Every so often, we’re going to start pulling some articles out of the Music Ally archives. We’re starting with what we think was one of the first interviews with Spotify CEO Daniel Ek outside the Swedish press, in November 2008.
There are some zinger quotes – “The model of buying and owning music is dead” – some long-forgotten features (Spotify day-pass, anyone?) and a fascinating glimpse at the company’s early encouragement for developers building things on top of its service.
Enjoy! The article was published in the Music Ally Report on 27 November 2008 – the text below is unchanged from what was printed then.
Swedish streaming music service Spotify has been getting rave reviews from consumers and labels alike since launching in October. We talked to co-founder Daniel Ek to find out why.
The service has been in the works for nearly two years now, although it appears to have been time well spent. Spotify launched in eight European countries at once, armed with licensing deals with all four major labels plus The Orchard and Merlin on the indies side. Its aim: to provide a more elegant and user-friendly alternative to P2P.
“Instead of legislation, we realised that the way to stop people consuming content through P2P networks is to create a better product,” says Ek. “We also realised that music today is more about access to music than actually owning music. The model of buying and owning music is dead.”
Few of Spotify’s label partners would go that far, but praise for the company goes across the board. “They’ve built relationships, laid out their business plan, and shared their knowledge with us,” says Simon Wheeler of Beggars Group. “They have smart people and the application is slick. They’ve basically approached the whole business in a really grown-up way.”
Merlin boss Charles Caldas agrees. “It’s good to have a service that’s done its homework. Their credentials are very good, their advertising background is very encouraging, and the attention to detail that’s gone into the construction of the service, the way it was presented, and the business proposal made us very comfortable dealing with them.”
So what is that business model? Spotify is a streaming music service accessed through a desktop application rather than a website. It’s got three pricing options: free with ads, £0.99 for a daily pass, or £9.99 for a monthly subscription – with the latter two models being ad-free. Ek expects most users to join the free option, but Spotify will then try to upsell them to the premium by offering exclusive album previews or extra features.
We’ve been impressed with the simplicity and elegance of the Spotify application, as well as the option to set up collaborative playlists with friends or colleagues. “It’s worked out really well for us,” says Ek. “There’s a lot of playlist-sharing going on already. We’re also seeing people building services on top of Spotify adding social features. They’re building stuff we never imagined, so we’re now creating tools to enable more of that.”
Examples include Spotify DJ, which lets people broadcast live DJ sets to other Spotify users; Spotylist, which allows users to vote on and share their favourite playlists; and Topsify, which maintains a series of playlists.
On the ads front, Ford, T-Mobile and Xbox were on board at launch. Spotify offers a mixture of ad formats, including radio-style audio ads played between songs. Ek says this could help the company ride out the economic crunch, even if advertising budgets take a fall in 2009. “We have formats like the radio ads that other services don’t have, so there’s an opportunity to get a lot of different budgets,” he says. “We can go for traditional radio and even video budgets, as well as online digital banner budgets.”
Whether the company succeeds in that aim remains to be seen – competition will be fierce, and it’s unclear how well Spotify can monetise those banner and video ads if users simply have the app running in the background when playing an album or playlist. Launching deeper community features so users spend more time interacting with Spotify may be one solution.
So what next? Ek says Spotify won’t add a digital music store element, but doesn’t necessarily see itself as a pure streaming play. “We’re a music access company, providing on-demand access to music,” he says. “That’s our business model, whether that access to music is downloads or streaming. But we won’t be a retail company doing digital download sales.”
A mobile client is also a possibility at some point, says Ek. But the most interesting aspect may be Spotify’s desire to partner with ISPs, web portals and consumer electronics firms. The company is already in trials with Swedish ISP B2.
“We’re seeing how we can work together with them, and hopefully find a blueprint to use in other countries,” says Ek. “They’re probably one of the most pirate-intensive ISPs in Europe, because they offer broadband between 100 megabits and a gigabit.
“They’re known for having a lot of users that download illegal content, so we’re working with them to see if we can offer a better product as an alternative.”