A digital music revolution is happening right now, and it’s called Spotify
Whilst there’s not much media reporting about it yet in Australia, there’s a digital music revolution happening right now in Europe, and it’s called Spotify.
In a nutshell, Spotify is the world’s biggest instant jukebox in the sky. And guess what? It’s free if you are prepared to hear an ad every 20 minutes. The Spotify application is a clever a piece of desktop software like iTunes but it streams music from the cloud using peer to peer, with no buffering.
The value proposition was understandably well received by the European public when the service launched in private beta 10 months ago. They had a million users sign up in the first 5 months. But even more impressive, the service grew a whopping 800% to 8M at the end of August – all via word of mouth and publicity. The service is restricted to Europe currently which makes the results even more staggering.
Spotify offers two levels of subscription, free with ads, and a paid service at 10 euros a month, with no ads. With an ad only every 20 minutes there seemed to be little incentive to pay but that all changed this week with the launch of the Spotify iPhone app.
Only available if you have a premium subscription the app gives you instant access to over 4 millions songs on your phone. But the killer function is the ‘Offline Mode’. When you are within a wi-fi zone your playslist is progressively cached on the phone so when you leave a wi-fi zone you can listen to your playlist without an internet connection.
Spotify is without doubt the first serious challenger to iTunes and illegal downloading, purely because it’s just so damn simple and easy to use. I signed up to the premium service a few months back (they since blocked Australian credit cards until they launch here) and I am VERY impressed. What I love about is that I can access any music I want from 4M+ tracks, from any computer with a net connection, just by downloading the software and logging in. No need for downloading and storing files. Managing multiple devices with different libraries is a thing of the past.
There’s no doubting that the user demand for Spotify’s service is there but what about the business model? Do the economics of a streaming music service funded by advertising and subscriptions make sense?
Other streaming music services like imeem, Last.FM, Pandora, Myspace Music and even Youtube are reportedly buckling under the weight of per stream royalty payments to the labels. But Spotify has the backing of the major labels who are minority shareholders, so they have a vested interest in seeing this succeed.
In my opinion, Spotify stands out as they have a subscription model that is hugely compelling because it’s the first to take its service to your mobile phone. Is it the game changer? If early reports are anything to go by, then yes. After 2 days the Spotify App is number 1 in the UK iTunes app store despite having to have a 10 euro monthly subscription.
What about the advertising model? In my view, the reason others have failed to attract significant advertising, despite having huge user uptake, is that there’s not been one single compelling model or offering for advertisers. Unlike radio there’s no standard or formula and during a downturn advertisers want easy, simple, proven. Can Spotify seriously challenge radio? If they can build on the hype and present their ad model in a way that reflects how radio is bought then yes, I believe so.
Like most things, timing is all important and it would appear that Spotify has timed things just right. As the ad market bounces back over the coming months, advertiser’s appetite to try new things will return and they have the best shot at cracking it.
Spotify is the most exciting development in digital music of recent times and I look forward to seeing how they roll this out globally, in particular when it arrives in Australia. You have to question, with all this momentum if Spotify can’t make a streaming music model work, can anyone?
3 Responses to “A digital music revolution is happening right now, and it’s called Spotify”
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it’s interesting isn’t it? It’s going to take another 15 years until the majority of music users get over the idea of owning music; and by pushig advertisers out, by pushing people into premium, spotify is locking themselves into one revenue stream. They’re also locking themselves into an expense stream that grows linearly with use and is controlled by the copyright holders. Historically it’s not a good model when theres no advertising revenue or subsidy..and they can’t sell sponsorship. Also, what happens when they go bust? “what do you mean I have no music now?” Many to one radio is not dissimilar to subscription DRM when you can’t get at ‘your’ music anymore.
Lets face it; all apple have to do is treat the once only download into a license to download or broadcast (and they don’t have to call it broadcast. your just storing the music you bought in the cloud instead of locally) and spotify is over…..but they don’t have to do that until spotify is successful or not….they can just do what they always do and wait until someone else makes all the mistakes.
In current phase they are offering both music and ease of use (as well as a nice looking interface). I think the functionality is well done, the community angle is starting to work with share playlists. But my concern, hinted by Ben, is that the business model needs to work.
All very well to say the labels have a stake and therefore an interest in making it work, but they ultimately need enough revenue to pay the artists share.
God knows what happens next, I’m just glad the current playing field features two players with nice looking interfaces and MySpace has become irrelevant and so stopped crashing my computer.
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