His reasoning: "Spotify lost £17 million last year, and key albums keep getting yanked from its library. Last.fm has never turned a profit in eight years," he says. "Last year, Sky Songs died, and We7 scaled back its unlimited on-demand ambitions."
Sure, he notes, services like Sony's Music Unlimited are being launched, but "it's becoming clear that ad-funded streaming simply doesn't make financial sense."
Also, Spotify failed to launch in the U.S., which suggests that the major labels are losing faith in the concept of ad-supported, free music. In spite of our best attempts to proclaim how the music business model might evolve, they're still making a most of their cash from selling music in physical and digital form, not renting it. To Lewis, this means we have more piracy to look forward to in 2011.
This positions Spotify as the record industry's last best hope in their efforts to wean fans from file-sharing. If Spotify fails and doesn't work as a business model, "frankly nothing will," he says. I hope Lewis is wrong. But he makes great points.
Allowed To Fail
BBC blogger Rory Cellan-Jones summed up this situation the best.
He says that the labels complain off the record about the small revenues they're getting from their licensing deal with Spotify. "But surely," he notes, "they ought to be asking themselves what it will say about their industry's digital future if the service which once excited both music fans and the labels is allowed to fail."
As I've argued before, Spotify has a shot at shifting the way that fans consume music. The problem with this is that the major labels don't want to change music consumption habits, because they're still hurting from the last time this occurred.
Apple's iPod, along with iTunes, already altered fan behavior and unfavorably so.
The major labels don't want to risk this to happening again. Plus, in letting Spotify into the U.S., they risk eroding iTunes sales. Despite their agnostic relationship with Steve Jobs, the major labels aren't looking to take music sales away from the one person that's sending large checks their way on a consistent basis.
They also don't want to deter Google from getting in the music business nor do they want to upset Amazon either. These companies will help them take market share away from Apple while still bringing in sales. Spotify can't promise this.
The Wildest Card
Absent from Lewis's year-end forecast is the possibility of iTunes subscriptions.
Jakomi Mathews and Chris McLellan at The Music Void offer up this prediction: Apple will launch a music streaming service."Motivated by the stagnation and already evident decline of al-la-carte downloads, Apple will enter the cloud music business with a bang," they write. "And it will quite probably dominate the US..."
As a result, they believe there will be a culling of US-based music streaming services as "Apple brings out its big, intimidating launch machine in 2011."
I've seen many tech writers argue that music streaming subscriptions will see a revival the moment that Jobs decides to turn the idea into gold. He doesn't even need to do anything that remarkable. People will eat it up just because Apple offers it, as if they'd never heard of the idea of streaming music online before.
And, we still have Slacker, Rdio, MOG, Rhapsody, and Thumbplay Music too.
In other words, there's still hope for online music streaming. Look at it this way, the major labels are one black turtleneck away from salvation. They're thrilled...
Oh, and did I mention, piracy is already flourishing.
