What's going on with Spotify?

I’ve been a little disappointed with the (lack of) reaction to 99 so far. Big Songs For Little Attention Spans swept the web a few years back, being linked all over the place and generating terabytes of downloads, and I’d hoped the easier accessibility and collaborative nature of Spotify – where you can just click a link to play all the songs legally, rather than having to download 100MB of illegal MP3s – would make ’99’ even more popular, as well as uncovering a whole bunch of new uber-short songs I’d never heard of.

But at the time of writing it hasn’t managed so much as a single retweet, and it seems doubtful that everyone in the world would have spontaneously become bored of the idea of punchy short songs tied into a theme (one small thread on The Word’s forum generated over 50 additions to the “b-side” playlist), so I started to wonder if making the compilation with Spotify – now almost exactly a year old – might have been more of a curse than a blessing.

It was a few months ago when I was recommending Spotify to a friend, as I’d done several times before, that I got a bit of a surprise.

“I can’t sign up to this thing,” she complained, “it says I need an invitation.”

And sure enough, when I logged out of my account and went to the webpage, you did need an invitation, after several months of the free version being available to anyone. It struck me at the time as a bizarre backwards step, and it still does now.

Spotify has two sources of revenue: people paying £10 a month for the premium version (which presumably they’re not going to do without trying out the free one first), and selling advertising space shoving ads at users of the free version (for which you need the biggest possible audience to get the most money). Neither of those income streams is fed – obviously – by restricting the number of signups, and the service is currently stalled at a fairly-niche seven million users spread across six European countries. So what’s going on?

Beyond the above figures, hard news on Spotify is difficult to come by. The service is frequently in the news, but all the stories are beset by vague pseudo-facts like “far fewer users then expected are handing over the cash for a monthly subscription”. How many fewer? How many were expected? We’re never told.

Other pieces report thatthere simply isn’t enough advertising revenue to sustain free music services, without offering any evidence or further elaboration beyond citing the collapse of other, far-less-publicised, services. (Had YOU ever heard of Spiral Frog and Ruckus? I thought they were those guys who had a hit with “Tease Me”.) But once again, that doesn’t square with restricting signups. If ad revenue is stretched thin, then you surely want to be able to offer potential advertisers the biggest possible number of ears for their money.

It may be that Spotify – which still hasn’t launched in the USA – is trying to conserve bandwidth in anticipation of a sudden upsurge in users. It could be that they hope Americans (who tend to regard anything free as a dangerous toying with socialism, the Great Wrong Of The Universe) will convert at a higher rate than parsimonious Europeans, and want to make sure that as many of them get to trial the service as possible with nice smooth streaming.

Or maybe the company doesn’t see its future on computers at all. The Spotify iPhone app made its debut last year, and it’s becoming available on more phones. The mobile version is for premium users only, and by all accounts is excellent, with thousands of glowing five-star reviews on iTunes and some impressive offline functionality. (There are also lots of one-star reviews, from people who’ve downloaded the free app and are upset that they can’t use it without a paid account – there seem to be very few criticisms of the actual app or service.)

It certainly at least makes theoretical sense if that’s the plan. If advertising isn’t economically viable in its own right, then you want to be spending the least amount possible on free users – just enough to generate word of mouth, then get them to sign up to the real thing. Music piracy is so easy on PC that Spotify might already have given up on getting serious numbers of PC users to ever pay (an idea at least partly supported by the stories about low conversion rates), but it’s a lot harder to download songs from the tens of thousands of MP3 blogs onto a phone.

(MP3 blogs are so plentiful, and so wonderful, that when making compilations on the PC of tracks I legally own, I’ve often found it much easier and quicker to find and download the song from a blog rather than get up, walk through to the living room, locate the CD on the shelves, take it down and rip it myself.)

