amazing icon

Report: Spotify Makes More Money For Labels Than Physical Sales

According to an exclusive piece from Business Insider today, Spotify is now the second largest generator of revenue for record labels after digital music sales.

The story quotes an anonymous source, so the report is impossible to verify. Still, such news isn’t all that surprising. Spotify has been growing at a blindingly fast rate since it was introduced to American listeners last year. Noted Spotify investor Sean Parker predicted that the service would overtake iTunes in the not too distant future. “Spotify is returning a huge amount of money,” said Parker. “We’ll overtake iTunes in terms of what we bring to the record industry in under two years.” Spotify also continues to grow as it expands their offerings to users. The streaming music service recently announced the introduction of free streaming radio to mobile subscribers. Streaming radio had previously been available only on the desktop app and only to premium Spotify users.

This latest news of Spotify’s dominance is also another nail in the coffin of physical formats. Late last week Digital Music News reported that physical music sales make up an infinitesimal percentage of the overall revenues at big box stores. How small? According to the head of EMI Music executive Roger Faxon, “If you take Walmart, Best Buy, and Target, music represents less than 0.3 percent of their turnover.”

MySpace Clears Out Office Space

It’s no secret that MySpace, a News Corp.-owned social media Web site, has been struggling in recent years.  According to Hypebot, 54 percent of US internet users were on Facebook, while only 27 percent used MySpace as of December 2009. That being said, MySpace let about half of its US workforce go last Tuesday” roughly 500 employees. There is speculation that News Corp. is trimming down MySpace to make a more palatable deal should they choose to sell. According to Business Insider, Yahoo in particular may be interested in purchasing the company.

(TechCrunch.com)

This is not the first time that MySpace has suffered major restructuring. Owen Van Natta, ex-CEO of the social media giant, cut nearly 30 percent of its employees in July of 2009. He, too, was replaced  the following February. Despite the rumors that suggest News Corp. is packaging MySpace to be sold, MySpace officials had no comment on the subject. However, CEO Mike Jones did say “Today’s tough but necessary changes were taken in order to provide the company with a clear path for sustained growth and profitability” in a statement last Tuesday.

The layoffs were spread out evenly throughout the company, says TechDay, except for the massive reduction in international employees. Jones maintains that despite the smaller audience for the site, their new strategy is based around more effective advertising. “The new organizational structure will enable us to move more nimbly, develop products more quickly, and attain more flexibility on the financial side,” Jones said. “We are also committed to rebuilding the company with an entrepreneurial culture and an emphasis on technical innovation.”

So how will this affect musicians on MySpace? Hard to say. With half of MySpace’s staff gone, users may expect a decrease in customer service and tech support. While Jones claims a more nimble organizational structure, they’re still operating with half of the manpower that they had just a week ago. It seems unrealistic to expect the same level of support during this transitional phase for MySpace. On the other hand, if Jones follows through with his promise for a focus on an entrepreneurial culture and technical innovation, then this massive layoff may provide MySpace with the cash it needs to make some significant changes.

MySpace has dominated the social media music scene in recent years and has launched the careers of more than a few musicians, but Facebook, YouTube and other similar sites have been positioning themselves for a music coup d’état should MySpace falter. MySpace knows the importance of their musicians, however, and doesn’t plan on relinquishing control just yet. We will continue to be absolutely committed to supporting musicians and will continue to create new tools and opportunities for them to build their fanbase and manage their communications, the senior vice president corporate communications told The Music Network. MySpace is in the hot seat, and the coming months will reveal how well they can adapt in order to survive.