Gadgetory

welcome to the 359 I'm Ben Fox ribbon I'm Joni sauceman Spotify is rolling out its much-anticipated IPO today a big milestone for the world's biggest music streaming service okay but we're not a business publication so why is this important Joan well it's important because I mean for any tech company going public is like the milestone of adulthood it shows that you've sort of come into your own it's a great position to look at Spotify his role in the world which is that it's not single-handedly but been most instrumental in making the music business not be declining anymore it's the last two years have been the best growth that it's had basically since built for the music industry for the music industry for the recording industry but the downside of that is Spotify basically just shoveling money to the music industry and not making any profit right there currently unprofitable very unprofitable they're like Amazon level unprofitable Wow yeah that that existed for a long time I think I remember from your story you said about 70 cents of every dollar more than more than 70 cents of every dollar they bring in they hand back to the music and disgustin royalties Justin royalty yes Justin licensing so what is there a way for them to get to profitability yeah so um there's two possible ways one is that Spotify already the biggest streaming music service by subscribers and by just plain listeners becomes even bigger so big that it can essentially force the music industry to lower how much they get paid right so it's a scale play the scale play or you know some people that I talked to you said there's also the opportunity for Spotify to broaden what it does outside of just music that comes with all those Royals he's a kid it's and it's talking about going into it already is in video and doing more of that getting into spoken word stuff like podcasts um maybe like getting into like StubHub business perfect and alive events you could get in that's you know one of the analyst I talked to you said that we're gonna look back at Spotify as a music listening service and laugh because like Amazon used to be a bookstore and now you don't you know you go to it first that's true you know like that Spotify could become an entertainment platform beyond just music we'll see if that happens yeah I also wanted to ask you really quickly - it's got a ton of competitors so how is it doing against folks like Apple music Apple obviously makes a ton of money right well it's doing in terms of how people on the ground are using products it has more subscribers than any of its competitors combined it's next closest competitor is Apple music and they have about half as many subscribers um so in that sense there's not really much competition just by those numbers but the difference of course is that Spotify is all it is like Spotify is just Spotify Apple as the iPhone it has all these other things that make the money now apples been saying that it wants its services like Apple music to be a bigger part of its business but really like it can just lose money on Apple music as long as it wants sure um who knows spot if I could continue to lose money as much as it wants Amazon did it for many many years let's say yeah next up our own day and Ackerman said it's time to break up with VR writing quote virtual reality may yet become a massive mainstream head but it's not going to happen with this generation of tech he was talking specifically about PC and console VR not mobile by the way but you have a different take on this I just think that if you're saying like to say the very first version of a pretty new technology is that hasn't hit mass appeal yet though the idea that the mass and the masses need to break up with this thing that they're not already trying but it's still super news yeah it's still super new and it's the first iteration you know isn't what's going to get people to fall in love with almost anything I would agree though with Dan that there still are a lot of hurdles to we are these days he specifies you know moving around in VR while your tablet is pretty difficult there's also a lack of games lack of content last for our tech enabled series Abrar Alec he D wrote about new capabilities for prosthetic limbs like sense of touch definitely check out that story on CNET if you want to read more about these stories them all out on CNN I'm Ben Fox Ruben thanks for listening okay thanks for joining us everybody I'm gonna go ahead and jump back into the chat and see if I can pull out any good questions and comments to keep the conversation going I think we kind of cheated that prosthetic story I wanted to I want you guys to expand some more on that because that was really fascinating yeah there are it's not enough enough there's never enough time in four minutes so I just want to hear more there are a lot of and I wish we had a bra on to talk about this but there's just she goes into a lot of the new technologies that are coming into prosthetic limbs one of them that I think is really interesting specifically is like thought control so and and this is still fairly new but the idea of actually being able to move around your prosthetic limbs with your with your brainwaves which is pretty incredible to think about but it's still pretty early technology yeah yeah the other one is sense of touch of course which definitely makes it easier to pick up a pen or smaller objects and just makes it more like you know an actual limb as opposed to a prosthetic right yeah let's talk about music shall we from sure enjoy honestly solve this what is Spotify don't tell me a streaming service it's not that simple now this is