Spotify recently announced a 17% workforce reduction, the largest since its founding, equivalent to about 1,500 people. Experts predict that this management crisis is due to the difficult business situation due to the high cost structure and slowing economic growth, despite the company recording its first profit since 2021.
What's wrong with Spotify?
Profitability: Despite having a 30% share of the music streaming market, it has failed to generate consistent profits.
Licensing costs: High music licensing costs put a lot of financial strain on the company.
Artist Revenue Problem: The streaming model generates huge revenue for big artists, but fails to provide sufficient income for smaller artists.
Competitive situation
Disadvantage to competitors: Unlike Apple Music and Amazon Music, Spotify lacks other revenue streams, putting it at a disadvantage to the competition.
Attempts to diversify content: Investing in content such as podcasts and audiobooks, but no clear results yet. Market Conditions and Outlook
Price hike risk: If you raise the price of a streaming service, there is a risk of users switching to competing services.
The valuation problem: While it offers users a huge music collection at a low price, it's structured in a way that doesn't benefit either the streaming service or the artists.
Spotify is experiencing management difficulties and profitability issues, which are due to high operating costs and an imbalance in its profit structure. In this situation, Spotify is challenging itself to strengthen its competitiveness and find a sustainable profit model. It is as if we are seeing the reorganization of the old domestic music market.
Personally, I think that fortunately, most domestic music streaming services these days are subsidiaries of large, solid companies or are based on platforms, so they won't have the same problems as above.
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