Analysis: the morning after Spotify’s day before



By now, you won’t need us to just rehash the details of Spotify’s big announcement last night. Free ad-supported streaming through its smartphone and tablet apps; an exclusive deal with Led Zeppelin; significant global expansion from 35 countries to 55; and the ditching of its 10-hour monthly listening caps in the markets that still had them.

Coming just a week after Spotify unveiled a set of artist-focused initiatives including analytics and in-profile e-commerce, it represents a bold end to 2013 for the streaming service, as it gears up for well-funded competition in 2014. So what are the implications of last night’s announcements.

First, it’s a fascinating smashing of the box that streaming music services had been herded into over the last three years: the notion that Pandora-style personal radio might be free on mobile devices, but anything richer should be tied to $9.99-a-month subscriptions.

Yesterday’s announcement did more than simply make Spotify’s ‘Radio’ feature free on mobile as had been predicted: it lets people listen to their own playlists and those of people they follow, while also ‘shuffling’ the back catalogue of any artist they like (as opposed to launching a station based on that artist). Licensing this kind of thing is far from easy, but Spotify’s move may open the door for rivals to explore the potential for richer free services on mobile too.

Also interesting: Spotify sees tablets as more like computers than smartphones, and is treating them accordingly with full access to its free service. It sounds logical, but is a.) unusual from a licensing perspective and b.) indicative of different user habits. “Tablets are where people lean in, search and build playlists,” as Spotify’s press release put it.

Meanwhile, the company can expect questions about whether such an aggressive expansion of its free mobile service will reduce the impetus for people to upgrade to premium subscriptions. We’d rather spin off that: it’s as interesting to think about how Spotify’s ad sales team rise to the challenge of reducing the gap in payouts between free and premium streams. What ad formats will work best, and how will Spotify scale up to selling them in 55 countries?

And then there’s Led Zeppelin. Music Ally understands that the rock band’s deal with Spotify is a one-year exclusive. A coup for Spotify, but there’s a negative side. It’s not good for fans on other services – more the band’s problem than Spotify’s admittedly – but establishing the principle of streaming exclusivity now risks a later fallout if, say, Apple enters the on-demand streaming market waving cheques to bag the Beatles and AC/DC. Or, perish the thought, to get some big artists to remove their catalogues from Spotify in favour of iTunes.

The bet may be that Spotify’s artist-focused features will be a defence against that, but if securing big artists becomes a battle of big cheques, there will always be a vulnerability to the companies with the biggest chequebooks.

Stuart Dredge

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