WHO’S AFRAID OF SPOTIFY?

Posted by | Aug. 5, 2010 | 14,498 views

Last week, there was a lot of news concerning Spotify resulting from some bogus information that was fed to the industry press. I guess some people in the business don’t want to make things easy for them to launch in the US. But why?

Rumours have abounded that one of the major labels is pushing back, because they have some ridiculous idea that by allowing Spotify to duplicate its model in the US, would be tantamount to giving away their content. Evidently they believe that the Spotify freemium model, that has been quite successful in Europe, won’t work in the US. Frankly, I don’t get the logic behind that. But then again, I haven’t had a major label lobotomy either.

If you look closely at the landscape of US music services that some would consider Spotify competitors, you’re basically looking at Rhapsody, Napster, Rdio and Mog. Both Rhapsody and Napster have in the neighbourhood of 500,000 subscribers each (some say those numbers are slowly dwindling). Rhapsody has been around for about 10 years and Napster for about seven! I would be very surprised if Mog has 30,000 subscribers, and certainly no more than 50,000, but that could change drastically with their new mobile application. Rdio, though the better of the two newbies, seems to be getting even less traction. Spotify, on the other hand, has acquired over 500,000 paid subscribers since last September.

And don’t get me started on MySpace Music. As everyone knows by now, anything MySpace is pretty lame and the service is a total dud.

Now, why is Spotify getting a higher rate of subscribers than services that have either been around for years, or even newer services that are trying to duplicate the Spotify model?

For one thing, people aren’t going to subscribe to a music service after a 3-day trial period. Spotify has gained traction, because once users live with the ad-supported service long enough, they become very attached to it and want to get a premium service. I have many friends in Europe who can’t live without their premium Spotify. They just love it and they’re passionate about it. The ad-supported service level is critical in converting users into buyers.

Another important and highly overlooked reason is that Spotify simply just rocks. It works better than anything out there. The user experience is spot on and the subscribers feel like they’re getting value. I guess that some just think that the US consumers have set the bar so low that they won’t cotton on to a really great quality service. Is the thinking that, whatever Europeans like, Americans won’t? It’s kind of like saying that BMW or Mercedes would never sell in the US because Americans only want Fords and Chevrolets.

The fact is that none of the other services are like Spotify. They try to copy some of the features, but have not put together the whole enchilada. What the obstructionists have to come to grips with is, of the existing US streaming and cloud-based services, Spotify is the only thing close to being a real game changer.

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Posted by on Aug 5 2010. Filed under Digital, Gadget & Services, Labels. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

8 Comments for “WHO’S AFRAID OF SPOTIFY?”

  1. SweBoy

    why can’t they simply release it soon? i just moved to the us from sweden, and i’d planned on buying premium to be able to use it on my new android (and not need a friend in sweden logging me in in sweden to make sure i’m still “travelling”), but the app wasn’t in the market, so i haven’t bought it.

  2. Chappas

    Interesting read. I’m a premium subscriber so I’ve a vested interest in whether the company succeeds or not.

    Last thing I need is for them to go bust & have to rebuild all my painstakingly crafted playlists from scratch again. I’ve got a good few people on my Spotify Social from my Facebook too, don’t know anyone who uses another streaming service yet so don’t quite fancy losing that sharing ability really :(

    Have to say though I think they’ll do well… Love their slick interface on the mobile app! Plus, I’d have to spend way more than £2.50 a week on music without a decent streaming app if they went bust :L

  3. John

    I live in the US and got my spotify premium from that shop :

    http://spotifypremium.bigcartel.com/

    Worked perfectly , now running my iphone app in NYC , love spotify!

  4. Spotify really has over 500,000 paid users since last September? Where do these figures come from?

    The author claims to know many users who can’t live without their Premium Spotify? I don’t know a single person who is a Premium Spotify user.

    As a content provider (formerly known as an artists or possibly even a musician), the figures supplied by Spotify do not add up with the figures being paid to artists. That is why I question the number of Premium Users being touted by Spotify.

    Representatives from Spotify have been questioned at Music Tank and BASCA events, however they have been unable to offer any concrete evidence for their figures.

    I would desperately love to see a service work so that we can find a way to earn money as musicians again instead of having to give albums away for free, but Spotify isn’t the way.

    The sad fact is that given a choice between a free service that allows you all the music you want, and a premium service, people will always opt for the free service.

    I think that the author will find that there is no one who is afraid of Spotify, but that Spotify is just another ‘brand’ trying to inflate itself instead of providing a service that works both for users and providers.

    Providers aren’t just record companies, there are many of us who license our own material for commercial release and use in other media.

    Best regards and peace to all.

  5. Fred

    Wayne, you are absolutely right. Spotify is the only thing close to being a real game changer. And it is doing quite well in Europe. They paid 10 Million to rights holders in Q1 2010.

    If I was Daniel Ek I would ignore the US and expand in Europe and Asia. If Spotify does not succeed, labels are more doomed than they already are.

    @Alexa You must have missed that sharing playlists is incorporated in Spotify as part of the Social Features.

  6. this coming from someone who’s moved from one failed start up to another. bravo!

    you truly have your head up you know what. you are operating on no data and all speculation. spotify has worked in scandivania but has not turned the corner in the uk. the company is hemorrhaging money. the reason it’s popular is because it’s free and after 3 months, if you don’t convert to paying, you never will. mog and rdio are i believe better than spotify already. they’re just not free.

    and actually netflix which does incredibly well requires credit card up front. no free trial pre card.

    this market is probably held back by pricing on mobile service more than anything.

  7. Alexa

    Hi Wayne, this is great that you are posting this. Although I agree with what you said about the older music services, I do not think it is fair to compare Spotify and RDIO. Spotify has been around a while and I would not consider them “newbies” by now. RDIO just officially launched in the US and Canada 2 days ago and obviously do not have so many subscribers because of the very fact that the time is not there yet. They are however a much superior service than Spotify and the record labels obviously agree. Spotify has been trying to launch in the US since November 2009. Daniel EK, Martin Lorentzon and Shak their long time side kick has been hitting up labels and my understanding is that there is something stalling them either because the labels do not agree with them in the US market hence their try for penetration in the Netherlands and I think Japan is another push. Every other month they are in the US trying to push through deals so we are waiting to see what they will bring to the table and see if there is a possibility of a US launch in 2010. Spotify is a great service, but RDIO has just taken this to the next level in terms of supplying a giant jukebox and incorporating the social networking component of sharing playlists. My 2 cents.

  8. Interesting article. I did actually write an article some months ago. You might interested in checking it out:
    http://marketingcommunicationsblog.blogspot.com/2010/04/monetize-through-streaming-music.html

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