They say change
is ideal and required in order to progress forward, but could it become a
hindrance to overall profitability? In
reality, progression should always be positive, but a recent financial report
from Rhapsody, a well-known music based streaming company, has shed some light
on the significant costs it takes to convert individuals into subscribers. This
is an important trend to analyze for music industry professionals because
streaming-based services has increased in popularity over the past decade and
has been introduced as the next rung on the music distribution ladder. This begs the question, if these companies
keep losing money, how will they be able to survive in the coming years?
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When looking at
the numbers, Rhapsody is looking strong with 2.5 million subscriptions reported
in 2014. Consequently, these numbers
look great and speak to the popularity of on-demand streaming, but that growth
is coming at a significant cost. In
order to obtain subscriptions, Rhapsody has reported that it lost $21.3 million
in 2014. These losses are stemming from
the $8.53 cost to the company each time a subscription is acquired. Before I proceed, it might seem like this
post is out to get Rhapsody, however Spotify is illustrating similar losses, but
on a much larger scale. In 2014, Spotify
reported $128 million in operating losses alone and there are no signs of this negative trend getting any better.
What does all
this mean for the overall future of streaming?
That is hard to say, but the music industry professionals of today just
cannot seem to get it right. There is
always a way to cut down on operating costs and these companies need to find the
recipe to do just that. Additionally, if
I were running one of these companies, I would be very concerned over the new
on-demand music services being launched by YouTube and Apple later this year,
because they just might have the golden answer.
