Last week, Spotify became the latest music-streaming service to announce an original video programming lineup, joining Apple Music and Tidal in the battle to get more people to their platforms. But despite the current popularity of video, some industry experts doubt the investment is worth it for these music streaming services.
Wooing more paid subscribers to turn a profit has been an ongoing challenge for some music-streaming companies. Standalone music-streaming services have struggled to achieve profitability, said Larry Miller, director of the Steinhardt School’s music business program at New York University. Although many have expected Spotify to go public, it might be a risky move given its inability to turn a profit. In 2014, Spotify's revenues grew to around $1.3 billion, but its losses swelled to approximately $197 million, according to the Guardian. The market has also not been kind to Pandora, the online radio business that had its initial public offering in 2011. This week, investor Keith Meister called for Pandora to explore a sale given its falling share prices.
Video won't be the savior for these companies, said George Howard, an associate professor of music business at Berklee College of Music. Listeners' reliance on YouTube, which has 1 billion users, for free music and videos is one reason why Howard isn't entirely convinced streaming services will find financial success with video.
“These companies think, ‘If we can’t generate a sustainable business on music streaming alone, let’s do video,’” Howard said. “It’s one of those gambits that is a group think. It seems very desperate to me.”
When users open a music streaming app on their phone, their first instinct is to play a song or playlist, Howard explained. Why, in the middle of a run or while working, would a user start watching videos on their phone?
“People’s default for video right now certainly isn’t Spotify,” Howard said, “or at least it’s not their starting point.”
Trying new tactics such as original programming could help streaming companies build stronger individual identities with users and distinguish themselves from one another. Despite having some exclusivity with artists’ new releases — initially, you could only stream Drake’s “Views” on Apple Music or see Beyoncé’s “LEMONADE” on Tidal — these services tend to share the same music catalogues. With original programming, users will be able to identify a specific series with its corresponding music-streaming service, just as "House of Cards" has become synonymous with Netflix and "Transparent" can only be found on Amazon.
“The only way that they have to compete is by way of price, features and exclusive content,” Miller, the NYU music business director, said. “These exclusive series are one way — perhaps a small way — in which these people can differentiate themselves from the other services.”
If users want to watch “Ultimate/Ultimate,” a mockumentary series about an electronic dance music competition from Oscar-winner Tim Robbins, they will have no choice but to watch episodes on Spotify. If a six-part Vice Media docu-series about music scenes across the globe sounds appealing, a person will have to subscribe to Apple Music. Interested in seeing emerging comedians perform on a show hosted by DJ Cipha Sounds? Tidal is your only option.
The decision to develop original series is also a gamble for streaming services that rely heavily on the subscription model. If for some reason Apple's or Amazon’s music streaming and original programming ventures failed, those companies would have entire ecosystems to fall back on. Apple can use its products to push users toward its services, just as Amazon can do with Prime or Alexa.
“It’s almost not even a fair comparison,” Miller said. “There is no question that the way licensing happens in the music industry … the companies that will survive and thrive are Amazon, Apple and Google.”