The Quest for Revenue in Audio and Video Streaming

One of the biggest stories in the news this week was the release of Spotify's financial report. The audio streaming service has seen its shares of ups and downs -- most recently fighting to keep high-profile artists such as Taylor Swift on board -- but the company's losses this past year are nothing like it has experienced before.

Spotify lost $197 million last year; that is nearly triple the loss it posted in the 2013 ($68 million). Although, according to Mashable, the audio streaming company points to product development, brand expansion, and music licensing as the main causes of monetary drain, it has remained consistent that it would be able to find profits once it hit a certain threshold of paying customers.

It is that last note which points to a way out of this jam: paying consumers. Spotify is generating a lot of revenue ($1.3 billion in 2014), but that last nudge it needs could ultimately be in the hands of the clientele it doesn't have. Only 15 million of its 60 million strong listeners are paid subscribers.

Apple has hinted at this reality in recent talk about its upcoming audio streaming service that will arrive as part of its acquisition of Beats. It will push forward a subscription model, says Engadget; however, some free trials or access to slim selections of music could help bring people into the fold. The point is that paying customers can generate the revenue that ads cannot. Furthermore, it will be on the shoulders of Apple and others to make their services worth the money.

This leads to another way out of the financial jam: video streaming. Services such as Netflix, Hulu, Amazon, and Roku all demonstrate, in one way or another, that viewers are willing to pay for quality products. The glut of new streaming services that accompany these giants are all after the dough present in the industry. Consumers are willing to extend the cash if they can get what they want.

For audio streaming companies such as Spotify, this could mean beefing up its service with more features or changing the way in which it interacts with customers. Apple will jump out the gate as (primarily) a pay-only service, so that expectation will remain in tow. Spotify and others may have a harder time moving from a free to a paid service.

This could be why Spotify is also considering getting into the game of video. Ars Technica reveals that Spotify is speaking to YouTube affiliates to acquire their material. It is also in talks with traditional media companies to get some of their content as well. And on top of that, there could be original content present in the fold.

There is no release date yet set for Spotify's new service. What we can see from this present vantage point, though, is a connection to other trends in the multimedia industry. Ad-supported streaming services struggle while paid video seems to rise above. Innovators in the market may also have more to show in the end because they started the next trend or just gave customers everything they had been looking for.

The combination of business models may also give developers something to brag about. Audio and video streaming providers can capitalize on services such as Zype, which help build cohesive streaming destinations, to help pad the corporate bottom line as well as customer happiness. In the end, those are the only two elements that matter. It's about how your video functions and how your service is perceived, and in that space, it's clear that there is room for combining audio and video, pairing of business assets, and subscription fees when they are paired with a quality product.

Feature and header images courtesy of Sorosh Tavakoli and Unnar Ýmir Björnsson via Flickr here and here. Inline images courtesy of Matthew Raymundo and VersusLiveQuizShow via Wikimedia Commons and Flickr here and here.