Saturday, March 25Welcome

Will the recession change the way Big Tech views music and entertainment? [Mark Mulligan]

Meta lays off 11,000 employees, Stripe cuts 1,000 because it overextended during the lockdown boom, Apple has a hiring freeze, and Amazon is laying off 10,000 people due. Big Tech is transforming, but how will that affect music and entertainment?

To Mark Mulligan MIDIA’s music industry blog

Music startup Utopia just announced a round of layoffs, fitting into a larger dynamic that could reshape the entertainment landscape. There are many reasons why the coming global recession will be unique, but the one most relevant to the digital entertainment sector will be the first recession since modern consumer technology has truly gone mainstream. about it. This is not only because it reflects uncharted territory, but also because technology companies (even the largest) operate differently than traditional companies, making far bigger bets on future growth. It is also because we are A strategy that works well in times of bountiful harvest, but is rapidly being re-evaluated in the face of impending recession. Big tech companies are cutting headcount, especially on bets they plan to make profitable in the future, but they haven’t yet. Most forms of digital entertainment fall into this classification. Music and video streaming have long been loss leaders for tech giants, but will that continue in a recession?

2007 was the year the last recession began, and the world of consumer technology looked very different than it does today. The first iPhone he did not go on sale until June 2007. Facebook started this year with 14 million users. Netflix has launched a streaming service. But Spotify was less than a year away from launch. Instagram won’t be launched for another three years after him. 5 more Snapchat. Therefore, the next recession most likely to come in his 2023 will be the first recession where consumer technology has become mainstream.

All of these companies, and most of the rest that drove the consumer tech revolution, grew rapidly because they actively invested in their future potential rather than waiting to raise money organically. did. This is a way of thinking that originates from the VC worldview. So build your product and customer base first, then worry about profit. Without that approach, the consumer tech sector might not be as far-reaching as it is today. But this strategy requires the underlying premise that next year will bring further growth. Otherwise the model will collapse. So now we’re seeing retractions across big tech. Meta said he laid off 11,000 employees, many of them from the VR Labs division. Stripe cut 1,000 jobs after overgrowing its business during the lockdown boom. Apple has frozen his non-R+D hiring. Amazon’s card sees layoffs of 10,00 people.

Out of this redundancy mayhem, one particularly interesting number emerged. Amazon is losing $10 billion a year from its “Worldwide Digital” team, which includes Alexa, Echo, and its streaming business. Amazon makes money from cloud services and commerce. Devices and content are growth areas that the company is investing in as they serve its future growth and core business. A very similar argument can be made for Apple’s streaming business (video and music), or at least YouTube Music and YouTube Premium.

Where will streaming remain if tech giants start reigning in non-core spending? , you may need to cut back on your spending. In that case, streaming video requires a large investment in original content, whereas the cost of rights to music is constant, giving you much more exposure than music. is high for video. That said, any music copyright deal negotiated with tech majors from this point on will almost certainly find licensees pushing cutbacks everywhere.

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