Facebook is talking about bringing music sharing services such as Spotify, Rhapsody, Rdio, MOG and Deezer onto their site. The idea is to make your profile an entertainment hub. But how much of a hub will it be if it drives these businesses out of business?
Very few online music services are profitable, and they have a model that causes them to lose money every time a free subscriber joins. After all, even “free” music requires a royalty paid to the record companies. Pandora, which had a successful IPO, has yet to make a profit. Martin Scott from Analysys Mason estimates Spotify had a $6 or $7 million dollar profit in 2010, and Rhapsody’s president – Jon Irwin – says they’re just at the break even point.
So even though getting in front of Facebook’s 750 million users seems like a good opportunity, it’s going to put a huge – possibly devastating – strain on their cash flows. Keep in mind that all those new, “free” users cost the services royalties to the record companies. And Facebook has a declared model of taking 30% commissions from their business victims, errr…partners.
My question is: What is Facebook doing to work WITH these services and ensure their success? Or is Facebook simply going to stand by and see which are able to survive?
We lead off today’s show with a Call To Capitalism going out to Facebook.
All the daily deal sites – and the merchants using them – are taking a hit in the pocketbook thanks to a new industry springing up. There are now aftermarket sites for un-used daily deal coupons.
Business owners are already crying “Uncle” under the rapacious terms from daily deal sites. They’re depending on the 20% of daily deal coupons that go un-used – only now the aftermarket sites (such as Lifesta.com) are making that un-used percentage goes down. And profits are going down for everyone in the process.
Listen now to hear what the winning model is – I’ll give you a hint: It’s an extremely Capitalist approach.
And we wrap up the show with a big dose of irony. Google is getting slapped by AOL, Yahoo and Microsoft.
At the same time that antitrust officials around the world are rallying against Google, they’re standing silent while AOL, Yahoo and Microsoft band together to attack. They’ve decided to sell ads for one another while excluding Google.
I really go to town on this one. Google’s no innocent babe, and I touch on their mistakes, too. But what these other monkeys are doing is exactly what the antitrust officials are after Google for.