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October 9, 2009

Spotify to face the music?

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by Darren Allan

Music streaming service Spotify has been put under the spotlight after a blog post from Chief Executive Daniel Ek.

He used the post, which marked the one year anniversary of Spotify, to defend the service’s business model – a mix of ad-supported non-paying listeners and paying subscribers. Those who stump up £10 per month receive a premium service minus the adverts, along with other boons such as offline playlists.

Ek said he’s looking to long term sustainable growth with Spotify, and that any “notion of overnight success is very misleading”.

The problem, according to a report in The Times, is that the vast majority go with the free option, estimating that less than 10% of UK users pay up and subscribe.

There are doubts as to whether Spotify can stay in business if that estimation of subscription levels is on the mark. Particularly when Napster has just cut the price on its unlimited music streaming package to £5 a month.

The Times quoted an unnamed senior executive in the music industry saying: “Spotify will be dead within a year if it carries on like this.”

So where does Spotify go from here?

To shift more people from illegal file sharing to legal services like his own, Ek urges the industry to “think outside of the box and realise that the new business model in music is a mix between ad-supported music, downloads, subscriptions, merchandising and ticketing where the user comes first and where the key to monetisation comes from portability and packaging access rights.”

However, there are those whose view is simply that £10 a month is too much to ask. And Napster cutting in with its £5 price is a move Spotify has to take on board.

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