Between Netflix and Spotify, Which One Is Better?

Netflix acquires shows and movies, and retails them via subscriptions. Spotify does not necessarily acquire the music streamed on its portal, rather, it licenses the music, and then pays royalty in perpetuity to the copyright owners when streamers pay for it.  Which one is a better business model?

Netflix Inc. is a media company offering streaming entertainment subscriptions. Its digital platform allows subscribers to stream TV series, documentaries, and feature films on demand. The company also offers a range of mobile games. Though most consumers access the most popular Netflix content online, the company still offers its original DVD-by-mail service in the U.S.

While the start-up cost of Netflix will be high, that business model gives one room to capture more value as profit, while Spotify is always tethered to royalty-percentages. Sure, Netflix has to be great on picking the shows and movies, to avoid wasting money, while Spotify may not necessarily care since it does not lose anything for dud music.

Spotify Technology S.A. is an audio-streaming subscription service legally domiciled in Luxembourg, but whose operational headquarters are located in Stockholm, Sweden, where the company was first launched.1 Its streaming services are monetized through both premium subscriptions and advertising, officially designated as its Premium Services segment and Ad-Supported Services segment, respectively.2

Which one works for you – and why? Let’s discuss business models!

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Comment 1: There are way more music in the world than movies and movies are way longer. Netflix does not have a tremendous amount of movies produced but they still manage to retain customers because people come to watch movies and it takes longer for one movie to finish. I would think that if Spotify were to go the Netflix route, they would not have as much music on their platform as they currently have and music listeners come to platforms to listen to music hoping they would be able to listen to any music they want to listen to. The cost of acquiring every music in the world “outright” makes a Netflix of music an unlikely business model

My Response: So, in your analysis, everyone is doing and running the best possible model for movies and music.

Comment 1R: Ndubuisi Ekekwe, I definitely think so. I cannot imagine Spotify running around trying to purchase rights to multiple music been produced worldwide. Would present quite a challenge. Same applies to Netflix and trying to license multiple movies owned by competitors. Moreover as Netflix have come to realize now that they have lost a lot of movies they held licenses to in the past to competitors like Disney and co, millions of people can be entertained with a Database of just 40,000 movies, if they want more, they can find another platform for more.

If you have a database of just 40,000 music and people are constantly not finding the particular song they want to stream on your platform(because of course music are soo short), people would leave and unlikely to be back.

There is a reason why a cinema where people can go and watch newly released music videos one after another could never become a business.

Comment 2: The Spotify business model is perfect for startups with limited funds venturing into very volatile business environment.

I also belive it is a great model for established businesses expanding or going into new frontiers,
especially with the ever blurring industry boundaries in today’s business environment.

My take, The Spotify business model is great for today’s business environment.

In the long run, Netflix will make more money. If Spotify licenses a really song, it will continue to share the revenue with the owner of the song forever. If Netflix buys a really good movie, it will own all the future revenue from the movie ?. More risk, more profit.

— Aderonke (@aderonkekilaso) July 26, 2023

Comment 3: The content types and target market also need to be factored. What Spotify does is relatively cheap, it neither calls for big innovation nor bidding wars, a modest business model. Not really capitalist inclined, more like a community thing.

For Netflix, it cannot guarantee great movies and shows if it goes by Spotify model, producers cannot make expensive movies when there is no form of exclusivity or some assurance for RoI. Movies are made with time frame of recovering the investment in mind, it cannot rely on getting royalty payments that trickle in at intervals, the next big movie will not be ready on if it plies that route.

The preferred business models pick themselves, I will ask both to remain in their respective lanes.

Comment 4: This is a case of low margin high volume versus high margin low volume models. Each have their advantages. One needs a deeper insights into the products being offered as well as LTV of the acquired customers. Also the customer acquisition costs is another important consideration as well as the scalability of the different models. To me, both of them seem to be a good fit for the type of product and target markets.

Comment 5: Music has a much higher replay value than movies, so the respective business models make sense to me. Even as a music artist, it is probably not wise to sell your album to a platform as it can he challenging to estimate the NPV of your art. With movies, the replay value is low, and because of the high initial capital that goes into making one, it makes sense that a movie studio may want to recoup those costs quickly via acquisition.

Comment 6: From another perspectives, you only need to watch a movie once and you are fine. But for Music, you stream and listen repeatedly.

For every new movie that is produced has a lifeline say 2-3 months. But music more like evergreen. You are more likely to still listen to music of the 80’ and 90’ but you can’t say that for movie.

So, both models works fine given the dynamics and percularities aforementioned

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