Per the article, the service hasn’t changed in price in 12 years, while the platform has certainly received a decent number of updates, new features, new artists, etc.
If it isn’t worth $11/month to you, don’t pay it? But it doesn’t seem right to insinuate that they’re doing something outrageous by raising prices once in 12 years?
To be fair (and understand I hate corporations and am speaking through clenched teeth), Costco loses money on those glizzies. They make the majority of their money on their memberships, and have made the bet that they gain more customers than they lose money on cheap hotdogs.
Streaming services have an enormous amount of fixed costs. It might cost them several billion dollars/year to operate the necessary infrastructure even with zero customers, but the marginal cost to serve a customer might be on the order of $2/month on that $10/month subscription.
It’s why streaming and digital storefronts are such a sink/swim industry. Either a company gets over user number+sales threshold to override their fixed costs, upon which they become profitable and all further growth makes them exceedingly profitable. Or the company fails to do so or barely does so, and makes somewhere between giant losses to minimal profits.
From a quick search, Spotify’s user count should have grown somewhere in the neighborhood of ten times over since 2015.
This is not a cost increase that is mandated or justified by inflation. It never is. It’s a cost increase from a very, very, very simple fact: companies want profit, and Spotify’s leadership has concluded that they will gain more profit by increasing prices than they will by not doing so.
Enormous fixed cost, yes. Billion not so much. The size of their entire catalog isn’t even going to be that significant. Music is tiny even the flac stuff just isn’t that big. The streams are so small they probably don’t even need peering agreements with most services. I’d be surprised if they’re burning more than 10 million a month in infrastructure. Now Netflix, YouTube, live video streaming services, totally different story. Those poor bastards end up maintaining servers inside other people’s networks.
Fixed costs isn’t the cost of having a single server with the storage. I’m thinking everything they need to have built up with the intent of having between N1 and N2 MAU, in order to make that viable.
It’s the cost of developing the software stack, of hiring the lawyers and accountants that (1) acquire the music rights and (2) handle the music payouts, it’s the lawyers that handle the different legal requirements across every major global economy, it’s the servers located in all of those countries with as many sub-national locations as necessary, it’s the IT staff that manage that server uptime, it’s the software developers that maintain that system and improve upon it so rivals don’t jump too far ahead… Etc.
Building a streaming platform that expects to have multiple billions of dollars in revenue across hundreds of millions of users is going to have enormous fixed costs that cannot be trivially scaled down if user counts are lower. If they plan around a much lower user count they can scale it down at that planning phase, but not after the fact (at least not easily).
Interesting. That’s dated October of 2009 and says Spotify had 5m users. Looks like they have ~200m users today. At a linear scaling it’d be twenty times larger, or £120m=$154m per month. That’s $1.85b/year.
In reality it wouldn’t scale linearly, but it also accounts for zero salaries, which was the major component of my comment.
(1) I didn’t downvote you.
(2) I said something similar but critically different:
Building a streaming platform that expects to have multiple billions of dollars in revenue across hundreds of millions of users is going to have enormous fixed costs that cannot be trivially scaled down if user counts are lower. If they plan around a much lower user count they can scale it down at that planning phase, but not after the fact (at least not easily).
The intended size of the platform dictates the fixed costs.
And…
(3) The data you provided wasn’t fixed costs. It was variable costs like server time, music rights, and bandwidth.
This is the same group of people who will rampantly upvote graphs showing how wages haven’t followed inflation, but when it’s the other side of the coin can’t seem to grasp it.
Yep, there’s a large contingent who simultaneously believe that corporations shouldn’t be allowed to exist and also that they should be provided everything in life for free, as compensation for existing.
I’m not saying that nothing should be done to rein in corporate profits, as those are also out of control, but economic forces cut both ways and it feels disingenuous to suggest otherwise.
I honestly can’t be mad about it. I know quite a few corporations likely used the guise of inflation to profiteer, but significant inflation did still happen. A $1 increase in this economic situation, with having never raised the price before, is reasonable. The inflation comment suggests $12 or even $13 could be reasonable. The gains made over the years in workers pay is really small compared to inflation, but I think it’s actually on par with this.
If you’re so enthusiastic about paying a corporation making 25 billion a year even more owing to inflation why aren’t you asking about the corresponding minimum wage hike for the people they get that 25 billion from?
How many more years could they have held back on the price hike if they hadn’t blown hundreds of millions on a failed attempt to lock up the podcast industry inside their walled garden.
That really seems like a stretch. More likely is they don’t, and instead we’re talking about them being bankrupt and people will say they should’ve seen the signs and sprung on exclusivity before Apple (or any other corp of your choice) bought out everyone and killed them.
$10 in 2011 would be $13.56 today.
Source: https://www.in2013dollars.com/us/inflation/2011?amount=10
Per the article, the service hasn’t changed in price in 12 years, while the platform has certainly received a decent number of updates, new features, new artists, etc.
If it isn’t worth $11/month to you, don’t pay it? But it doesn’t seem right to insinuate that they’re doing something outrageous by raising prices once in 12 years?
If Costco can sell glizzies for a buck fifty a pop I don’t wanna hear it
Fwiw Costcos main profit is from membership sales…which they’ve been cracking down hard on right now!
Wait - what are they doing?
