Why Spotify’s upcoming announcement matters

Friday, December 6, 2013 - 12:35pm

Spotify will announce free mobile access to its listening platform, according to the Wall Street Journal, citing anonymous sources. If true (we think it is), the announcement will probably be part of a Spotify media event in New York on Wednesday of next week. Spotify distributed mystery press invitations to the event earlier this week, Apple-style, with no agenda or purpose disclosed.

The news might be puzzling to some observers. Isn’t Spotify already a mobile service, in addition to its desktop-bound computer application? 

Yes, Spotify apps can be downloaded by anyone, whether or not they subscribe to Spotify’s service. But free use of the mobile app is restricted to the “radio” feature. Spotify is also a jukebox service providing random access to tracks, albums, and user-created playlists. The whole shebang is available free of charge on computer desktops, supported by ads. Subscribing to Spotify ($10/month in the U.S.) cleans out the ads and opens up the entire platform (including song downloading) to smartphone and tablet use. 

Assuming the leak is true, there are a few significant dimensions to Spotify’s decision.

Erasing the difference between mobile and desktop

This is the aspect with the most far-reaching consequences for all stakeholders -- music services, music owners, and consumers. For years, mobile has been regarded as a separate usage realm, existing alongside normal computing, and exceptional. Increasingly, That view of usage has shifted out of alignment with lifestyle realities.

RAIN spoke with music-tech entrepreneur Michael Robertson earlier this year about the separation of mobile use in music business models. Robertson, whose latest project is the Radio Search Engine (RAIN review here), took the consumer’s viewpoint:

“One of the big hurdles has been the industry's view that mobile is different than desktop. Spotify, Rdio, Xbox Music -- these have most every song in the modern library. On the PC it's free with ads, but when it comes to mobile, you've got to get out your credit card. That has stunted access. People wonder whether they really have access. When there is an arbitrary decision about delivery on a PC but not on a tablet, people think, ‘Maybe I don't really own this.’” 

Consumers are leading the “mobile-first” revolution sweeping through Internet content of all sorts. Spotify’s decision to open up mobile (to some extent, not yet known) would ratify a growing mainstream reality that the smartphone is the consumer’s leading digital device. The boundary between desktop and mobile is increasingly artificial and hostile to users.

Turning on new revenue

To whatever extent this course change reflects new mobile ad inventory, Generating more mobile usage traffic will generate more ad revenue. That doesn’t necessarily mean a profitable mobile operation, of course.

The other side of Spotify’s business is the paid subscription tier. Withholding most of the platform’s features in the past was intended to drive free desktop users into the paid subscription service. But that style of coercive induction has become bizarre and off-putting to consumers in a music-access world with more choices than ever before. Speaking of choices--

Competitive positioning

Spotify has leadership position against Rhapsody and Rdio, its most direct U.S. antagonists, when it comes to audience size and brand sway. But as online streaming flows into general awareness, the user population is less able to distinguish fine points of service features -- and uninterested in doing so. To some extent, “Internet music” today simply means finding the most convenient Play button and clicking/tapping it. In that context, Pandora is every bit as directly competitive, even though it offers a substantially different feature set.

Looking ahead, the waters will get choppier, and the competitive atmosphere more strangling. It is nearly certain that YouTube, Deezer, and Beats Music will launch highly publicized, attention-grabbing U.S. listening platforms in early 2014. (Beats Music is a certainty for January.)

In anticipation of a more crowded field, now is the time (arguably past time) for Spotify to fortify its brand by opening the doors wider, both to get existing users more involved in the ecosystem, and to give new users a rounded view of its features.

SpotifyArtists vs. SpotifyForArtists spoof site

Thursday, December 5, 2013 - 12:10pm

The “Spotify Debate” has been raised to a new level. It features the same debate points, but now presented as dueling websites. Until now, the war of words and philosophies was waged in sniping blog posts and interview quotes among well-known musicians and pundits on both sides of the streaming music fence -- such as David Lowery, Thom Yorke, David Byrne, Billy Bragg, and Bob Lefsetz.

Here’s what’s going on this week. 

