It’s brutally expensive to be in the music streaming game. Development costs are astronomical yet pale in comparison to the high fees these companies must pay to publishers and rightsholders. No wonder we’ve seen layoffs at companies like Rdio, Slacker and others.
It’s no easier for other companies in this space.. Spotify is hemmorhagging money. Pandora’s pleas for reduced fees has fallen on deaf ears. Meanwhile, everyone is being hammered by Apple’s iTunes Radio and Google’s streaming music service. Both those companies are bottomless pits of money.
So here’s the question: can these independent companies continue to be standalone operations? Or will they be bought by larger companies?
I’ve already address the idea of consolidation in this space. And this week, Anu Kirk, the director of music services for Sony, said that the indie services will struggle mightily against competition from the big boys, including Sony, which has a service tied to its Playstation consoles.
From Music Week:
“If you look at the history of digital music, no-one’s really making a lot of money being a standalone digital music service,” he said. “Music on its own is a pretty difficult business to operate in but if you think of it as as part of a larger strategy it makes a lot more sense.”
We’re already hearing about how Microsoft may purchase Deezer. One theory is that Cumulus, the second-largest radio group in the US, is thinking about upping theri $100 million stake in Rdio into some kind of ownership position.
More from Kirk:
“When I look at the economics, I find it very hard to believe that these companies will be able to survive,” said Kirk. “Look at Spotify: there’s a lot of public information about their finances, they’re the number one player in the market and they’re not exactly making money. If they can’t do it at the scale that they’re operating at, it’s really hard to see how smaller fish can keep up.”