Why Netflix Can Turn A Profit But Spotify Cannot (Yet)

Having just celebrated its 10th (streaming) birthday, Netflix followed up with a strong earnings release, announcing 5.8 million net new paid subscribers in Q4, sending its share price up by 9%. This wraps up a stellar year for Netflix, one in which it doubled down on original programming and delivered acclaimed hits such as Stranger Things and The OA, shows that don’t fit the traditional TV mould. In fact, Stranger Things was turned down by 15 TV networks before finding a home at Netflix and The OA’s oscillating episode lengths (from 1 hour 11 mins to 31 mins) would have played havoc with a linear TV schedule (not even considering its mind bending plot).

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Netflix closed 2016 with 89.1 million subscribers and the temptation to benchmark against Spotify’s equally strong year is too strong to resist. Spotify (which celebrated its decade in June 2016) closed the year with around 43 million subscribers, 48% the size of Netflix. But a closer look at the numbers tells another growth story.

Read the full post on the MIDiA blog by clicking here.

MIDiA’s 2016 Predictions – Here’s How We Did

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Part of our job at MIDiA Research is to help our clients ‘look round the corner’ and see what disruptions and innovations are likely to impact their businesses. In short, our job is to help understand what the future holds. This is why in 2015 we published our ‘2016 Predictions’ report in which we made a number of big calls on the coming year in digital content. Here’s how we did:

Macro Trends

  1. Mobile messaging apps will surpass 6 billion. VERDICT: Correct. (There are now more than 6.5 billion)
  2. Video will eat the world. Whatever media business you are in, in 2016 you will be a video company too. VERDICT: Correct. (2016 was the year video took centre stage)
  3. Some or all of Amazon, Apple, Facebook and Google will start to aggregate TV channel apps and SVOD apps to join the digital TV dots. VERDICT: Correct. (Amazon and Apple both made their first TV app aggregation moves in 2016)

Music

  1. Digital will finally be more than 50% of revenue. VERDICT: Correct. (Q2 major label results showed digital as 54% of recorded music revenue)
  2. Streaming holdouts will trickle not flood. VERDICT: Correct. (Indeed, remarkably few artists held back albums. Exclusives became the new black instead)
  3. Spotify will still be the leading subscription service. VERDICT: Correct. (At the end of September Spotify had 40 million subscribers compared to just under 18 million for Apple Music)

Mobile

  1. Android app revenue will surpass iOS. VERDICT: Wrong. (Apple’s App Store still has almost twice the revenue of Play Store. In our defence on this one this was as a result of Android under performing and Apple over performing. Android increased OS market share but still did not overtake app store revenue which means that Play ARPU reduced while Apple App Store ARPU increased.)
  2. Adblocker disruption will accelerate for publishers. VERDICT: Correct. (Adblock plus now grew big enough to open it’s own adexchange, and publishers can do little but get on board)
  3. Big freemium games will lose steam. VERDICT: Correct. (Fewer apps in the top free and top grossing app charts now compared to January)

Video

  1. More unbundled SVOD services will launch. VERDICT: Correct. (2016 saw a succession of new video services)
  2. Mobile video will blur at the edges. VERDICT: Correct. (Messaging apps have made video central to the user experience with the Snapchat illustrative stories feature now being replicated on Instagram)
  3. Interactive ads will gain traction on TV channel apps. VERDICT: Wrong. (Although still be tested on selected Fox Networks authenticated channel apps, they have not moved into the mainstream…yet )

We’ll be publishing our 2017 Predictions report in the next few weeks. To learn how to get a copy of the report and of our 2017 Predictions report and also our 2016 Predictions report email us at info AT midiaresearch DOT COM.

Introducing The Future Music Forum

fmf-sync-logoThis September MIDiA will be participating in the Future Music Forum (FMF) in Barcelona. We’ve been involved with the FMF since its inception and we think it’s a great, intimate event that combines forward thinking presentations with informal but highly productive networking. And of course it is in sunny Barcelona!

This year I’ll be doing the opening keynote: Music Rebooted: How Emerging Technologies And Gen Z Are Changing Music For Good. In this presentation I will be looking at how audiences are changing, talent is changing, content is changing, and all at an unprecedented rate. How what used to work doesn’t and what does work won’t in the future. Technologies as diverse as VR, Musical.ly and Snapchat are transforming what success looks like and writing new rules for success. So, just as you thought you were getting your head around how to make the economics of streaming work now you have to change the entire way you look at what music looks like and what it means to fans.

In addition, MIDiA’s Paid Content analyst Zach Fuller will be moderating a panel: Social Media Influencers / Music Industry’s New Talent Pipeline. In this panel Zach will lead a discussion exploring how millennial audiences now rely on social media platforms to capture their experiences, communicate with others, and find information used to make purchasing decisions (among other things). He’ll look at how marketing with social media influencers is one of the most cost-effective and powerful ways that brands can reach millions of consumers on Snapchat, Instagram, and YouTube.

FMF runs from the 20th of September to the 21st, with an additional Synch Summit running alongside starting on the 19th. We hope to see you there.

Introducing The New MIDiA Research

Regular readers of this blog will probably have noticed that my posting has become a little less regular than usual over the last couple of months…well there’s good reason…we’ve been building some great new product features, research and data over at MIDiA Research and we launched them today.  That’s what’s been keeping me busy!

midia site front pageAs many of you will know I formed MIDiA Research back in July last year because I wanted to provide a depth of analysis, data and research rigour for the music industry that most technology sectors benefit from. During the last year we have been fortunate enough to grow quickly and acquire a client base that is a who’s who of the music industry, from record labels to music services to big tech companies.

We quickly realised that our model was working so well for music that there were other media verticals that would benefit from the same approach. So today we are proud to announce the launch of two new research services:

  • Online Video
  • Mobile Content

Click here if you are interested in finding out more about our new site and research.

We also launched today a weekly newsletter that gives you a round up of analysis, research and data on digital music, online video and mobile content. We like to think of it as the definitive take on the digital content marketplace.

To sign up head over to the MIDiA blog and enter your email address in the field on the right of the page.  All subscribers get a free 28 page MIDiA report ‘The State Of Digital Music’.

Normal service will now resume on this blog!