The music industry giants are looking to expand further and push the boundaries. So it's time to take stock of this race for expansion and profitability!
#1. Spotify is preparing to launch “Spotify Deluxe” subscription
At Spotify's Q2 earnings call, Daniel Ek revealed plans for a new premium subscription, possibly priced at $18/month. The announcement follows Spotify's record quarterly profit of $4.13 billion (€3.81 billion), thanks largely to its 246 million subscribers, of whom $3.64 billion (€3.35 billion) came from paid accounts.
Mr. Ek highlighted Spotify's strategy of diversifying its offering, which aims to enhance the user experience with a new, higher-priced “Spotify Deluxe” plan. This level will offer better audio quality, additional features and greater flexibility, which could add $5 to the price of the current Premium level. Although details are scant, Ek mentioned improvements such as HD audio, advanced mixing tools, and greater audiobook access.
As Spotify looks to increase its average revenue per user (ARPU) and differentiate itself from rivals such as Apple Music and Amazon Music, the success of Spotify Deluxe will be closely watched, particularly in a difficult economic climate.
#2. The role of social platforms in the entertainment industry
Today, social platforms play a crucial role in the entertainment industry, driving music discovery and marketing strategies for artists, TV shows, and films. Platforms like YouTube and Instagram are essential for promotion, and even major deals like Amazon's with MrBeast have their roots in social media success.
According to MIDiA Research, the under-25s spend more time on social media than watching TV or streaming music. This works not least because social media is monetized by advertising, prioritizes screen time over content quality, and competes directly with traditional entertainment for users' attention.
With the rise of AI-generated content and the creator economy, social platforms are focusing on supporting the creators who generate the bulk of content. Indeed, this evolution is challenging traditional entertainment models.
#3. Universal Music reports a solid Q2
Universal Music Group (UMG) continues to prosper, reporting an 8.7% year-on-year increase in sales. Recorded music revenues rose by 5.8%. Subscription streaming services saw revenues increase by 6.5%, but free streaming revenues fell by 4.2%. In addition, physical sales rose by 9.5% and merchandising revenues jumped by 44.6%.
However, UMG is concerned about the slowdown in subscriber growth on the main streaming platforms. The slowdown in recorded music subscription revenues is slowing subscriber growth on platforms such as Apple and Amazon Music, despite healthy growth on Spotify and YouTube.
As a result of this slowdown, competition for new subscribers is intensifying, affecting overall growth. Revenues from ad-supported streaming also fell, influenced by a change in UMG's agreement with Meta, which stopped licensing premium music videos, and a temporary loss of revenue from TikTok. However, excluding these effects, UMG's sales from ad-supported music streaming increased in the second quarter.
#4. AI-generated music is still present on Spotify
Spotify is grappling with a wave of AI-generated tracks masquerading as music by genuine artists, undermining artistic integrity. Fake AI-generated artists, identifiable by generic profiles and repetitive music, have flooded the platform, exploiting Spotify's compensation system.
Daniel Ek, in particular, acknowledged the legitimate uses of AI, but condemned AI's usurpation of artists' identities. Despite this, reports published in 2024 highlighted the persistence of fake AI artists, often appearing within popular playlists. However, this phenomenon raises questions about listeners' ability to differentiate between AI-generated and original music, as well as the need for streaming platforms to be transparent.
#5. Music Canada CEO criticizes new tax on streaming platforms
Apple, Amazon, and Spotify challenge Canada's new 5% tax on streaming services. Under the Online Broadcasting Act 2023, the Canadian Radio-television and Telecommunications Commission (CRTC) has extended its authority to online content, requiring music streaming services that earn more than $25 million in Canada to pay 5% of their revenues. This tax is intended to support Canadian music creators and broadcasters.
Music Canada's CEO criticized the tax as disproportionately supporting traditional radio and expressed disappointment that the CRTC had not taken the opportunity to modernize the broadcasting system to better support Canadian and Aboriginal artists in the global streaming market.
Indeed, Music Canada's CEO warned that the tax could lead to higher costs for consumers, reduced investment in Canada by streaming services, and even an exodus from these services, all of which could harm the Canadian music industry and jeopardize the growth of local artists.
