Chapter 2598 The monopoly pattern of music

In this life, Spotify, with the full support of Boss Zhou, has developed much better than in the previous life. Not only did it go very smoothly in terms of financing, but also in terms of strategic planning, business development, product design, etc., we received advice from the world's richest man with a keen eye.

Now Spotify has 70 million global users, of which 17 million are paid users, with a paid conversion rate of 25%.

By the end of the year, the number of paying users this year is likely to reach 20 million!

20 million paying users means that Spotify can earn US$150 million in revenue from monthly membership fees, after deducting commissions from channels such as Apple tax.

Count advertising costs for free users.

Monthly revenue can reach $180 million!

Although Spotify's expenses remain high, it is losing $10 million almost every month. Compared to a monthly revenue of $180 million, a loss of only $10 million is nothing.

This provides a strong financial guarantee for Spotify's listing.

Don’t be afraid of losing money, the key is that your income is high enough and grows fast enough!

This has led to a strong voice inside and outside Spotify calling for the company to go public, including among the entrepreneurial team.

After all, unless it goes public, Spotify, which is losing money, will always be a huge hidden danger.

Once it is listed, everyone's options and stocks can be freely traded in the stock market, allowing many investors to recover their capital and allowing many employees to have free wealth.

You can stay safe.

Zhou Buqi made a special trip to Spotify's global headquarters in London to stop this plan and it must not be listed! Not this year, not next year, not within three years!

Boss Zhou made a resounding voice in the boardroom.

The opposition seemed to disappear immediately.

It's like a mouse meeting a cat.

It's all wilted.

After the board meeting, Zhou Buqi had a special conversation with Spotify's Daniel Ek and asked: "What did you think about it? Do you also want to go public?"

Daniel shook his head, "I don't think it's the right time to go public."

Zhou Buqi asked: "Then how could such a chaotic situation arise? Whether it is the board of directors or the management, everyone respects your opinion."

Daniel sighed, "This matter has indeed troubled many people. I am just... hesitant. I am worried that the ideological differences caused by not going public will affect unity."

Zhou Buqi said: "You are the soul of the entire company, and everyone surrounds you. The slightest wavering in your belief, if passed down layer by layer, may form an avalanche effect."

Daniel nodded and admitted openly, "I am responsible."

There is no shame in doing some self-criticism in front of Boss Zhou.

Zhou Buqi said sincerely: "Even if you make some decisions that are wrong, you must remain firm. The biggest secret of authority is to establish a personal image. Even if it is a very bad image, it is better than no image at all." Look at MacArthur smoking a pipe, look at Steve Jobs wearing a turtleneck and jeans."

Daniel sighed and said: "After so many years, Spotify has never been profitable. And according to our model... the more users we have, the more losses we will have. This completely goes against the survival logic of Internet products. The company's scale development The bigger it is, the more difficult our operations will be and the greater our financial risks will be."

Zhou Buqi smiled and said, "Your model must be wrong."

"ah?"

Daniel was a little surprised.

Zhou Buqi said: "You cannot use the current perspective and past data to judge the future. In the future, information fees will be greatly reduced, and the cost of data flow will also decrease, but this is not the most important thing."

"That is?"

"The Advantages of Monopoly."

"Um?"

"Spotify is the best product of its kind on the market, and we can all see this." Zhou Buqi analyzed, "It can also be seen from the scale of paying users."

Daniel was quite proud, "Indeed, the monthly fee of US$9.9 is actually higher than many competitors. But we now have 17 million paying users, even more than the paying users of our competitor Pandora, which has a membership fee of US$3.9. need more."

Zhou Buqi smiled and said: "Isn't that right? Spotify is doing so well, charging so high, and struggling to survive. If competitors charge so low, it will only make it harder for them. Grit your teeth and persevere. Wait quietly for your competitors to die so that the key data in your statistical model can be changed."

"Well……"

Daniel's eyes widened.

I felt Boss Zhou’s brutal business strategy.

I just want to burn out all my competitors by burning money.

By then, the streaming music market will have formed an almost monopoly.

Once this pattern is formed.

Many market elements can be changed.

For example, the four major record companies cannot speak loudly when licensing music copyrights. If you don’t give it to Spotify, who else can you give it to?

If you want to make money with digital music, you can only cooperate with Spotify. This is the best channel.

The music market is different from movies.

This is a highly monopolized market. There are only four major record companies in the world, Sony Records, Universal Records, Warner Records and EMI Records.

The other small record companies are all vassals of these four giants.

