The industry is still picking over Spotify’s financial results for 2015, with consultant Mark Mulligan the latest to weigh in.

His analysis of the figures raises some sharp points, including the fact that Spotify’s rights and associated costs were 83% of its revenues in 2015, up from 81% in 2014.

The company’s gross margin per user has fallen from $4.20 in 2013 to $3.45 in 2015: “Particularly challenging for a model with already wafer thin margins,” according to Mulligan. “It is rising rights costs that are keeping Spotify from commercial sustainability.”

It’s an alternative view to Spotify’s official line, which is that its model will be profitable at scale, so the costs (and heavy losses) of getting to that scale are worthwhile.

Mulligan’s other point, however, is that Spotify is no longer a $9.99-a-month service in real terms: he suggests that its effective monthly retail price is now $6.49 thanks to promotions, carrier deals and student discounts.

“It is about time that the music industry stopped pretending that this isn’t the reality of the market and instead starts pursuing proper pricing innovation rather than by stealth via discounting,” he wrote.

“83% of Spotify’s gross revenue going to rights is clearly too high and unsustainable, yet $0.00098 per song going to artists is also clearly too low and unsustainable. Something needs to give, for both ends of the value chain,” continued Mulligan, suggesting that Spotify may need to reach 50 million or even 100 million subscribers before it feels it has the clout to challenge rightsholders over the terms of its licensing deals.

“Perhaps it will never happen. But if it doesn’t, the economics of streaming will remain so broken that only companies with ulterior business objectives will remain viable players, enter stage left streaming’s Triple A: Apple, Amazon and Alphabet (Google). The labels need to ask themselves whether that is the streaming future they want,” wrote Mulligan.

More and more people are talking about this ‘Triple A’ future, but concrete suggestions for how the big pureplay streaming services can sustainably compete with the big tech firms remain elusive.

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