it turned out to be in vain so that the musicians began to protest because they felt that their efforts had been useless. If not addressed quickly, piracy will become more rampant.

The streaming music business is now present as an alternative solution. Musicians in the world support the use of Spotify, Joox etc. so that eventually there are more and more streamers on them every day. In addition, this music service also pays song royalties for each singer, for example Spotify. Until the end of 2017, they poured funds of up to 9 trillion dollars to pay royalties to singers.

Is the Music Streaming Business Making Money?

With spending as high as $ 9 trillion plus other expenses, how can a music streaming business make money? in fact, Spotify, Joox and other applications take advantage offers subscription to get money from their users. By giving a certain amount of money in accordance with the provisions, users of the streaming application will get privileges.

Joox has around 50 million users, while Spotify has around 100 million. Of these, just assume that only about 50% of users subscribe to the alias VIP access. With a fairly low cost, no more than 10 dollars per month, can this money cover all the costs incurred?

In fact, not everyone who uses the online streaming model is willing to spend money just to listen to more listening access. Most of them prefer to use basic features which are limited to certain songs. This is of course another obstacle for Joox, Spotify etc. to make extra money.

Prior to using the ‘subscription’ model, streaming music apps received revenue from advertising. The existence of this is often disturbed by users. Therefore, they chose to use an adblocker as one of their initiatives. This is further strengthened by a report from the Ad block report which states that around 600 million devices use ad blockers to avoid advertisements.

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Making Money Doesn’t Mean Profit?

By far, Spotify is the owner of the largest music streaming service in the world. Because, there are about 71 million people who subscribe and are willing to pay around 10 dollars per month. In second place, Apple has a total of 36 million subscribers each month. The disparity between the two is large enough that Spotify has indeed dominated the line of the world music market.

With a large number of subscribers, the music streaming business certainly provides a money guarantee, but that doesn’t mean they will make a profit. According to Paul Resnikoff, every music service has not felt a return on investment. Furthermore, Paul said that a new music service will benefit if they have 100 million subscribers who want to use a paid system.

Why is profit so hard to get for players in this business? because, their expenses are very large, namely 73% paid to the label and the artist concerned as copyright and the remaining 27% to pay for salaries and other business needs.

For example, Spotify gets about $ 511 million from advertising content and $ 4.5 billion from app users who use paid subscriptions every month. Of the total profits gained throughout 2017, the Swedish music streaming giant had to spend up to 1.5 billion dollars for expenses not to mention other costs.

Spotify Playing on the Wrong

“The music streaming business is great for the future of the music scene but it doesn’t help much on the business front. No margins to earn and no big bucks to make. ” said Jimmy Iovine who is the chief executive of Apple Music.

In that sentence, Jimmy emphasized that a business cannot rely on the music industry as the main spearhead. Because, there are several big players like Apple, Amazon and Google who have other things as their main income. Meanwhile, Spotify is considered to be playing on the wrong ground because they rely on subscription music streaming as their main business.

“The music streaming business is not good for business. This is very good for Google, Apple and Amazon because they have other businesses. But for Spotify? they just rely on that, don’t they? ” close Jimmy Iovine.

 

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