Spotify should become its own record label according to one industry expert. The world's biggest streaming service recently announced plans for its own initial public offering but after confirming a huge loss of $1.5 billion in 2017, a number of investors appear to be pretty reluctant when it comes to investing in the company. Now, though, industry expert Duncan Davidson believes Spotify should take a few notes out of Netflix's books.
Spotify has spent close to $10 billion on music royalties since it was founded, with these expenses growing 27 percent in just the last year. However, before Netflix announced its own original programming, it was also in a similar state, with film and TV royalties growing on a constant basis. Now, years after the announcement, the company is producing "more content than all of Hollywood," according to Davidson, while the video streaming service also shows no signs of slowing down in the near future, despite the fact that Disney has confirmed that it will be pulling all content from the service. Netflix has effectively carved out an environment that allows it to survive, even without the backing of major film studios, and it is this that Davidson believes Spotify should recreate. If the music-centric company can successfully find its own musical talents, it would be able to bypass a huge number of the costs that come with licensing music from other labels. Furthermore, the exclusivity of new music could also prove a popular attraction to users who perhaps would not have previously considered the service, therefore allowing the streaming platform to grow revenue at a much lower cost. In addition, in its current climate, Spotify relies heavily on major music labels to provide content for its subscribers, meaning a label pulling their content from the service – in a similar manner to Disney with Netflix – could prove to be fatal to the service.
Now, in order for this to be successful, Spotify would have to find a huge number of unique artists, possibly even more "than the whole of the music industry." Doing so would require a massive amount of spending and effort in the short term, but if Spotify can successfully create its own roster of artists, it could prove to be a significant cost saver and revenue-generator in the long term. Not to mention the fact that it would better differentiate the service from the likes of Apple Music or Deezer, while also reducing its dependence on major music labels and generating its own loyal subscribers in the process.