Zhou Buqi said: "I read the financial report. Currently, Spotify's biggest expense is royalties. Is this the share given to the four major record companies?"

Daniel nodded, "Yes, half of the income will be given to them."

Zhou Buqi said: "The share of this part cannot be reduced, even if a monopoly pattern is formed. This is content. In the future era, we must please the content. To please the content, we must please the four major record companies and please them." musicians. The royalties given to them can only increase, not decrease. This is a major prerequisite."

Daniel certainly understands the reasoning behind this, "I understand that only by pleasing the four major record companies and musicians and making them all make money, will they be more willing to cooperate with Spotify."

Zhou Buqi said: "The expenditure on royalties cannot be moved, but the second largest expenditure can be moved, and the expenditure on copyright can be reduced."

Although both are streaming media, Spotify’s model is different from Netflix’s.

Netflix is ​​a buyout system.

Netflix spends money to buy copyrights from movie companies, buys them permanently or purchases streaming rights for 3-5 years, and then puts the content on Netflix's website.

No matter how many viewers watch the movie from now on, it has nothing to do with the movie company.

There is no subsequent share.

Spotify is different, it must be divided.

This is determined by the properties of music.

Movies have a long duration but low playback volume; music has a short duration but a high playback volume and will be played repeatedly. If a music fan likes a piece of music, he may listen to it hundreds of times a day. No matter how much a movie fan likes a movie, it will end after watching it a few times.

So music must be divided.

The more you listen, the more you share.

This increases Spotify's operational complexity and the difficulty of opening up a new market for music streaming. In order to persuade the four major record labels to join, they must first pay a sum of money to purchase the digital rights of their music and let them put the music on the Spotify platform. Then, Spotify’s songs will be divided into subsequent shares based on the number of plays.

But once a monopoly pattern is formed, this condition can be changed.

Zhou Buqi said: "In the past, the four major publishers did not understand streaming music, and were even worried that over-sales of digital music would affect the traditional music market. So Spotify had to pay a copyright fee to purchase their music."

Daniel smiled: "Yes, this is indeed an advantage. Digital music has become popular, and the traditional music market has shrunk severely. The four major record companies now have no choice but to cooperate with us. Spotify is becoming the best platform for digital music distribution. Channels. We have also recently discussed that in the future we will only have a share-sharing system, and there will be no need to pay additional copyright fees to attract them to cooperate with Spotify. The copyright expenditures in the current financial report are mainly exclusive copyrights."

It’s the same membership business that Netflix and Steam are doing.

Exclusivity is always the greatest competitiveness.

For example, EMI's flagship music copyright - Beatles music.

It was exclusively licensed to Spotify.

This can become Spotify's core competitiveness. Any music fan in the world who wants to listen to Beatles music online has only two choices - either listen to pirated copies, or become a Spotify user.

The cost is also high.

Spotify will pay EMI an exclusive royalty of US$40 million per year and a share of approximately US$20 million.

After EMI received the $60 million, it had to pay $30 million to the Beatles.

Fortunately, the Beatles were a band decades ago, and they were just starting out when they signed with EMI, so they were able to sign a 50% share clause.

Many well-known contemporary musicians, such as Taylor Swift, had very harsh conditions when they signed a contract with a record company. The record company earned $100 from her songs and gave her $80 as a score.

Zhou Buqi said: "As long as Spotify persists and forms a certain monopoly pattern, the expenditure on the exclusive model can be significantly reduced. After one company becomes dominant, it can create strong stickiness with users. Even if the competitors The Beatles rights are also there, and fans will stay on Spotify instead of going to a competitor."

Daniel felt like the clouds were clearing, "If we can cancel the exclusive model, we can save at least 20% of the cost! Judging from Spotify's current situation, without exclusive expenses, every month... We can make at least 20 million US dollars in profit every month!”

Zhou Buqi smiled and said: "The music industry is highly monopolized, and its strategy can be more flexible than other industries. If we really find that many music fans go to competitors to listen to Beatles songs, it will cause Spotify If you lose users, you can go to EMI to discuss and sign back the exclusive copyright. Small companies simply don’t have the financial resources to compete. In an era when content is king, content advantage is an excellent weapon to defeat competitors.”

Daniel immediately felt much more settled and no longer had to worry about going public.

The dream is so big.

It's really too early to go on the market now.

Zhou Buqi said: "This is not over yet. When the market matures, the membership fee of US$9.9 can also be increased moderately. In short, we are constantly testing among competitors and users to find the best one." The balance between increasing and decreasing income and reducing expenses.”