Ben Gilbert: evaluation

Transcript context

…So many people with veto power, what a byzantine industry. Crazy, right? Okay, back to this gross margin problem. According to a piece from Trichordist, which is a music industry site, Peloton pays out 3.1¢ every time that you are on a ride and hear a song. That number should actually sound pretty high to you because that's meaningfully larger than what we talked about on the Taylor Swift episode per stream. Let's take that 3.1¢. If you ride every day, and people don't ride every day, but I think people ride about 20 days or they use the product about 20 times per month. Let's say you ride every day and assume there are about 10 songs per ride, and I went back through my recent rides and looked at that's about right, that's $9 of your subscription revenue that is going straight to music. If you're on the bike subscription, that’s 23% of your subscription that you're paying to Peloton goes immediately to the labels, which kind of checks our math above that the biggest part of that 1/3 of the cost of revenue is actually for music. Of course, if you're on the digital-only subscription, that's really high because if that's only $13 a month. If you're actually using that thing every day, I assume the royalty structure is similar. It may be the case that Peloton is large enough that they've negotiated a specific revenue share somewhere between 15%, 25%, 30%, or something like that with the music labels rather than needing to pay out a fixed amount per song because if it's a fixed amount per song, then they could get underwater pretty quick on that digital-only subscription. God, the parallels to Spotify are just amazing with the two different tiers of customer experiences and vastly different implications of that for their back-end costs.…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.