expanding on exactly what you talked about just a few minutes ago how would you brand something like Spotify now because like you said Amazon was a bookstore it's not a bookstore anymore it's a store it is the end-all be-all incumbent of e-commerce but is it a bookstore no what what is Spotify now is that a music hub is it a music networker I don't know what the right word for it is and I think part of the reason why it's hard to come up like with the lightning bolt light bulb over your head perfect name for it is because the music industry this is I mean for since the dawn of music since like piano pianos got those like the piano rolls like that's at the very beginning of mass-produced music it's all been about buying and owning you as long as music has been recorded or produced it's all about buying and owning it and you have it and this is a dramatic change it's a total change and the idea that you just kind of pay a fee and you have access to essentially almost all the music in the world yeah there's not I don't know if there is a good word to say like what that what that is but it's that's and Spotify is the one that not started it but it's definitely the one that made it the norm exemplifies it yeah you to know a lot more about the music industry that I do but I probably say correct me if I'm around here that Napster was really the big disrupter you know back in the 90s and since then the music industry has really been struggling to find its footing and find like a functional business model and it seems that Spotify and streaming services have finally provided something of that yeah so the music industry's it's difficulties began Napster's what exemplified the problems in the late 90s early 2000s peer-to-peer peer-to-peer slash piracy the digitization of music and its ability to be swapped over the internet the fact that it started out because the music industry when I send when I say that I mean like the major labels they were so intractable about because they had the CD and the CD was just like a cash cow well you had sometimes like one good song yeah and then just crap yeah no killer yeah and then you sold it for 16 to 20 dollars forever yeah but you know like I remember paying that when CDs first came out and I remember paying that five years after CDs came out I didn't know that digitization generally was the the fact that the music industry couldn't see that that's how people were going to want to have their music they wouldn't want to have to have this really poor value in a CD anymore the fact that they were so dead set on that it said I mean that really kind of set them on this path that's lasted them 20 years it set them on this path where there was this you know to music consumers hated the labels because of them sued people over digital things and then when you buuuut I'm sorry when iTunes happened that stopped piracy but it didn't help the music industry from still declining I mean he went from like sixteen to twenty dollars for an album to not in a sense for for the good song or the good song or if you buy the whole album that's still like if it's twelve tracks it's only $12 you know like even if you do buy the whole album and not just a single so the last two years in 2015 was the first time really that music sales stabilized for the music industry and in there was a 20 year almost twenty years yeah and at this and this this past year is the first time that there's been accelerating growth in the music industry since like 1999 since Bill Clinton was in office there's another oh go ahead no no no please there was another point that I wanted to mention in the podcast which was I I've heard a lot of complaints about from from musicians about YouTube why is YouTube getting you know crapped on whereas Spotify is like the golden child I don't actually understand so that's a really good question um the reason is cuz of this thing be called it's called the value gap and the idea is that the fundamental difference between how people use YouTube and how people use Spotify is that Spotify offers a very popular subscription or people pay $99 99999 dollars $9.99 bucks a month ten bucks a month were and that's Spotify has been very good again about getting people to pay that much money more successful than any other company YouTube is predominantly used because people go to YouTube type in what they want to hear and they listen to it for free and so it's an ad based versus subscription model between the two and the ad base model the YouTube model pays really really really poorly and so the music industry feels like that's where this idea of a value gap comes in they're getting paid very very little for a ton of listening whereas on Spotify there's a ton of listening but they're being paid much much much right as far as they're concerned a track is a track like you're listening to my song right so yeah that's interesting yeah unfortunately like we don't like to think about music it's an art form but it's also because of digitisation has become a commodity become an essential part of a lot of people's day-to-day yeah and naturally there's a lot of people in the chat pointing out like there's a lot of great options to Spotify you know there are there are no one's really presenting a fantastic monetary solution for the industry and at the very least Spotify still kind of at the top of the list yeah Spotify I mean just in terms of subscribers it's not to say it's the best streaming music subscription but it's the one that most people are using around the world yeah yeah it's definitely marketed the best I would say at this point yeah is it is it a situation where the music industry