A Change of Tune: Interview with online music phenomenon Spotify
Free online music site Spotify is fast generating a large fan base despite fears that its business model is unsustainable in the long term. New Media Knowledge’s Chris Lee spoke to the firm to talk more about its model and its prospects.
Music distribution service Spotify has become the latest online music phenomenon. Sweden-based Spotify hosts a library of four million songs which listeners can search for and listen to for free with occasional interruptions for adverts.
“Because music is social, Spotify allows you to share songs and playlists with friends, and even work together on collaborative playlists,” the site boasts.
Aside from adverts, the site is funded by the sale of ‘premium’ memberships, allowing users to pay £9.99 a month to not be interrupted by ads. The site has also signed a deal with digital download site 7digital to enable users to purchase tracks.
NMK struck up a chord with Spotify’s UK head, Jon Mitchell (pictured).
What was the inspiration for Spotify?
It was a goal to offer music free for people in a legal framework a few years ago. File sharing helped sow the seed but the costs of streaming as well as the industry not perceiving a need for a service like Spotify - and therefore not needing to do any deals - from a monetisation perspective meant that it had to wait for the right moment.
How does it differ from the likes of Last.fm?
Spotify allows anyone to listen to as many tracks from whichever artist as many times as they like for free. I believe you can only listen to certain tracks for free three times on Last.fm.
We are not a social network. We have social objects such as ability to share music with friends through e-mailing playlists, albums or songs which we believe is very powerful. Personal recommendation carries a great deal of weight.
For advertisers Spotify has more sophisticated targeting. We can target 15-24 year old males in Glasgow due to data provided by the user, including postcode data, which is much more credible, not IP data. Last.fm does not know the same amount of data for every user. This means zero wastage and better return on investment for advertisers.
Last.fm has no audio ads which misses a huge means of communication for advertisers.
Tell us about the 7digital deal. Are you turning into iTunes? How are you competing?
We believe that people should be able to consume music wherever and however they want. The deal with 7digital means that you can check out a song or album and if you love it then buy it. In both cases the artists get rewarded.
We are not competing with iTunes. You can buy some tracks through them if you want.
Our competition is music piracy. We want people to come to a legal service that is faster, has more music and is easy to use. If we do this, we can monetise an audience that previously never paid and return that money to the record labels.
Is £9.99 a month too much for a premium subscription? Moving from free to £9.99 is a big step, what’s the conversion rate of non-subscribers to subscribers?
With more features, such as pre-releases, exclusives, meet and greeting the bands, VIP competitions and lots of other ideas £10 becomes more acceptable. It is not just about removing the ads, although that will be attractive to many people. We don't comment about specific numbers but anticipate it growing considerably over the next few months. As more ads are introduced there will also be a greater differential between free and premium.
You’re developing mobile apps. Isn’t this going to make paid-for downloads obsolete? Couldn’t I just log onto my free account and listen for free on the move?
We know people like to carry music with them, however, we'll continue to focus and make the online offering even more appealing and look into other opportunities as and when it makes sense as a business.
What can we expect to see from Spotify this year?
A great deal of innovation, more music being integrated, fun and wildly creative uses of the API and increased user numbers. It’s going to be hard work but we know people love what we have done so far and will continue to make the best music service even better.