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What began as a music-only streaming platform evolved into a broader audio platform that included podcasts and audiobooks. Now, Spotify is venturing into video — in both snippets and long-form content, although the latter is only in an experimental phase.    During Tuesday’s Q2 earnings call, CEO Daniel Ek and interim CFO Ben Kung repeatedly referred to “the Spotify Machine” when explaining the company’s expansion beyond music. As Ek explained, the term means the company “isn’t just a sort of one-trick pony anymore, but it’s actually multiple verticals working together” to create more choice for consumers and drive more engagement. “Because you may come for the music and stay for the audiobooks,” Ek said. “Some customers may come for the podcast and stay for the audiobooks.”  Trending on Billboard The term makes sense: Spotify is an increasingly complex product with multiple moving parts, numerous audio and video formats, and a variety of paid tiers. Each new component to the machine is meant to make the company more valuable as a whole. Similarly, concert promoter and ticketing company Live Nation uses the term “flywheel” to describe how its various products and business segments provide momentum for the larger entity. But “the machine” has a better ring to it.   The machine is integral to becoming a sustainable, profitable company. As Spotify detailed in its 2022 investor day presentation, branching out from music will help improve its gross margins and become the profitable company it has long aspired to be. Music margins are roughly 30% of revenue — the remaining 70% goes to rights holders — and will top out at 35%, the company has said. At that 2022 presentation, Spotify said podcast margins can reach 40-50% gross margin and overall gross margin can get to 40% (gross margin rose to 27.6% in Q1 from 25.2% a year earlier).   The machine helps increase engagement. Spotify is more valuable if people spend more time using it. When engagement increases, churn decreases, which in turn reduces the expense involved in bringing those lapsed customers back. When engagement increases, free users are more likely to become paid subscribers. The last thing a streaming service wants is an infrequent customer who doesn’t enjoy the features or delve deep into its content. Audiobooks are a good example of keeping people hooked: Ek said that in the markets where audiobooks are available, 25% of users are listening to them. What’s more, in the first two weeks a Spotify user listens to audiobooks, Spotify sees “over two and a half hours of incremental usage on the audiobook side,” he said.  The machine gives users greater freedom of choice. Ek confirmed Spotify will have an audiobook-only subscription tier along with a music-only tier; the standard subscription tier offers both music and audiobooks. Over the years, Spotify has given consumers multiple options to choose from: an individual plan, a two-person plan called Duo, a multi-user family plan, and, in certain markets, the ability to purchase one day at a time. Spotify wants to provide “as much flexibility as possible in this next stage of Spotify” to convert more users to paid subscribers, Ek explained.   The machine is built to maximize value. Ek and Kung frequently mentioned a particular internal metric, a value-to-price ratio, that Spotify uses as a North Star these days. By adding podcasts, audiobooks and education, as well as features such as Wrapped — Spotify’s personalized year-end recap — Spotify delivers more value than it provided when it was a simpler, music-only service. Ek singled out the videos that Spotify has added in “11 or 12” markets and built anticipation for video clips that will allow artists to tell stories about their new releases. Such videos are one way Spotify is “focused on winning discovery” to make the platform a better listening experience, Ek said. Spotify’s recent foray into educational video courses in the U.K. is another stab at adding value.   The machine ultimately gives Spotify the ability to raise prices. When Spotify adds products and features, EK explained, it increases its value-to-price ratio. That, in turn, allows it to occasionally raise prices to capture the value it created. “The way you should think about this as investors is the better we can improve the product, the more people engage with our product, and the more value we ultimately create,” Ek said. “And the more value we create, the more ability we will have to then capture some of that value by price increases.” After more than a decade of value creation and stagnant prices, Spotify raised rates in July 2023. In April, it again hiked rates in select markets — including the United Kingdom and Australia — and is expected to expand those increases to additional markets.   The machine also requires a feat of engineering. “It’s a fairly complex machine,” Kung said, because Spotify has both variable-cost models, such as revenue sharing and per-hour royalties, and fixed-cost models — some in-house and licensed podcast content, perhaps. Ek added that “the machine takes care of all the complexity on the back end to deal with what was historically a very difficult problem to solve, which is multiple business models in one consumer experience.” Spotify’s engineering challenge is incorporating additional verticals into a seamless user experience without getting clunky — a criticism often launched at iTunes, which started as a music store and added videos, books, apps, podcasts and iTunes U, a place for educational materials. “Simplicity is hard,” a former Apple product designer once wrote. “Very hard. But when you get it, it’s beautiful.” The machine might take some getting used to. As Spotify branches out to non-music verticals, it has stakeholders other than the music rights holders, artists and songwriters it has served for more than a decade. Now, Spotify also supports podcasters, authors and — although in the early stages — educators. That has already created some tension between music publishers and Spotify following news that Spotify considers its music-audiobook subscription offering to be a bundle under the Phonorecords IV mechanical rate structure in the United States. Subscription bundles allow Spotify to pay a slightly lower royalty rate. But really, is anybody surprised that the machine is trying to save a little money? 