Mobile users are a relatively captive audience, and they’re also a lot more receptive to the idea of not having to store all their music at once on a device with comparatively tiny memory space. Additionally, users of the sort of high-end phones capable of running Spotify tend to have plenty of disposable cash, and be already comfortable with the notion of paying monthly subscriptions for stuff. (If you’re the sort of person who doesn’t flinch at £40 a month for a contract iPhone, you’re not going to blink at another tenner for infinite free music, especially when it’s only the cost of about 13 tracks on iTunes.)

In fact, the more you look at it the more obvious it becomes. On this model, and on those numbers, Spotify actually could become that most elusive of mythical beasts, an iTunes killer. All the world’s music for the price of 13 songs a month is a bargain in anyone’s book, particularly if it can be achieved through an interface that’s as user-friendly as the iTunes one. And there are hundreds of millions of smartphone users to sell to already, a number that’s going to go up and up and up.

If the service becomes phone-focused, the company can afford to discourage free users even more than it’s doing now (ads on the free service are now intrusive, frequent, long and repetitive), because people will only use the free service briefly to test the catalogue and decide whether to subscribe or not, rather than as an actual music player. That would also have the side effect of reducing strain on their servers, helping to keep paying customers sweet.

It’ll be a real shame if the free Spotify becomes unusable. It’s a fantastic way of instantly sharing music, introducing people to stuff they might go on to buy. But the music industry is notoriously greedy and impatient, and the lack of instantly-visible results in that area may already be putting Spotify’s catalogue at risk, which could strangle the service before it reaches critical mass in the mobile market.

Either way, free users probably better get ready for a lot more ads.

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10 Responses to “What's going on with Spotify?”

  1. one of the reasons it hasn’t been that popular is that spotify still doesn’t work in many many countries

  2. I find that I can’t justify spending £120 a year on a service which largely just provides me with music I already have. The ads are starting to get a bit annoying but I can still put up with them. I don’t mind unless they’re as unpleasant as the NME awards. Sure it’s quite nice to hear playlists and recommendations but I can tolerate ads for those small things. I hope spotify doesn’t disappear but I don’t know if I’d miss it all that much.

    The lack of an American launch is more to do with rights issues I think than bandwidth.

  3. There’s another side to the mobile Spotify. Get yourself a cheap iPhone dock (£5 from many places, and even the Apple one can be grabbed for under £20) and a stereo phono to stereo minijack lead (£1 from eBay) and you have almost every album you ever wanted pumping out of your stereo, without all the nastiness of having a PC welded to your amp.

    In terms of the service, though, it’s interesting how many people I know aren’t going for the premium model because of the price. It seems £10 isn’t quite the sweet spot (£5 per month, however, appears to be the “WHERE DO I SIGN?” price-point.) Regarding the free service, I’d also love to see a breakdown of costs and income, but I suspect the rumours and guesses are right: Spotify’s payments for bandwidth and especially royalties are enormous as it is, and advertising online is a seriously fucked market right now. Doubling Spotify’s market probably wouldn’t make a great deal of difference regarding ad revenue at the moment.

  4. Yeah, £5 would be a lot more tempting for me. There’s just far too much of the music I like that’s not on there to justify a tenner, but £5 would almost be worth it just to free up a few GB on my iPod for more apps.

    Although I’m not sure how your scenario improves on just having my iPod connected to the stereo, for free.

  5. I believe they should include a £5 option that either loses all the adverts OR gives you the mobile and offline options. As others have said, £10 just seems a bit steep.

  6. That’s an interesting idea, but who’d pay £5 a month for a mobile service with ads?

    £5 a month for no ads but without any mobile functionality sounds like a possible goer, though. Or for mobile-ONLY with no ads.

  7. The other aspect is that even if they weren’t trying to stop people using their service, signing up for a new site with attendant spamwatch, learning what buttons they want you to push to make the damned thing play and then sitting tied to my computer for an hour or two is not ‘easier accessibility’ than downloading a zip file and extracting it on my MP3 player. Might get around to it sometime.

  8. I wouldn’t be too surprised if like likes of broadband providers or mobile phone networks looks at integrating either spotify or similar service into their contracts, as an optional extra.

  9. xbendystevex Says:

    I've still got Spotify invites if you still want/need any Stu.

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