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Why Spotify’s in Such a Tight Spot—Data Sheet

October 22, 2019, 12:38 PM UTC

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There’s a critical insight in Andrew Nusca’s smart cover story about the world’s biggest streaming service, “Spotify Saved the Music Industry. Now What?” Yes, Spotify built a massive business by legitimately delivering to music lovers what Napster allowed them to steal. And, yes, Spotify has been durable and tenacious and innovative.

But Spotify also is somewhat tapped out. It already has deals to stream the majority of music distributed by major music labels. And those powerful labels now have credible alternatives to Spotify in Amazon and Apple.  What’s more, Spotify, which isn’t all that good at making profits, is in the middle of negotiating a new deal with the labels. If you had to guess which way Spotify’s margins will trend in that negotiation, you’d choose down.

This explains the company’s love affair with podcasts, of which it has been an active acquirer. Podcasts require less complicated payments to the creators than music does. And Spotify can own the content rather than license it. Still, it’s hard to see how podcasts will ever equal music as a revenue generator.

It’s an age-old story, and one Fortune has been coming back to repeatedly. Appliance innovator Dyson had a credible shot at making a car. But the efforts of those who have the most to protect and who also know what they’re doing proved too much. Spotify has transformed the music industry in a way no modern player has since Apple’s iPod and iTunes software and store. But the music industry is striking back.

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I have a big advantage over the rest of you when I have a problem with personal technology. I call Aaron Pressman. I phoned Monday to ask if it was just me or did the magnifying glass thingy on my iPhone disappear, the thing that makes it easy to move the cursor in the text when I’m composing. He reassured me that I wasn’t an idiot and that Apple had indeed done away with the feature, replacing it with something better that involves holding down the space bar instead. (This article, which Aaron also kindly found for me, explains that and other changes.)

Here’s the thing. There was nothing intuitive about this shift. And, while Apple may have publicized it, I’m guessing I’m not the only person who didn’t know about it. This is a vestige of Apple’s legacy culture, when its products were low-market-share masterpieces and it could assume its customers were technophiles.

There likely are oodles of people like me out there who could use more than a little help.

Adam Lashinsky

On Twitter: @adamlashinsky

Email: adam_lashinsky@fortune.com

This edition of Data Sheet was curated by Aaron Pressman.

NEWSWORTHY

Should I stay or should I go now? It's a moment of truth for the company formerly known as WeWork today. The We Co. board meets to decide between competing offers from major shareholder SoftBank Group and banking titan JPMorgan Chase. SoftBank's debt-and-equity proposal would crater WeWork’s valuation and JPMorgan's bond package would saddle the firm massive debt, Fortune's Rey Mashayekhi explains.

Seven strangers picked to live in a house. The new streaming service at Disney won't ignore the non-fiction realm. Disney+ will be chock full of new reality shows (The Hero Project–A celebration of stellar kids who get “Marvel-ized” as their own comic-book heroes) and documentaries (Beauty and the Beast–the life story of song writer Howard Ashman, the genius behind iconic musicals like Aladdin and The Little Mermaid). 

Won't get fooled again. Heading into the 2020 election season, Facebook announced a series of measures to combat misinformation and other misuses of its platform for political ends, including banning inauthentic networks from Russia and Iran. "We have a big responsibility to secure our platforms," CEO Mark Zuckerberg told reporters. At the other end of the political process, Facebook and Amazon ramped up their federal lobbying spending to record levels in the third quarter.

You say potato. Remember way back last month when researchers at Google said they'd demonstrated a quantum computer's "quantum supremacy"? Well, researchers at rival IBM say not so fast. The problem solved by Google's computer wasn't as tough as it seemed, so the quantum solution isn't so impressive, IBM's team contends.

They are a very festive people. A food fight is breaking out in Europe's food delivery scene. Naspers spinoff Prosus offered $6.5 billion for Just Eat, which already has a $6.2 billion offer from Takeaway.com on the table.

Autonomous knowledge. The latest issue of our new newsletter, Eye on A.I., hits later today. Subscribe now to get your copy of the in-depth take on the artificial intelligence scene.

FOOD FOR THOUGHT

What's the old saying in the ad business? I know that I'm wasting half of what I spend, I'm just not sure which half. With fashion and cosmetic brands in the lead, so-called online influencers will rake in up to $8 billion this year for promoting products on Instagram, YouTube, and the like. Wall Street Journal reporters Suzanne Kapner and Sharon Terlep take a deep dive into the world of influencers to examine what brands are getting in return.

But a whiff of deceit now taints the influencer marketplace. Influencers have strained ties with advertisers by inflating the number of their followers, sometimes buying fake ones by the thousands. They also have damaged their credibility with real-life followers by promoting products they don’t use.

“All these paid posts make you question whether influencers are genuine or just doing it for the money,” said JaLynn Evans, a 19-year-old student at Virginia Commonwealth University. The loss of trust undermines the power of influencers, according to Marcelo Camberos, Ipsy’s chief executive. “Have they peaked? I don’t know,” he said. These days, the firm is recruiting its own customers to post products—for free. 

ON THE MOVE

Deepening ties to China, Apple CEO Tim Cook is taking the chair role on the advisory board of the School of Economics and Management of Tsinghua University in Beijing...Karen DeSalvo, former HHS assistant secretary in the Obama administration, joined Google as its first chief health officer... Javier Soltero, who oversaw Microsoft's revamp of its Outlook email app, has also jumped to Google where he will run the G Suite productivity app unit...The company formerly known as WeWork has been losing top execs during its current financial turmoil. Among the recent departees is chief communications officer Jimmy Asci, who joined six months ago from Teneo.  

IN CASE YOU MISSED IT

Facebook Is Still Figuring Out How to Police Deepfakes By Danielle Abril

NordVPN Suffered a Security Breach, Denies Being Hacked By Lisa Marie Segarra

How a Chinese Developer at Tencent Is Shaping the Future of Gaming By Grady McGregor

After WeWork, Private Investors Have a Message For Startups: Lose Money ‘Thoughtfully’ By Karen Yuan

Samsung Joins Google and Amazon in Backing ‘Trapped Ion’ Quantum Computer Startup By Robert Hackett

Streaming Wars Will Cost Netflix Another $2 Billion By Chris Morris

Verizon Adds Home 5G Internet Service in One More City By Aaron Pressman

BEFORE YOU GO

In case you didn't happen to be watching Monday Night Football last night (and if you did, sorry, Jets fans), here is the final trailer to the final movie in the Star Wars saga. Looks like a real humdinger.

Aaron Pressman

On Twitter:@ampressman

Email: aaron.pressman@fortune.com

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