at least realizes that it doesn't want to you know kill the Golden Goose like no the music industry loves Spotify yeah now now that they're actually making money again it's been really bleak in the music industry for a really long time so they love Spotify at this point but it said it's like when I say that it's it's this like it's a frenemy situation because they feel a gatekeeper it's like yeah you know like Best Buy in Walmart were the ones that were you know sold the most music in this in in the CD era and now it's basically Spotify and so they have this sort of frenemy situation where Spotify has pulled them out of the gutter but as the bigger that one person gets their goal is to have to pay the music industry less because otherwise they're never gonna make any money and in addition to that you know people talk about as Spotify ever going to become a label itself like Netflix like taking the Netflix model like have original content and in the Spotify sense it would be original music that they own I guess they own the the Masters for and all the rights for but what's tricky about that is the labels are actually investors and Spotify like their own investors would be like you can't take my business away from me you know so it's a complicated everything with music industry is very complicated and this is no exception there isn't a lot of brick walls though to stop Spotify from founding their own label um I don't think so I don't think there's anybody on there I don't know actually if they start sniping artists they would be burning bridges they could never rebuild yeah that's the thing they can't they can't but if they start at their own kind of up and coming right much like SoundCloud did SoundCloud kind of embraced that entire concept of nobody knows you right let's lean into them and Spotify looked at possibly buying SoundCloud and decided against it yeah I don't know um yeah they have to they have to keep within the good graces of the labels for the time being and that would mean not completely undermining the labels entire livelihood one of the other elements that we should touch on is that Spotify is IPO is definitely different yeah yeah and they're probably not gonna make a ton of money on no money they're not making any money on this IPO so this whole talk about unprofitability and potentially getting more runway so they could keep the lights on the IPO doesn't solve that yeah and it's not it their argument is that it's not even an issue of having runway and being able to keep the lights on because they've gotten tons of funding they're very well funded but you know Daniel X says it's just weird it's just very weird nobody definitely nobody at this scale has ever done what's it's called a direct listing instead of an initial public offering and it's the difference is basically like instead of having this whole dog and pony show where they line up particular institutional investors and having a bank that's there to make sure that share the whole thing the shepherd the whole thing through and also make sure to make sure that on that today once your start trading that they can't plummet from like $20 to $2 that's what an underwriter does they make sure that it stays like generally in the not horrible result zone above the red yeah because they're not doing that they're saving some money a little bit of money not as much as they could potentially make if they just had an IPO or like a more traditional a more traditional IPO yeah and they also we also have no idea how many shares because what it basically means is anyone who has shares and Spotify workers founders investors they can decide to start selling them or not and so we have no idea how many shares are gonna be available to treat it feels like a potluck we don't know what we do there is a bank that's helping Shepherd this this procedure through a little bit and so they're going to land an idea of how much the first trades are supposed to be but we don't like there's nobody that's gonna be like we say it's 20 there's somebody saying like we think it should be $20 a share but there's nobody being like now that it's 3 maybe we should do something about that so people don't think that our company is dying yeah no no we have known they have a lot of name recognition so that's definitely gonna benefit them but you never really know with an IPO I remember Facebook had some really miserable days starting off after the IPO and a couple years ago and they had a ton of banks supporting them so yeah now I think your name have largely answered this in the past 30 to 60 seconds but imagine Sagi was saying like explain how they don't make money off the IPO so yeah so to crystallize that to make it maybe a little more clear usually with an initial public offering a company says all right we've already given a bunch of shares to our founders and our employees and our investors what we're gonna do now is we're going to tell all those people you can't trade those shares for like six months but we are going to invent a pool of new shares gonna put that in the public market and then six months later all those people can start trading those shares - that's another way that they keep in an IPO they keep the market for it from like going all over the place is that there's a set pool of shares that can trade that have nothing to do with the shares that were already created for people before it went public but in this instance they're not creating those new shares so it means that there's no new money being invented by having shares period it's all just instead of the people that already have shares aren't subject to that lockup period they can