The Music Math - Read This If You're Upset About The Spotify Playlists
i've been seeing a ton of posts complaining about the music and the spotify partnership.
from what i have read and experienced, this "issue" is only affecting app users. if you have an all-access membership, your playlists, the music catalogue and overall experience have not changed. (edited to add: specifically for equipment-based classes: tread, bike, row)
there are two tiers of subscription on the app. $29 and $16 ($35 & $17 in canada).
music streamed through peloton programming is considered "public performance" and as such, royalties are paid. peloton pays some of the highest royalties in the business; around $0.04 per stream. that's magnitudes higher than everyone else. if you want to know why? google it. that in itself is an interesting read.
which is great for the artists.
some baseline math:
it costs peloton around $5500 to produce a single class, and the output is ~55 classes per week, meaning the company's weekly operating costs are around $300k.
high quality production is expensive. that is an unavoidable fact.
in every other streaming business in the world, (streaming costs and data storage aside) once a production is locked, wrapped and made available for streaming, all it does it make money. but not with peloton. every single time it gets streamed it costs the company in royalties.
a 30 minute song contains, on average, 9 songs. so when you do a 30 minute ally love barre class, it costs peloton $0.34 just in music. every single time it's streamed.
if you're an app one subscriber and you're doing a 30 minute class daily, 62% of your subscription is paying for royalties.
if you spend just 7 hours on the app in a month, the company is losing money on your subscription.
7 hours and you're now a liability.
so what are the options?
- raise prices
- limit usage
- trim expenses
the company doesn't want to raise prices. they know people are feeling the economic pinch and they know that during times of economic uncertainty, things like this are the first to go. and they definitely aren't going to cap your usage.
they aren't going to lower production quality.
they aren't going to produce less content.
so what's left?
royalty free music.
royalty free music gives the platform a solid way to ensure that every single membership level is profitable (sustainable) without artificially increasing revenue through price adjustment or other drastic measures that will have an impact on the rest of the company and clientele.
the bottom line:
the company is doing what it has to do to ensure a sustainable business model in a way that makes the most sense for the long term viability of the company while ensuring peak experience for the most valuable customer.
waiver: i am not affiliated with peloton in any way shape or form. i have no inside information at all. my only relationship to them is as a customer. i just happen to have an interest and understanding of this issue because i am involved professionally in entertainment on multiple levels, one of which directly involves licensing and streaming. this peloton x spotify situation caused me to do a deep dive into their business model.