The Signal #13: Kim Kardashian, Spotify, and turning hours to dollars (日本語版あり)

(originally from our May 29 newsletter – slightly for public post – sign-up at our index page)

Friends –

App developers have long lamented app economics. And it *is* a hard business, even for developers of hit games. Take GLU Mobile’s hit game, Kim Kardashian: Hollywood. (What, you don’t play? Sure you don’t.)  Close to two years since launch, it’s still a Top 10 grossing adventure game, according to AppAnnie.  GLU shares 30% of gross revenue with its distributor (Apple or Google). Assume it shares 50% of what’s left with Klan Kardashian, that gives GLU a gross margin of 35%.  (In potentially related news, GLU is not profitable.)kimkardashianapp

GLU’s overall gross margin is 57%; hardware maker Fitbit’s is 48%; gaming giant Activision’s is 66%; Adobe’s is 84%. Music streaming company Pandora’s GM is 40%. (Also not profitable, although its core music streaming business is on a standalone basis.)  

So, to make those economics work, GLU needs to migrate users acquired through the Kardashian game over to other GLU apps with more favorable economics, preferably games that don’t need a revenue share with an IP holder.  At least, that’s the idea. Smurfs from Capcom is another example of this strategy.

Which gets us to this week’s flurry of news about Spotify. Hey, Spotify is losing less money as a share of revenue than ever before (Recode’s take) !   PrivCo provided this chart in its newsletter. privco-spotifyA quick eyeball indicates that Spotify shares about 84% of revenue with artists. On the one hand, this seems good for artists. On the other hand, this makes Spotify’s gross margins more inline with distributor Avnet (buy low, sell slightly higher; 11% GM) than…GE (27% GM), let alone hardware companies Apple (40%) or Fitbit (48%). Or software companies like Adobe (84%).  Is this a sustainable business model?

There is a long-term potential impact of a company that can in essence infinitely raise investor dollars to condition users to expect music to be free, which is perhaps the more sinister long-term implication of Spotify. They may be the icing on the cake that ensures that artists can only make money through live performances.   Which could explain why Pandora is investing in the ticketing business.


In our last edition we wrote about an upcoming panel on the On-Demand Economy, featuring speakers from Mayfield Fund and Hackbright Academy, along with our own Michi. That has a new date – June 28, at Digital Garage’s San Francisco office, DG717.  Early bird tickets on sale now.  Look forward to seeing you there.

– Team Blue Field




最近の大ヒットゲーム、GLU Mobileの「Kim Kardashian: Hollywood」ですら事情は同じ。発売以来2年近くたつのに、今でも「Top 10 grossing adventure game」(AppAnnieによる)にランクインしていますが、配信パートナー(アップルまたはグーグル)に30%支払い、残りをカーダシアン家(歌手でも俳優でもないがなぜか有名な「セレブ一家」)に「ブランド」料として折半すると、粗利はわずか35%しか残りません。






ところで、前回ここで「オンデマンド経済」に関するパネル・イベントをご紹介しましたが、日程が変更となりました。新しいスケジュールは6月28日、場所は同じDG717です。登壇者は引き続きMayfield FundとHackbright Academy、そしてJonと私です。早期割引チケット発売中ですので、ぜひご利用ください。

 – Michi


Interested in our recent engagements and thought leadership? Follow our LinkedIn page here and check out our blog posts on our website.

We are also active on Twitter.
Jon Metzler, Founder and President 

Michi Kaifu, Analyst

Sandro Olivieri, Product Strategist