start trading them today as soon as it goes public but what that means is Spotify doesn't make any money because it's not creating new shares and it means that the number of shares that are in the market it's not they don't have that pile that was designated and set and it's gonna stay stable for six months it's gonna be just however many shares Daniel elect decides he wants to trade how many shares like the programmer that decides the algorithm for discover weekly decides he wants to start trading so yeah that's how it's a difference between normal and not making money they're not yeah they're not selling their own shares this time around but when they do create a market for this it means that they could potentially sell shares later down the road could we'll see yeah usually companies don't do that because other than an IPO I mean they do do that but they do it very strategically and carefully because what that means is you're basically diluting the value of a share if you create investors generally don't like it let's create a market for it yeah music industry is messy so that's Wall Street let's talk a little bit of a history lesson here because there's a really great comment here from Nick pover Minh we'll get to that in a second but let's look back so we talked about how Napster kind of like undid the threads which actually it's a fun fun fact Napster is now subscription-based service that is a competitor Spotify very true it's never died and eagle-eye viewers will know that there were other peer-to-peer options prior to Napster but they became the household names kind of broke the system we moved on from there and as we talked about earlier Apple music iTunes broke the album the art of the album right by making it more song based single based and then we bring up this headline that says spot if I save the music industry which is ambiguous at best let's expand on that for a second because Nick says you know I don't know everybody that uses Spotify and as we mentioned a lot of alternatives do exist out there Ryan is pointing out like I really am invested in the Google ecosystem how is that differ from Spotify like I myself like Google Play Music I can upload things that I own that don't exist that aren't represented and and streaming on on a Spotify platform but I would argue that the good thing that spot if I did for the industry is that they reopen the availability or the option or the art of the playlist of the album itself and if we take a look back I think I read an article a week or two ago about how 2017 was the best year for physical sales of music since 2011 and that's based largely around people wanting to collect again and people wanting to collect specifically vinyl yeah one of the interesting things that last month there was the latest data about 2017 sales in the in the recording industry and at this point physical music CDs and vinyl our bigger business than iTunes like more money is spent on that CDs - yeah still do buy CDs yeah it's a charter you got you know it's for lack of a nicer term its its shelf poor well on the shelves correct me if I'm wrong here - but that's probably the stuff that's selling right is the collectible stuff as opposed to like just one jewel case stuff that looks really nice yeah I mean that's why I do still like to buy vinyl and I sound like such an agent hipster with that one but it's like there's something about seeing that label in your line of sight every single day records in particular are fun really fun and pretty art there's art I mean it feels much less commoditized than a bunch of ones and zeros that you're streaming into your headphones now full disclosure with every record I still buy these days it gets download code and if I'm measuring on / / Act activation per volume I'm listening to the stream a lot more because that's coming with me in my pocket I'm out more than I'm in and until they figure out a way to make a portable record player noted ooh then that's the way it's it's gonna work for a lot of us that are that are active commuters yeah yeah um I haven't listened to a record since 70s Ben wasn't even alive in the seventies he may seem old but he's not that old I think my dad used to play records it's cool that you guys are like big music people for other people like me I'm like that's great I don't go way more into music oh I'm sure I'm sure it's it's to me i I like hear what you guys say because I think you also collect records too right I don't collect them but I have I have records yeah and you have a record player the records I have the device with which to make the music I do have I know I actually have four records I know people have records and no player yes I'm one of the four records in my house and they're in those urban outfitter kids so yeah I mean like I haven't put them up in my house yet but anyway whatever he just made me yeah yeah it's just music should always be fun to an extent and I think Spotify kind of made it fun well you yeah you did brought up a great thing that we haven't talked about which is playlists which are the most powerful music every tool right now it seems like besides just straight searching for what you want but that's not really discovery that's knowing what you want to find and finding it yeah it I feel like playlists have they're super super powerful for people finding music and I think they have added a little bit more of the art to and the fun of music it doesn't feel as an antiseptic you know when somebody's making and they're like I want to share it with you I will say this that Spotify seems to like with its playlists it seems to actually understand a little bit more about what