Spotify is pulling the plug on its original video efforts and heading back to the drawing board, according to a report today from Bloomberg. The company isn’t leaving video altogether; Spotify plans to reboot the initiative, marking just the latest shake-up in a meandering, and at times uncertain, gamble on original content. Current original video series won’t release new episodes, and unreleased shows currently in the works are being scrapped. Going forward, Spotify plans to work on crafting video formats that are unique to the music streaming service’s platform, Bloomberg reports.
Due to music royalty and other licensing costs, streaming on its own is a costly business with razor-thin margins. More than 80 percent of Spotify’s entire revenue stream is paid out to record labels and other music industry players, Bloomberg reports. Only with immense user numbers could Spotify start tipping the scales, yet it’s only been able to beat out rivals like Apple and Google by offering a controversial free tier subsidized by advertising, which generates only about 10 percent of Spotify’s annual revenue, according to Bloomberg. The free tier has also led to high-profile showdowns with big-name artists like Taylor Swift, who only agreed to an armistice of sorts with streaming services like Spotify and Apple Music this past June.
Spotify thinks it needs original video to survive the high costs of music streaming
For these reasons, Spotify has spent the last few years trying to carve out its own niche in streaming video, which is increasingly claiming ad dollars from traditional TV. To build its video platform, Spotify has thus far invested in a mix of licensing deals with existing networks like Comedy Central and ESPN alongside original video, which has typically centered around music with a documentary bent. On its app today, you can find series like Spotify Landmark and Flash Frame featuring look-backs on and interviews with artists like Green Day, Metallica, and Blink-182. There are also partnership programs with popular and influential playlists like RapCaviar, and a hip-hop spin on comedian James Cordon’s Carpool Karaoke called Traffic James.
Still, these video efforts appear to be having little effect on Spotify’s ability to make money, as the company bleeds profits over the generous licensing deals it maintains with labels to justify its affordable, a la carte approach to music streaming. Back in May, Spotify reported that its fiscal 2016 losses had grown to about $637 million on revenue of $3.4 billion. Original video would offset that by giving Spotify a license-free content stream. But it appears users aren’t watching, or even noticing, the company’s videos enough to make that shift worthwhile.