Watch Latin American Music Awards Ciara is documenting her weight-loss journey on social media after welcoming baby No. 4 in December. Shortly after revealing on Instagram that she hopes to lose 70 pounds post-birth, the 38-year-old singer shared her current weight in a candid post on Thursday (April 25). In a carousel of photos, Ciara included a snap of her scale. On the screen, her weight is displayed as 181.4 pounds. The post also features pics of the “Goodies” singer posing with Kendall Jenner, hanging out on a pickleball court and cuddling up with her daughter Siena, who turns 7 on Monday, and her new baby girl, Amora. Ciara shares both daughters with newly signed Pittsburgh Steelers quarterback Russell Wilson, as well as 3-year-old son Win. The vocalist is also mom to 9-year-old son Future Zahir, whom she shares with her ex, rapper Future. Ciara’s latest post comes about two weeks after she shared a gym selfie with followers and wrote, “Trying to lose 70lbs post baby, prepare for a show and tour while breastfeeding, and running my businesses…Shout out to all my mammas out there gettin in, I see you!” The Ten to One Rum founder is currently gearing up to embark on her Out of This World Tour with Missy Elliott, Timbaland and Busta Rhymes. Their first show is slated for July 4 in Vancouver, followed by stops in Seattle, Los Angeles, Las Vegas, Denver, Atlanta and more cities before the trek wraps Aug. 22 in Rosemont, Ill. Since welcoming Amora in December, Ciara has been open about the struggles of new mom life. Last month, she shared a sweet video of her husband struggling not to spill a capsule of her breastmilk during a bumpy car ride, captioned, “Babe helping me … when breastfeeding is life!” “Don’t drop the milk!” Wilson said in the clip, making his wife laugh.

Watch Latin American Music Awards The National Music Publishers’ Association’s (NMPA) model TikTok license, which is used by a number of the independent music publishers, will expire at the end of April, and there are no ongoing negotiations between the NMPA and TikTok to renew it. That means that starting May 1, more songs will be removed from TikTok, joining the millions that have already been removed from the Universal Music Group’s catalog earlier this year. At the end of January, licensing negotiations between UMG and TikTok collapsed, resulting in UMG’s decision to pull its music off the platform. In an open letter sent to artists and songwriters, the company lamented that TikTok failed to pay the “fair value” for music. It also noted other concerns with the platform, including AI concerns and artist safety. TikTok replied within hours, calling UMG’s letter a “false narrative” and that it was “sad and disappointing that [UMG] has put their own greed above the interests of their artists and songwriters.” It is unclear how widespread the impact of the NMPA’s lapsed license will be. A TikTok spokesperson claims that only a small percentage of its overall music library used the model license and that they are not sure TikTok users will even notice the removals. The spokesperson adds that TikTok is in talks with a number of the publishers who used the NMPA license about getting an individual license, including a few of the larger players that use the NMPA model license. TikTok declined to provide further details. The NMPA is also tight-lipped about the size of this impact, given the decision of whether or not to individually renew TikTok licenses for May 1 is in the hands of its members, not the NMPA. While the NMPA cannot disclose which independent music publishers use its model license for TikTok, it appears that it is a popular option, used by a large number of firms, ranging from tiny boutiques to sizable independents. The major publishers and some large indies negotiate directly with TikTok already, but the NMPA’s TikTok model license exists as a service largely to help the smaller publishers who would have less negotiating power or resources to get the license on their own. The NMPA also has model licenses with the other social media networks available to its members, including YouTube, Meta and others, and the organization says it will continue to offer these other model licenses to members. X, notably, is absent from this list because it does not pay for music that appears on its platform. The NMPA has been asking X to license and pay for music for years to no avail, leading the trade organization to launch a $250 million lawsuit against X in June 2023. The NMPA’s decision to pull out of TikTok should come as little surprise. NMPA president and CEO David Israelite has been supportive of UMG, and its publishing company and NMPA member UMPG, and its choice to leave TikTok since the beginning. Right after UMG announced its exit, Israelite offered a statement, saying “it is extremely unfortunate that TikTok does not seem to value the music creators that fuel its business.” On Feb. 2, Israelite gave a speech at the Association of Independent Music Publishers Grammy week event, announcing that the NMPA’s license was set to expire at the end of April. “I’m only going to say two things about TikTok: the first is I think music is tremendously important to the business model of TikTok, and, secondly, I am just stating the fact that the NMPA model license, which many of you are using, with TikTok expires in April,” he said at the time. On March 5, the organization sent a letter to its members, explaining that the NMPA did not foresee renewing its license with TikTok and told members using their model license to negotiate directly with TikTok if they wanted to continue to be on the platform. Since then, the organization has not returned to the negotiating table with TikTok. In a statement, TikTok said, “We have direct deals in place with thousands of music publishers — including NMPA members — and we will continue to engage with the entire publishing industry to help make their songs available on TikTok.”

Watch Latin American Music Awards This week, Billboard’s New Music Latin roundup and playlist — curated by Billboard Latin and Billboard Español editors — features fresh new releases from artists such as Belinda, Marc Anthony, Jay Wheeler and Anitta, to name a few.  Marc Anthony’s Muevense is a testament to his musical prowess. The 10-track set is home to tracks like “Ale Ale,” […]