“I would say if you’re a drama queen, knock yourselves out! It’s going to be a great show,” said Spotify’s CFO Barry McCarthy in September 2018, about the streaming service’s upcoming round of licence-renewal negotiations with major labels. Well, if this is a drama, the latest public comments from a Spotify executive suggest it’s less of an action-packed thriller, and more of a gentle Sunday-evening serial.
“From an economic standpoint, we don’t expect any change to the music side of the equation. We got much improved terms in our last round of negotiations,” said VP and head of financial planning and analysis, treasury and investor relations Paul Vogel, in an appearance yesterday at Goldman Sachs’ Communacopia conference in New York. “If people look at how our gross margins have expanded over the last couple of years, you will see that from the negotiations two years ago, we were able to sort of change the economic dynamic [of the company] but that’s not something we expect to happen this round.”
It’s not the stuff that thrilling TV trailers are made of, but there’s still potential for some friction. “This round is really about enabling marketplace services. It’s working with the labels to understand what those marketplace services will be and getting clauses into the contracts, as well as building out the non-audio side and the podcasting side as well,” said Vogel.
We’re reminded of comments by Warner Music Group’s Tracy Gardner at Midem this year. “We’re making smarter strategic decisions when negotiating with our partners, and finding ways to protect against dilution of our market share on the services by putting in protections,” she said then. “And recognising that there are things competing for listeners’ attention, like podcasts… So finding out ways to protect ourselves in the structures of those deals.”
Other points of interests from Vogel yesterday: the top 10% of artists on Spotify measured by streams has grown from around 18,000 in April 2018 when it went public to 30,000 now; that the audience for podcasts on Spotify grew by 50% between the first and second quarters of this year; and that Spotify’s subscription-increase tests in Scandinavia “went really well” – although he did not signify immediate plans to replicate it elsewhere in the world.
Vogel was also asked about a potential hi-res tier for Spotify, in the wake of Amazon’s announcement of Amazon Music HD yesterday. He said Spotify “haven’t talked much” about offering a higher-quality tier. “If you go back and look at it, it’s not really something that’s been a big differentiator among the different services. It’s really about user interface, algorithms, playlists, discoverability and those type of things.” However, Vogel was careful to add “I wouldn’t say never”. If Amazon Music HD takes off, you can imagine Spotify talking a lot more about the idea.