Spotify valued at just under $30 Billion but what will it take for the Tech giant to finally be profitable

Spotify went public Tuesday, April 3rd, 2018, opening up with a value of just under $30 Billion, the largest direct-listing ever. Not bad for a business that’s never made a profit.

 

Questions are still in the air about the future of the tech giant, however. The company cannot rely on its current money stream as it has them dishing out an alarming 79% of the $5 billion they earn annually.

 

Spotify is bleeding money in the form of payments to major labels, who own the music that equals to 87% of the companies streams.

 

Spotify and the Majors

The relationship between Spotify and the major labels is a mutually beneficial one however. Because of streaming the music industry is finally seeing a profit after years of losses.Without Spotify and other streaming services, the majors would be back to losing. Without the labels, Spotify would no longer have access to the vast majority of their musical catalog.   

 

Though both ends are content as of now, the long-term goal for each side is to be able to stand alone. For Spotify, the answer to how this can become possible is clear.

 

The future of Spotify

Spotify’s long-term agenda must include pushing a strong network of artists who work independently, that is, without the inclusion of big labels. This future would be beneficial for the tech giant as they would now be able to command better terms from smaller indie acts. Essentially cutting out the middleman.

 

Technology has historically been the enemy of major labels. Many new tech startups like United Masters are seeking a future where labels are not the dominant force in the industry. Though record labels have indeed found new life with streaming the fact of the matter still remains.

 

They are dying, and it’s all tech’s fault.

 

Brief history lesson

Well, almost. The invention of the MP3 file shook the music industry to its core. Fans were now able to download their favorite artist’s music for free rather than pay for the album. Major labels had a chance to embrace the change and grow with it, or fight against the wave in an effort to make things like they were.

 

The labels went to war.

 

Now techs space in music is so large that the majors had to partner with companies like Spotify and Apple just to turn a profit.

 

This major shakeup along with continuing advancements in tech allowed artists to be able to earn a substantial income without a deal from a major label.

 

As it stands now labels still have a lot to offer new emerging acts. But as time progresses and new tech continues to emerge, it will be very little a label can do that an artist with a good team can’t do.

 

Inevitable conflict

Spotify has played a major role in saving the music industry as it stands. They have even managed to broker an uneasy peace with the powers that be. The time is coming, however, where the needs of Spotify and that of the major labels will conflict with one another.

 

What do you think the future holds for Spotify?