On Monday, subscription music service Spotify launched SpotifyArtists, a resource site for musicians that also (naturally) advocates for Spotify as a distribution platform. The site presents an anatomy of Spotify royalty infrastructure, demystifying how payouts are calculated and clearing up misunderstandings. The site received widespread media attention for its transparent revelations and its resourceful reach-out to musicians.

Although Spotify’s website is named “Spotify Artists” in the page header, the browser-tab branding is “Spotify for Artists,” and a banner on the home page reads, “Welcome to Spotify for Artists!”

That’s important because today a new site appeared: SpotifyForArtists. With a similar look-and-feel, and nearly identical logo and trademark branding, it is confusing and fooling people, including Radiohead-affiliated producer Nigel Godrich, who nearly burst into flames on Twitter before being set straight about the hoax.

The spoof site is a poker-faced takeover of Spotify’s voice, realigned to the priorities of its most vehement critics. “We’ve really changed our ways,” the opening header declaims. Scrolling down the page reveals Spotify’s faux-intention to begin selling albums (with 95% of proceeds going to the artist), offer a consulting service to help musicians write better contracts with labels, and eliminate “secret math” describing how artists get paid.

It’s all entertaining (if arguably actionable), but with a serious purpose of continuing the debate and opposing the educational and peacemaking intent of Spotify’s real artist resource site. Whether it succeeds depends on individual viewpoint.

Spotify’s whiz-bang summary of 2013

Tuesday, December 3, 2013 - 12:40pm

Spotify might not have a big-data operation like Wal-Mart or Target. But 24-million users listened to 4.5-billion hours of music in 2013, and have created one-billion playlists on the platform. So there’s a good flow of metrics. Spotify, which has previously demonstrated a taste for showing off its big numbers, has assembled an interactive presentation of how the service was used in 2013.

If you’re interested in music charting, the feature invites you to drill into global stats by artist, album, and song. You can get more geo-specific by country (only those countries where Spotify operates, naturally) and selected cities. Looking at most-streamed songs in different locations is fun, but Spotify raises the funness quotient by showcasing the most popular songs and playlists for various “moments” -- for example, hangovers, road trips, and break-ups.

Spotify reiterates its notorious 5th-birthday statistic: 20 percent of the Spotify library has never been played. That metric runs contrary to the long-tail presumption that there is a little bit of interest in everything. When Spotify first publicized this statistic in October, we suggested creating and promoting an Untouched Tracks playlist to give those dark-matter tracks some love. Whether due to our suggestion (unlikely) or on its own (likely), Spotify is now promoting an #Undiscovered playlist for that purpose. As of this writing, the #Undiscovered playlist is followed by, well, one person. And oddly, the list seems to consist of only spoken-word audio. “Scuba Diving - Frequently Asked Questions”? Well, to each his own on Spotify.

CEO of record industry group defends streaming services

Tuesday, December 3, 2013 - 12:40pm

Frances Moore, CEO of the International Federation of Phonographic Industries, made some waves and splashed some cool water of long-term thinking on the hot debate over artist payouts from streaming music services. Moore spoke at the ARIA Masterclass in Sydney, Australia.

In her remarks (PDF transcript here) about a global recovery of a recording industry disrupted by the digital shake-ups of MP3, piracy, download stores, and streaming music, Moore directly addressed controversy stoked by outspoken musicians David Byrne and Thom Yorke. Byrne and Yorke have objected to Spotify particularly, with product boycotts and sometimes scatalogical language. Moore’s overview on all that: “I do believe their concerns are overstated.”

Moore dove deeper into the IFPI’s perspective on streaming:

“Yes, such services shift us from a world where rights holders receive the bulk of their revenues in the weeks after an album or single’s release to one where they receive micropayments each time their work is played. That can be disconcerting. But the evidence is starting to build up which suggests that, over a period of time; income from streaming services can surpass that from download stores. It is easy to forget that services such as Spotify are just five years old, and it has been present in Australia since May last year. They are still in their infancy. But with time and scale, they can significantly add to industry income and they attract music fans away from pirate services which pay nothing to artists and record labels.”

