I’ve been asked by several people recently to share my thoughts on how Spotify will change the music industry. This right here is straight talk. My opinion on the state of the music industry and what Swedish-based technology platform Spotify will do for you, me, the artists, and the industry as a whole.
When Spotify was brought to the United States on July 14th, people suddenly realized that the times they were a-changin’.
Spotify is a Swedish-based music streaming service that allows users to stream entire songs (compared to the short clip that iTunes allows) from a range of major and independent record labels including Sony, EMI, Warner, and Universal. For free. Yes, you read that correctly. For free, you can listen to entire albums (with just a few advertisements thrown in there to break up your seamless experience). For a small fee, you can have an ad-free experience and have added features that include higher bitrate streams and offline access to music. If you purchase a Premium account, you can access Spotify and all of your playlists on your cell phone.
Spotify’s collection currently holds about 15 million tracks, but that number is said to be growing by around 10,000 tracks per day. And this is legal, because the labels have agreed to give Spotify rights to their artists’ music. Some labels and artists have not agreed to be added to Spotify yet, but something tells me that as soon as they see the number of Spotify users and really let that sink in, they’ll quickly be begging to be added to the database.
So you get free music. That’s cool. But what’s the catch? Where’s the stickiness? Ah, yes. In the playlists. Using Spotify, users can set up playlists that they can then share with other Spotify users. Want to see if your friend Joe has any public playlists? Simple! Connect to your Facebook account and you’ll then have a right rail that shows your Facebook friends who are using Spotify. By clicking on Joe’s name, you can then see his playlists that he’s published. Heck, you can even make a playlist WITH Joe that both of you can edit. And once you’re done, simply drag your playlist link into an email, an instant message, a tweet – whatever you want! People can then click on that link and the playlist will automatically be downloaded into their Spotify.
This all seems too good to be true, right? Well, in part, it is. This whole unlimited access to streaming music for free is going to be, well…limited. In short time, U.S. users will get a more realistic taste of Spotify, as those with free accounts will soon be limited to 20 hours per month of free streaming. Brilliant marketing plan by Spotify, if you ask me. Give users a taste of what they can do (for the most part) with a Premium account, make them think this is the best thing ever, and as soon as they’re about to explode confetti out of their ears from excitement, introduce a cap, or make them pay to avoid the cap.
So how does this affect the music industry? Well, right off the bat it would seem as though the labels have reached their doomsday, no? That’s what I would guess, since people have access to full streams of songs without having to pay a penny. However, Spotify has created a concept that nobody seemed to understand until this point. They are trying to change the focus and success of the music industry from ownership of music to streaming of music. Yes, that’s right. Streaming music will be the revenue driver.
In October 2010, Wired reported that Spotify was making more money for labels in Sweden than any other retailer, on or offline. How? Spotify’s financial set up seems to give a minimum to artists based on stream count, which might actually be more profitable for artists than the current system, since so many people are illegally downloading music off the internet and from torrents. If Spotify is playing fair and actually paying these artists on stream count (there have been complaints that smaller, independent artists haven’t been receiving the same treatment that major labels are), artists will (finally!) once again be paid for having their music heard, which hasn’t seemed to be the case for several years.
That’s a major change. For years, the music industry in the U.S. has depended on people buying albums and going to concerts. In 2010, nearly 80% of the labels’ $2 billion in digital revenue in the U.S. came from sales of records and singles. Translation? Sales on iTunes. Sweden, on the other hand, and where Spotify originated, saw in 2010 that album and track sales only accounted for 20% of the $38 million in digital revenue. Sixty percent of that revenue came from…yep, you guessed it…streaming.
Personally, I haven’t yet fallen totally in love with Spotify. I’m still unversed on how to control my privacy, which is a big barrier between my heart and Spotify. There are some playlists that I just don’t want to share with people. I’m still unsure how to privatize some of my playlists, but I’m sure that is something I’ll figure out pretty quickly. Another barrier: I am an iTunes addict. Yes, I am a slave to Steve Jobs’s money-sucking system. I suppose I’m being an old fart who clings to familiarity, but it’s true – I’m familiar with iTunes and I love it’s layout, it’s look and feel, and its simple user-interface. Seeing something new and different is a bit shocking. But as with most things, I’m sure I’ll suck it up and get used to it and soon be drooling over Spotify, just like everybody else seems to be.
What I have been leaning on Spotify for so far is streaming brand new albums. It’s been great to be able to listen to an album in full before purchasing it. As a music blogger, I’m expected to listen to new albums as they come out. That typically means that (so long as I haven’t been given a free copy by the artist or the label) I have to purchase tons of new albums every Tuesday. Somewhere in there, I think people forgot that I’m young and poor. Everybody except Spotify founder Daniel Ek, who has introduced the concept of paying $9.99 a month for unlimited access to streaming just about anything I want. That right there, Mr. Ek, is brilliant. You keep doing your thing, and I’m sure, in due time, I’ll be ooh-ing and ahh-ing and wanting to kiss your feet just as much as everybody else in the world seems to be right now.