Spotify, typically known for its music streaming service that competes with Pandora, iHeartRadio, Mog, and countless other streaming apps, is expanding beyond music.
Spotify is looking at a foray with an on-demand video service, although it isn’t looking to leave behind its music roots. Business Insider’s sources report that Spotify wants to become both a music and video service, which could possibly be bad news for Netflix, Hulu, and Amazon.
Where Spotify wants to compete with these services is to invest in original content. YouTube, Hulu, and Amazon have all made efforts to produce original content that is carried through their respective services alone. You might have heard of YouTube’s $300 million investment to find the next new media channels worthy of competing with the tube called the YouTube Original Channel Initiative, or Amazon Studios, which is turning to the crowd to find the next big online show. And of course, Netflix’s House of Cards has managed to steal the streaming spotlight recently.
The report reasons that Spotify is motivated to move into video because the streaming music service isn’t a sufficient revenue generating business. Record labels are still the ones to dictate the royalty costs, much to the chagrin of music streaming services. Its margins are slim enough as it is, which Spotify can blame on the plethora of competitors that are vying for crucial label and licensing deals. With more music streaming players in the space, the record labels have the power to call the shots. Labels can push for higher royalties and there is little that Spotify can do about it. If Spotify doesn’t like the terms, then these labels can move onto the next service in line that might offer the labels a better royalty.
What Spotify gains from dipping its toes into original content, even though it’s bound to be a costly endeavor, hinges on how captivating the content is in the first place – clearly, a risky move. But the plan is to create content exclusive to Spotify (since these shows would be funded by Spotify) that its users would have no choice but to pay to watch. It’s certainly possibly: Game of Thrones fueled the demand for non-HBO subscribers wanting to pay for HBO Go.
Spotify may at the same time vie for the attention of television and movie studio executives in an effort to provide popular TV titles, although this detail hasn’t been confirmed.
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