MBW Reacts is a sequence of remark items from the Music Enterprise Worldwide crew. They’re our analytical (and typically opinionated) reactions to main current leisure information tales.

It’s been a curious week for these of us with a blue-tick Twitter account.

Once I say ‘us’ btw, I don’t imply ‘me’; my private causes for fleeing the bully-bird’s cage have been lots, however can primarily be summed up in two chirps:

  • (i) I’d seen sufficient scorching takes and phony remonstrations to acknowledge the tawdry guidelines of Twitter’s numbers sport. If I’m to spike my night cortisol with interactive nonsense, I’d fairly accomplish that enjoying PlayStation;
  • (ii) In the end, I put meals on the desk for my youngsters with phrases, and I didn’t wish to habitually piddle these phrases away to complement gazillionaire Silicon Valley bros (Jack, Elon)… for nothing.

So after I say ‘us’, I imply ‘us’.

As in, Music Enterprise Worldwide, and some other enterprise whose on-line presence continues to hold Twitter’s once-prized blue verification protect.

You will have learn within the media that Elon Musk is now promoting blue-tick verification for a month-to-month subscription worth.

What you may not have examine is Musk’s follow this carrot: like a canny gangster, Twitter has begun robbing its customers’ technical safety, earlier than, seconds later, providing to switch it… for a tidy sum.

On Wednesday (March 22), Crew MBW obtained the next e mail from Twitter informing us that our Music Enterprise Worldwide profile not loved two-factor authentication.

(In case you weren’t conscious, two-factor authentication = receiving a novel code every time you go online to a service with a view to guarantee nobody dodgy is hacking into your account.)

Guess how one reinstates cell/SMS two-factor authentication on Twitter? Yup: Begin paying Elon for a month-to-month subscription.

That is Musk enjoying hardball: “How a lot do you worth the safety of your Twitter account? Are you prepared to danger being hacked and unmentionables being tweeted out in your identify? If not, pay up.”

So, begrudgingly, we’ve needed to.

There’s a wider enterprise lesson to be discovered right here: Elon Musk’s stone-hearted choice to start out promoting an important service profit that we’ve lengthy grown accustomed to having at no cost.

That concept, in flip, has dropped at thoughts the Good Ship Spotify, and a captivating slide from one explicit presentation at SXSW in Austin final week.

Mentioned presentation got here from Rob Jonas, CEO of Luminate, the leisure market monitor and insights supplier that was as soon as often known as MRC Knowledge and Nielsen Music. (You’ll be able to hearken to Jonas’s full SXSW presentation by right here.)

The related slide inside Jonas’s presso is the one you’ll be able to see above, primarily based on Luminate knowledge. It delivers some jaw-dropping info.

To start with, verify this: There are 67.1 million tracks sitting on music streaming companies as we speak that, within the 2022 calendar yr, attracted 10 or fewer streams apiece, globally.

That 67.1 million determine represents slightly below half (42%) of your complete catalog of tracks accessible on worldwide music streaming companies as you learn this (primarily based on ISRCs).

(All the catalog of music on these streaming platforms is comprised of 158 million tracks in complete.)

Put together your self for the subsequent statistical haymaker: Practically 1 / 4 (24%) of the 158 million tracks on music streaming companies monitored by Luminate in 2022 attracted ZERO performs that yr.

That’s roughly 38 million tracks. 38 million! Zero performs!

Not one single sausage finger pressed a forward-facing arrow beneath the art work of any of those songs, on any streaming service, anyplace, at any time, within the entirety of the twelve months of 2022.

It’s nearly sufficient to make you cry.

Not me, although. It made me consider Spotify.

As our common readers could recall, in November MBW revealed an article that exposed some startling stats in regards to the sum of money Spotify pays Google annually to be used of its cloud storage amenities.

Spotify doesn’t publish a exact determine for what this Google cloud storage prices it yearly. However SPOT does publish, in its annual SEC-filed report, the financial yearly improve in its firm prices for ‘utilization of cloud computing companies and extra software program license charges’.

What this implies: MBW is ready to determine the minimal quantity that Google’s cloud storage companies (plus different software program licenses) are costing Spotify yearly.

To repeat that: The under chart represents the minimal quantity Spotify is spending on these companies annually. The fact is probably going far (i.e. multiples) costlier.

(We’ve been in a position to replace the under figures for FY 2022, as Spotify filed its newest annual report, for final yr, in Q1 2023.)

Query: If Spotify is now shoveling a good-looking nine-figure price over to Google annually for cloud internet hosting companies, the place is the income coming from to cowl that invoice?

Reply: proper now, that income is coming from Spotify’s three sole earnings streams: (i) Promoting; (ii) Subscriptions; and, to a a lot lesser extent, (iii) On-service advertising and marketing charges paid for by the music trade.

In different phrases, these hefty cloud internet hosting prices are immediately consuming into Spotify’s margin at a time when analysts throughout Wall Road are baying for Spotify to extend… its margin.

However what if Spotify was to take a leaf out of Elon Musk’s ebook RE: two-factor authentication?

What if Spotify additionally began ruthlessly passing on the price of a utilitarian technological profit to its particular person B2B purchasers (aka artists) – however this time, for the cloud internet hosting prices required to maintain music accessible in its library?

Particularly if it began immediately billing, below menace of takedown, the tens of millions of artists behind these 38 million tracks (nonetheless an unbelievable stat) that attracted ZERO streams in 2022?

And, by extension, the artists behind the 42% of tracks that attracted ten or fewer streams final yr?

No pay, no keep (unplay-ed).

As issues stand, Spotify can’t technically do that, not less than immediately.

Its financial relationship with stated B2B clients (9 million artists and counting) can solely happen through middlemen, by way of distributors and document corporations.

A very powerful sector, volume-wise, of these middlemen? DIY distributors, whose self-uploading purchasers are accountable for almost all of recent music pushed onto streaming companies’ huge catalog (158 million tracks and counting).

If solely there was a manner for Spotify to have a direct distribution relationship with artists, in order that it may ‘Do An Elon’ and begin billing stated acts, one-to-one, for important B2B companies.

Oh yeah, there may be: Spotify launched a direct DIY distribution product for artists in 2018, solely to close it down in 2019 below stress from the main document corporations.

Since then, the likes of SoundCloud and – amazingly, in current context – TikTok’s SoundOn have launched their very own DIY distribution choices for music artists.

4 years on from the final time Spotify deserted its personal music distribution operation, is it time for Daniel Ek and co. to have one other crack at this market?Music Enterprise Worldwide