type of music I actually want to listen to whereas when I used to be more of a pandora listener I feel like they kind of got the genre right sort of but not really so they seem to have like their algorithm seems to be pretty good as far as finding music that I'd be interested in listening to even if it's new that would be an interesting topic for us to deep dive into one day and a slow news day I would love to learn more about how these algorithms work and we've seen bits and pieces of them throughout and a lot of them borrow from each other but that all this talks ever since music has existed and and personal recordings have existed one of the best parts about music is the art of the mixtape and that's why I think that that's that's largely why Spotify has excelled so much and why you can do similar things in in Amazon Prime google play music and other places but Spotify really opened that door and I think I guess my closing statement is I think Spotify is less of a streaming service and becoming largely more of a social network or a hub yeah there's definitely a social element to it people music and social has had a very it's the path that's littered with the carcasses of people that have tried it which is silly because music is such a community-based thing but I do think that playlists are kind of the genesis of how music is becoming more social I mean how many how many of us had their AOL Instant Messenger away message as song lyrics it was a pre-op cut in life deep cuts in life but if you want I could really quickly just go over some of the things that differentiate the algorithm of Pandora and Spotify I'd love to I mean I would love to learn more about all of them see how they all behave because everyone's like ah this one's got a better one this is got it they all learn different things about using different ways yeah and how they play off each other and what they look to because society is an ever-changing thing and we're getting way too soapboxing assumed but yeah I would always be interested to learn more about how they think like I'm gonna really love this metal band when I've been listening to jazz for a straight week which works for me I mean that's that is weird I I couldn't even start to understand that usually when I listen to something on Spotify they give me something close to it so basically well the thing that that Brian do that you just mentioned I can't remember I think that Pandora and Spotify both I assume they all do it but one of the things that their algorithms can do is learn how elastic you are for surprise in algorithms and what your suggested so somebody like Brian is somebody I know Pandora does do this and I assume Spotify does too they like they not only do they learn what styles you like they also learn how much diversity you like within the music that you're listening to so if you're somebody maybe like Ben who's like I love my phone rock I'd go more bluegrass okay I love bluegrass and maybe and apparently he doesn't want to go into folk rock even though he likes bluegrass and so like Pandora and Spotify not only they learn that he likes bluegrass where they also try to learn the fact that he you know Ben likes to stay within a pretty small band of bluegrass whereas Brian might be like give me my death metal right after my bluegrass please right they figure out you're listening patterns yeah I figure out that you're chaotic yeah neutral I mean it makes a lot of sense right but that is kind of cool when you when you know you explain it that way yeah yeah so basically pandora what they do they have this thing called the Music Genome Project and they have music experts that listen to every single song and tag it for like between a dozen and thirty different attributes and that's the basis for which their algorithm understands that song Spotify does it more based on this mass this mass amount of usage and finding patterns within usage and then Apple music relies more on it's more of a man-machine mix or they have more curators and they have more curated playlists to offer as discovery tools that are maybe they definitely have personalized elements but they're less personalized than Spotify is for sure cool so just propose a question before I move on and we are almost out of time but we are having a couple requests to move on to VR which we dance Arianna will take a few minutes for that but and in closing statements to end the topic of Spotify and music who thinks that they might actually invest in Spotify who's gonna buy Spotify stock when the time becomes available may be enlightened we're obviously barred from doing it that's a last thing I didn't get I mentioned about this weird way that Spotify is doing an IPO is it means that normal human beings can invest like it doesn't they didn't do like a roadshow where they went to all these institutional investors with the piles of money and said we want you to consider investing in us basically if you have like an e trade account you can start buying it as easily as somebody at Goldman Sachs could do it alright so finishing off who's gonna buy stock where do we think Spotify is gonna go next are they're going to work into hardware are they gonna integrate themselves in other places are they gonna start to develop original content by label start a label sign bands interested to see where anybody thinks any of this is worth going for them and finally are they going to overtake the mantle as the next great social network as Facebook sputters and I personally could only communicate in song lyrics from you like somebody it'd be hard for there to be election meddling if we could only talk in song lyrics Oh we'll