Why is Everyone Talking About Spotify?

spotifyThere’s enormous buzz about Spotify, the European streaming music platform that promises to launch before the end of the year here in the US. I wish I could say I’ve tried it, but can’t unless I fly over to Europe for the weekend. Spotify is a music service that allows listeners to browse and stream songs on demand from a library of 3.5 million songs. Listeners can also build playlists, and their interface is supposed to be very intuitive and fun to use.

According to CEO Daniel Ek, Spotify aims “to provide the world’s biggest catalogue of music that’s quick, simple and fun to use.”  He says they’ll compete with Napster and Rhapsody here in the US (among others) but that only Spotify offers both an ad supported and subscription ways to enjoy the music.

Two main things about Spotify make it a good bet for success. On demand song streaming is appealing to music fans. Recent research has shown that as on demand streaming of songs increases, illegal song downloading goes down. Music fans are content to legally listen and share their music via an on demand streaming service rather than illegally download the music. Research also shows that fans would consider using an ad supported platform to get their music for free. Spotify’s platform gives music fans the chance to hear what they want when they want it, without paying for it. Legally.

They’ve reportedly raised millions of dollars (pounds) in VC money, and have tied the record labels in with equity deals as well, like Imeem and MySpace Music.

Everything I’ve read mentions their nifty platform, which requires a download onto your computer. They do not yet have an iPhone app, and they have a Google Android app that has not been released.

Already valued at $242 million, Spotify will be under enormous pressure to generate both advertising revenues and premium subscriptions to appease both their VC investors as well as pay royalties to the labels. In an article in Techcrunch over the weekend, guest author Michael Robertson is skeptical that they can make it given current royalty rates.

I have to admit I’m curious – both to see the service and to see how well they can monetize it.  It will be an interesting test of both the ad supported and premium subscription marketplaces. May they thrive…

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3 responses

  1. I registered and downloaded Spotify via a UK proxy, and I have to say that it is absolutely fantastic. As a Rhapsody subscriber, I can say that it is not as well-designed as Rhapsody, nor does it have the additional content that Rhapsody provides, but all of the key elements are there. If you are interested in searching for music, organizing your music into playlists or libraries, and listening to it on demand, Spotify is just as good. It is light years better than Myspace Music a nd Imeem.

    You hit the nail on the head, though: The real key is going to be their ability to monetize it.

  2. I can’t imagine that the service could be sufficiently better than those already available that US users will migrate in the masses necessary to offset the royalties and make the investors happy.

  3. Carl, I think you need to try it before you pronounce judgement! I’m with Jim on this one–Spotify could be a game-changer for online music.

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