A secondary argument that has recently entered the “Spotify debate” centers on the contractual terms by which recording artists are paid by their labels for streams of their tracks. Artists aggrieved by micro-royalty checks, the argument goes, should determine whether their labels are paying out the artist share by the old product model (low royalty percentage) or the new access model (higher licensing percentage). That line of reasoning, which applies to artists who don’t own their recorded masters, shifts responsibility from streaming services to record labels -- the constituency represented by Frances Moore and the IFPI.

On a related note, Spotify itself launched an anchor site for musicians and anyone else interested in the business side of streaming music distribution. Called Spotify Artists, the site offers help guides for maximizing exposure, and -- in what will surely be the most scrutinized portion -- a clarifying explanation of how Spotify calculates royalties. 

Quick Hits: Rescuing radio; Deezer vs. Spotify

Monday, December 2, 2013 - 12:15pm

Worthy of note:

  • Doc Searls, author and one of the first cognescenti bloggers (since 1999), has published a prescription for radio in the Internet era called “How to rescue radio.” In it, Searls seems taken aback by the changing definition of “radio,” and particularly offended by Apple’s iTunes Radio, which he calls, “...a body-snatch on all of radio, as well as a straight-up knock-off of Pandora.” He’s late to the game with that objection, and not exactly correct about the knock-off part. But the substance comes down the page when Searls lays out a multi-part plan for keeping broadcast radio prominent as users shift to digital and mobile. His suggestions are provocative, but not gratuitously so. Searls has clearly brought years of experience to his perspective of old media navigating new-media waters.
  • Music subscription services Spotify and Deezer are head-to-head competitors, but American listeners don’t feel the competitive tension since Deezer is not (yet) available in the U.S. (Many reports indicate that Deezer will migrate to the states early in 2014, perhaps on the wings of a telecom partnership.) For our European readers, Deezer and Spotify are both important pureplay platforms with large audiences across many countries. In that context, Liam Boogar’s comparative review in Rude Baguette (“France’s Startup Blog”) is interesting and well-done. Cut to the end: Boogar started out this piece of work as a Spotify subscriber, but ended up ditching Spotify for Deezer for what he perceives as better music-discovery tools.


Spotify as star-maker

Wednesday, November 27, 2013 - 12:05pm

The “Spotify debate” swirls around one core hypothesis: Musicians don’t get enough value from the service. As such, Spotify is a surrogate for music streaming sites, which promote access instead of ownership, and attention instead of purchases.

The debate flared up again this week, in a caustic exchange between Thom Yorke of Radiohead and Moby. Moby called Yorke “an old guy yelling at fast trains.” Yorke emitted a Twitter yawn.

Spotify evangelists, especially founder Daniel Ek, repeatedly preach that it is still early days for streaming, and that massive future scaling will eventually solve complaints about the model’s revenue potential for recording artists. (Spotify’s investors have reportedly bought some time to build into that future with an eye-popping new funding of $250-million.) 

But the entire subject of artist revenue on Spotify might be moot in the long run. What if streaming services are really about exposure of potential stars? What if Spotify’s true role is more about leverage than earnings? In other words, is Spotify the new radio as a hit-making influencer? 

A just-published piece in Forbes lays out a timeline of Lorde’s success in Spotify, identifying Spotify’s role in building awareness of the artist and her not-yet-hit single, “Royals.” Key to this conception of Spotify as a star-maker is the early-mover power of virality inside the app. Two weeks after entering the Spotify catalog, “Royals” was featured on an influential public playlist followed by nearly a million users. That was back in April. From there it jumped to Spotify’s in-house charting system, where it climbed quickly. Two months after that, the song entered radio playlists. One month after that, “Royals” was recognized on the Billboard Hot 100 chart.

This timeline is meaningful and emblematic of “crowd wisdom” which is supposed to shape a more democratic media landscape, but which so often doesn’t seem to. The Spotify crowd pushed Lorde into broadcast’s gigantic audience, and onto the charts. As to Spotify’s much-debated role as an earnings machine, “Royals” has been streamed 100-million times in Spotify alone. That would probably furnish a good-news earnings story for the music service if the figures were ever disclosed.

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