see I don't know those Russian trolls are pretty good have you listened to Neil Young but new Young I don't know Neil Young is that's that's funny that you bring him up because he's so anti streaming yeah so anyways let's talk quickly about VR we only have very general statements people wondering if the playstation 5 could be a good place to revive VR as a lot of their worries about the playstation 5 already well there will be a playstation fight or will it be a playstation 5 for sure but joan go i don't know about playstation 5 but generally speaking i feel like i feel like you know we're in the like pre flip-phone stage of VR right now you know people talk about how VR has actually been a technology since like the 80s or even before it 70s but i mean really this is the very beginning of consumer VR and it's only been what two and a half years has it been that long since people normal human beings can try it and see it well since this latest incarnation of it where it's become more household more readily as I mean almost no point in history has there been the opportunity for normal human beings to buy and use VR like this and so and it's not and it's also not going from like a telephone that you turn or punch and pick up and talk to you know like the smartphone had the flip phone as a runway and had traditional telephony as runway I feel like we're just this is like a new kind of interacting with media and people that we are totally unaccustomed to and the technology is clunky and it doesn't work very well but I also think that like I don't know saying like it's so over when it hasn't even started yet yeah it's it seems premature that's my take but dance take and I think that in you're right I think he does make some really great points that one of the reasons why it hasn't hit consumer adoption is because it is really clunky it's really awkward it's really expensive and there aren't a lot of like motivators there's not a Pokemon go of yaar yeah there's not something that's just a massive hit that makes everyone want to try it so we're computers in general in the sixties though and look where we've gone with that you know it's it's one thing to say it sensationalized over it's another to say well it is stale right now and he's not wrong there we haven't seen anything astonishingly new happen about yeah I also think that his I mean and this is totally valid but his article came to it from a gamer and hardware standpoint I don't see I don't know and I'm and I get to go see cinematic VR more than anybody like a normal human being would but I'm always good I'm always surprised with how cinematic VR is improving and getting better so you're saying right now is maybe more of an opportunity for VR to embrace not the home entertainment but the attraction entertainment the the the theme park amusement park type entertainments internet situation maybe possibly say I think site-specific VR is really fun if it's done well the only times that I ever see it being done well are at film festivals and those are exclusive things hard to get into an expensive - yeah you saying it feels very exclusive still yeah oh yeah it's definitely very exclusive yeah and I think the dance totally right that mobile based VR will likely be the thing that is separate from his issues I agree with that's gonna be how most people if they do decide that they like er it'll be through a system like that I think it kind of goes without saying that mobile based anything is the gateway for most things days right right we are pretty much out of time I like this comment though to call it a close things out from the eighth cow which expands into other ideas if they want VR to become more mainstream they need to do something for those who wear glasses wearing VR headsets hurts my eyes and it's too blurry to read anything what are some things y'all know I was gonna say that and I thought it was crazy I totally agree with that comment oh yeah absolutely super annoying to take I wear my glasses in VR and it's super annoying to take it on and off I always think they're gonna pray it's also like and I get annoyed with this because so many engineers are men like it's really annoying when like if I can't wear a headset of my hair if my hair is up like this like I can't do it cuz it like won't fit if I have my hair back if I have it my hair in a ponytail I have to take it out like those are things that like predominantly male engineering forces I don't think think about and I'll give them some slack like that's not the primary problem they need to solve but I do think these design issues like these are very simple design issues wearing glasses having hair that isn't dude hair even like Brian's arrow like it would ruin your hair to put on had said you're very well coughed nothing ruins his hair not a var said not nothing no nothing yeah so yeah that's it for us but I do want to hear more from people about where they think get really personal really specific what do you need out of VR to make it more worthwhile for you does it hurt your eyes with glasses is it affect your hair do you want that do not even know it into your brain do you not you want it to be more affordable yeah but yeah let's sound off in the comments and that was a great discussion today everybody we have a lot to go on and then hopefully we'll expand on these stories in the near future oh thanks everyone will say bye for now who wants to say take us out on the script I'll do it yeah the 3:59 podcast is available on itunes toon and stitcher feedburner google play music amazon echo and of course cnet.com thanks everybody for watching we'll see you again tomorrow take care