Why Spotify’s upcoming announcement matters

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Issue Date: 
Dec 6 2013 - 12:35pm

From Issue:

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.

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