Making sure you have a membership before you can buy things. Shocking…
Haven’t they always done that?
They’ve been more strict about it recently, especially with people that share memberships and self checkout stations.
They sell those at a loss to bring in customers to buy other higher margin items. What else is Spotify selling?
Ads on podcasts, even for premium members
Costco doesn’t have high margins on any of their items. They have like a max of 15% markup. They make their money off the membership.
Ads on podcasts, even for premium members
To be fair (and understand I hate corporations and am speaking through clenched teeth), Costco loses money on those glizzies. They make the majority of their money on their memberships, and have made the bet that they gain more customers than they lose money on cheap hotdogs.
“If you raise the price of the hotdog i will fucking kill you”
Streaming services have an enormous amount of fixed costs. It might cost them several billion dollars/year to operate the necessary infrastructure even with zero customers, but the marginal cost to serve a customer might be on the order of $2/month on that $10/month subscription.
It’s why streaming and digital storefronts are such a sink/swim industry. Either a company gets over user number+sales threshold to override their fixed costs, upon which they become profitable and all further growth makes them exceedingly profitable. Or the company fails to do so or barely does so, and makes somewhere between giant losses to minimal profits.
From a quick search, Spotify’s user count should have grown somewhere in the neighborhood of ten times over since 2015.
This is not a cost increase that is mandated or justified by inflation. It never is. It’s a cost increase from a very, very, very simple fact: companies want profit, and Spotify’s leadership has concluded that they will gain more profit by increasing prices than they will by not doing so.
To quote my insurance company when I asked why my rates went up, “well, everything is costs more. Other places are charging more too.”
This seems like a similar situation.
Enormous fixed cost, yes. Billion not so much. The size of their entire catalog isn’t even going to be that significant. Music is tiny even the flac stuff just isn’t that big. The streams are so small they probably don’t even need peering agreements with most services. I’d be surprised if they’re burning more than 10 million a month in infrastructure. Now Netflix, YouTube, live video streaming services, totally different story. Those poor bastards end up maintaining servers inside other people’s networks.
Fixed costs isn’t the cost of having a single server with the storage. I’m thinking everything they need to have built up with the intent of having between N1 and N2 MAU, in order to make that viable.
It’s the cost of developing the software stack, of hiring the lawyers and accountants that (1) acquire the music rights and (2) handle the music payouts, it’s the lawyers that handle the different legal requirements across every major global economy, it’s the servers located in all of those countries with as many sub-national locations as necessary, it’s the IT staff that manage that server uptime, it’s the software developers that maintain that system and improve upon it so rivals don’t jump too far ahead… Etc.
Building a streaming platform that expects to have multiple billions of dollars in revenue across hundreds of millions of users is going to have enormous fixed costs that cannot be trivially scaled down if user counts are lower. If they plan around a much lower user count they can scale it down at that planning phase, but not after the fact (at least not easily).
Here’s a good estimate on their hosting, streaming and licensing costs
https://www.theguardian.com/technology/blog/2009/oct/08/spotify-internet
They tack it down to about 6 million a month that is of course excluding lawyers and other salaries.
Interesting. That’s dated October of 2009 and says Spotify had 5m users. Looks like they have ~200m users today. At a linear scaling it’d be twenty times larger, or £120m=$154m per month. That’s $1.85b/year.
In reality it wouldn’t scale linearly, but it also accounts for zero salaries, which was the major component of my comment.
Look I appreciate the downvotes and all, but didn’t you just say that fixed costs don’t go up and down with users?
(1) I didn’t downvote you.
(2) I said something similar but critically different:
The intended size of the platform dictates the fixed costs.
And…
(3) The data you provided wasn’t fixed costs. It was variable costs like server time, music rights, and bandwidth.
This is the same group of people who will rampantly upvote graphs showing how wages haven’t followed inflation, but when it’s the other side of the coin can’t seem to grasp it.
Yep, there’s a large contingent who simultaneously believe that corporations shouldn’t be allowed to exist and also that they should be provided everything in life for free, as compensation for existing.
I’m not saying that nothing should be done to rein in corporate profits, as those are also out of control, but economic forces cut both ways and it feels disingenuous to suggest otherwise.
I honestly can’t be mad about it. I know quite a few corporations likely used the guise of inflation to profiteer, but significant inflation did still happen. A $1 increase in this economic situation, with having never raised the price before, is reasonable. The inflation comment suggests $12 or even $13 could be reasonable. The gains made over the years in workers pay is really small compared to inflation, but I think it’s actually on par with this.
Probably the same assholes that think Netflix no longer allowing password sharing is an overreach.
If you’re so enthusiastic about paying a corporation making 25 billion a year even more owing to inflation why aren’t you asking about the corresponding minimum wage hike for the people they get that 25 billion from?
Because that’s not what the article is about? Why is this hard for people to grasp? Not every comment is about everything in the world.
How many more years could they have held back on the price hike if they hadn’t blown hundreds of millions on a failed attempt to lock up the podcast industry inside their walled garden.
That really seems like a stretch. More likely is they don’t, and instead we’re talking about them being bankrupt and people will say they should’ve seen the signs and sprung on exclusivity before Apple (or any other corp of your choice) bought out everyone and killed them.
Bad take.