Just as tens of thousands of sites were getting ready to plunge themselves into darkness to (successfully) protest the proposed SOPA and PIPA anti-piracy legislations, music streaming service Grooveshark went dark in Germany on Wednesday. It too was protesting against something. But that’s where the similarities end. The company, a bête noire of music labels, has decided to shut down its German operations due to the “unreasonably high” licensing costs being demanded by music performance rights outfit GEMA , which claims to represent “64,000 members (composers, lyricists, and music publishers), as well as over two million copyright holders all over the world.”
Users across Europe may love Spotify's free, ad-supported music streaming service, but if their 2009 numbers are any indication, they might not get to love it much longer. According to Spotify's own disclosure, the company lost £16.66 million in 2009. That comes from £11.32 million in revenue, and £18.82 million in costs. Add a dash of taxes, and you get a pretty hefty operating loss.
Spotify clued us into how their earnings break down as well. They get cash from two sources: ads and subscriptions. In 2009, Spotify pulled in £4.51 million from advertisements, and £6.81 million from subscriptions. Only 3.57% of Spotify's users bought into a paid subscription in 2009; a rate that may not be sustainable.
But how has Spotify been doing in 2010? Well, they haven't let that cat out of the bag yet. Although, the company did respond to these numbers saying, "The groundwork laid in our launch year has been crucial to the significant achievements made in 2010." Taking bets, how will Spotify do come the end of 2010?
Hard times come quickly for social networking sites. One minute you’re on top, popping open bottles of vintage sparkling mineral water and picking up the tab for another round of tofu burgers. The next you are head-in-hands wonder how it all went so horribly wrong. Today’s patient on the couch is MySpace, with parent company News Corp. none to pleased with what’s going on.
Jonathan Miller, who keeps the watcher’s eye on News Corp.’s Internet services, put it pretty plainly: "The thing you see in this space more than anything else is that if you don't keep innovating and moving forward, you get in trouble. You can't stop. And MySpace stopped." MySpace’s stopped and, since being number one in 2006, has been outpaced by more popular alternatives: Facebook and Twitter.
Time, again, to reinvent the wheel, according to Miller, and return to what MySpace does best: music and gaming. MySpace recently purchased the online music provider iLike. And it has announced a new music video service which will allow labels and artists to see how well their music is doing on MySpace.
To expand gaming opportunities, Miller believes MySpace must open up its system to external developers. He also hinted that some paid premium services to be in the offing.
"Everybody in the company is upset that we didn't keep going when we had the real momentum. Regaining momentum is always much harder than keeping momentum going,” Miller stated. That, and keeping an eye on your rearview mirror to see who’s about to overtake you.
What not to expect, says Arrington, is a service similar to the one Google presently has in China. This services allows users to search for songs by song, artist, or album title, and download the licensed music files for free. (Why can’t we have that here?) According to paidContent.org, the revenue stream, split with the Chinese music company Top100.cn, comes from ads.
As rumors go this one is not a big surprise: there’s some serious coin to be made in music downloads, and it would have been more of a surprise if Google didn’t make this move. However, the entrant of another heavyweight into an increasingly crowded marketplace, even without Spotify’s impending entrance, raises questions about how many will actually survive.
Update: First screenshots of Google's music service after the jump.