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Originally Posted by Top100EbooksRank
Spotify could be profitable tomorrow if it want to by limiting the free user.
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Spotify has chosen to offer free use to lure users. If they restricted free use, the free users that they want to nudge into paying will drop them like a stone.
(Note, they didn't have to do it that way; Rhapsody offers a free 14-day trial, but no free-with-ads like Spotify, Pandora, Last.fm etc)
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Originally Posted by Top100
If Rhapsody has 5 million paying subscribers instead of just 1 million subscribers....
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So your counterfactual is, "what if Rhapsody was five times larger than it is now?" Really?
Their profit margin is roughly 0.8%, and they likely won't benefit from economies of scale. With 5 million users and no changes to royalties, they might eke out a $5 million profit on $600 million in revenues.
Some perspective: It takes Apple (the entire company, not iTunes) about 2 days to generate $600 million in revenues, and with a profit margin of
22%, less than 3 hours to generate $5 million in profits.
After 10 years, Rhapsody was stuck in the 600,000-user range, and squeaked into 1 million users earlier this year because of the Napster merger. They're not getting to 5 million any time soon.
This isn't a zero-sum game, where a subscription to Pandora stops people from purchasing music. I.e. it's going to take a lot more than a half dozen services collecting 30 million paying subscribers to truly challenge Apple's position.
The reality is that several music subscription services have failed (Napster, iMeem, Myspace, SkySongs, Nokia), and a half-dozen subscription services are scrambling to survive.
And again, even if a streaming service does break out and build a sustainable model, that doesn't mean it will translate well into ebooks.