Music Streaming is a money Pit
In recent weeks Pandora media and Amazon have announced plans to launch there own on-demand streaming service offering to the public. In the case of Amazon provide a $5/month pricing tier which other services have already implemented to convert users who are unwilling to go to the $9.99/month price point.
It begs the question. How many streaming companies do we really need? And how can any of these companies be profitable with so much competition? Royalty fees to artists and record labels increase just as fast or even faster than revenues. According to this article:
Spotify's revenue grew 81% last year, but royalty fees jumped 85% to nearly $2 billion, taking up 84% of revenue. Such a business model leaves little left over to pay for marketing, technology, and corporate salaries.
And this with Spotify who boast 40m paid subscribers. Not to mention Pandora never posting a profit and Tidal posting a $28m loss (double on the previous year). This doesn't bode well going forward especially for new entrants into a heavily congested market.