Music-streaming service Spotify has become a huge player in the on-demand music streaming scene, and is now looking to enter the realm of on-demand video streaming. According to Business Insider, Spotify will compete head on with the likes of Netflix and HBO Go by providing original content as well as access to a library of other content.
Spotify has picked up some substantial investment from companies such as Coca-Cola and Goldman Sachs, but is still having a hard time turning a profit. Spotify does not own its content, but rather pays record labels for access to their songs. This model is increasingly hard to manage for Spotify, as prices for access to songs climb as Spotify’s popularity rises. A variety of other music streaming services are bidding for the same access, thusly allowing the record labels to charge whatever they see fit.
Netflix has faced similar problems, with movie studios charging high prices for content, leaving Netflix with a small profit margin. Netflix decided to make original content in an attempt to woo more users and increase profits, releasing its original series House Of Cards last year. Whether the original content model will pay off however, remains to be seen. Production costs of original series are expensive to produce, but Netflix and now Spotify are investing now for the hope of more subscribers in the future.
This announcement highlights changes of the entertainment industry, as smaller studios are able to create content on par with traditional Hollywood studios.
[Via: Business Insider]
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