Spotify: A Lifetime or A Season

Is Spotify in danger of becoming just another blip in pan music service? Information about Spotify is hard to track and inconsistent. Many users find the catalog selection insufficient and there is little evidence that users will be willing to pay to stream music. And if more people pay for a subscription to avoid the ads, the service would become less attractive to potential advertisers. Also, the more ads it runs, the less attractive it becomes to music lovers. In fact, granting free access to users in the hope of attracting larger pools of subscribers is probably unsustainable, as advertising in the ‘free’ version is unlikely to cover costs.  Finally, even though the company may be generating money for Sony, EMI, Warner Music Group, and Universal, its long-term benefits for artists and independent labels are less clear.

History and U.S. Market

Well what exactly is Spotify? It is an online music service offering users the ability to stream selected music from a range of major and independent record labels, including Sony, EMI, Warner Music Group and Universal. Launched in October 2008 by Swedish startup Spotify AB.

In July 2011, Spotify launched its US service after delays and years of negotiation with the four major record companies.  Music can be browsed by artist, album, record label, genre, or playlist as well as by track name.  Users can register either for free accounts, supported by visual and radio-style advertising, or for paid subscriptions without ads and with a range of extra features such as higher bit rate streams and offline access to music. Spotify is funded by paid subscriptions, pop up advertisements for non-subscribers, and music purchases from partner retailers.

Currently, there are three Spotify account types: Spotify Open, Spotify Unlimited, and Spotify Premium.  The different paid subscriptions are free of ads and for the first 6 months the listening time is unlimited. However, they only allow 10 hours of listening time per month after that.  A paid  ”Premium” subscription of $9.99 per month is the only account type that allows users to access Spotify on mobile devices.

Facebook

One of the reasons behind Spotify's growth and success in Europe has been its strategic deals with Internet Service Providers. Spotify is currently the second largest source of digital music revenue in Europe after iTunes and is the largest digital music retailer in Sweden and Norway. Digital music revenues grew by 20 percent in Europe in 2010. Spotify's success was noted by the business and paved the way for US startup and partnership with Facebook.

The Facebook partnership is noteworthy. The idea is that members that listen to music from Spotify can share a constantly updated playlist of tracks. Facebook friends who have access to the same music service can also play this music simply by clicking on a link to the track. New Spotify members require Facebook accounts to log in and access the service. Although it early to judge the impact of this partnership on listeners, Spotify has brought Facebook squarely into the music business. Spotify is arguably going to become a significant music distributor, and will be in a position to make demands from music companies as well as promote particular labels, artists, and publishers to million to Facebook users. Facebook has more than 800 million active users and Spotify can add ten million registered users across seven countries in Europe, including the U.S. In the meantime, social media continue to grown in importance for the record industry. 

Song Selection

Spotify might be the right for tech-savy listeners. However, Spotify's logo "All the music. All the time." is not accurate. Well-known artists such as The Beatles, Metallica, Pink Floyd, AC/DC and Led Zeppelin are absent from the service. Adele's label named Spotify as one of their top digital partners globally by revenue. But Adele's album '21' not available, while Rdio, MOG and Rhapsody have it. 

Making Hip-Hop Stars into Status Symbols

A few months ago while working on my Company Leadership Research Presentation, I came across the name Steve Stoute.  Upon further investigation I learned that Steve Stoute was a former music executive who has become a matchmaker between music and corporate America. I recently just finished reading his book “Tanning of American: How Hip-Hop Created A Culture That Re-wrote The Rules of The New Economy”.

Hip-Hop is being used to sell products to people who aren’t necessarily fans but they know cool when they see it. A concept I’m personally trying to understand as I work with up and coming producers, songwriters and artists’. How do I expand their brand beyond music? Hip-Hop artist are now expanding their brans in the club by marketing self-branded drinks.

For years Hip-Hop artists have endorsed beverages, in 2006 Anheusuer-Bush, Inc. teamed up with Jay-Z, making him co-brand director of Budweiser Select. In 2007, 50 Cent made $100 million after Coca-Cola bought his Vitamin Water drink, Formula 50. The soft drink giant paid $4.1 billion to drinks company Glaceau, which 50 bought in as a shareholder in 2004. In exchange for his share in the company's profits, Glaceau named a Vitamin Water drink, Formula 50, after the artist.

Sean “P. Diddy” Combs signed a partnership with spirit maker Diago PLC to promote the company’s Ciroc Vodka in the U.S., in return for 50% of the profits from the brand. The arrangement could be worth more than $100 million to Sean Combs Enterprises, depending on the performance of the Ciroc brand. 

Multi-faceted hip-hop moguls like Diddy and Jay-Z have always combined street cred with street-meets-Madison-Avenue business savvy to sell products such as clothing and fragrance lines in a way that few genres outside of hip-hop have the power, or cache, to pull off.