The Great Spotify Mystery

For those who don't know, Phorm, from Wikipedia:

Phorm, formerly known as 121Media, is a Delaware, United States-based digital technology company known for its advertising software. Founded in 2002, the company originally distributed programs that were considered spyware, from which they made millions of dollars in revenue. It has since stopped distributing those programs after complaints from groups in the United States and Canada, and announced it was talking with several United Kingdom Internet service providers (ISPs) to deliver targeted advertising based on the websites that users visit.

http://en.wikipedia.org/wiki/Phorm

The article implies that Spotify will essentially turn into something similar to survive.

Sometimes I think that the only way there will be a music industry is for the current one to go ahead and totally collapse, and then for the doomsday scenario to actually occur: For some reasonably value of "good music", there really isn't any more, for some large number of people's definitions of "good music". Only then would there be some real pressure to figure out how to make some money model work in the face of "free". The industry makes noises about how necessary they are, but "we" as a whole clearly don't believe them, and the only way they can prove they are right is to stop.

Of course, the music industry is stuck, in that it's very easy to make and distribute music. It's a common hobby, and has been for decades, and just gets cheaper and cheaper.

Maybe the movie industry could pull this off; while movies will continue to get easier and easier, I doubt a "summer blockbuster" will ever get as easy as music is now, if for no other reason than the fact that a five minute song is adequate but a "full" movie is an hour and a half, and each minute is intrinsically harder.

What if there isn't actually any way to monetize these industries? Should anything be done about that? What should, and what could, be done? I don't think going all draconian on copyright is worth it for society (the value of the movie industry is not infinite and it's distinctly less than free speech and freedom in general, no matter how they feel), but are there any other options? Because let's get real, we're not going to donate or micropay our way to "Star Trek" or "Terminator 4".

For some reason it feels like that article completely misses the point.

If the record industry own 30% then they can get access to statistics then they are able to much better target what music to push.

That's just one place that spotify allows for return on investment.

But the biggest problem with the claims is simply this.

The article states that if no one can make money on music then no one will invest in music making.

That's purely and utter nonsense. Art is created DESPITE there being no money in it, further more the artist can instead make good money on live concerts because they have reached a much higher fan-base.

Don't blame spotify for the record industries lack of imagination. Actually blame the record industry for existing at all at this day. Who really needs them.

You get interrupted every fifteen minutes or so by an advert - surely they make money from that?

The article completely misses this...

How can a person in Canada "simulate" an IP address seeming to originate in the UK to get access to Spotify? It currently rejects visitors from Canada.

spotify not being able to monetize is a joke, they are in the position to completely dominate the market, and launched from day one (I believe, if not at least very early) with media subscriptions.

media subscriptions can make a lot of money, spotify are the first with an application that could pretty much kill physical media sales, if you replace all that market, thats a hefty bunch of cash.

micropayments, people still want to own their music, have it backed up, play it on their mp3 player, I believe this is in the works, if it happens, then they have all of itunes money.

advertising / merchandising / ticket sales, if you become the home of music to most people, then you pocket pretty well here.

They still have a bit to go, I am hoping they come up with a better way of transitioning free customers to subscribers than bombarding them with ads, but from what ive seen that looks like the strategy, people dont need a lot of convincing to upgrade their accounts because the service is so good.

their mechanisms for finding music, the artists radios suck, however they have a fundamental change in the way people can find new music because... sharing playlists actually works, drownedinsound / pitchfork / my friends with good taste can all make playlists and share them with me, thats a million times better than some dodgy collaborative filtering.

Their social aspects are pretty non existant, but thats very easily added, they are new and they have done the hard ground work and passed with flying colours.

They dont have all the music in the world, but they have a lot and its only going to grow, any limitations on artists are purely down to it being new and needing some more traction for labels to understand they dont hae a choice.

The music industry has been faltering time after time to try and keep people paying for music, spotify from what Ive seen has the chance to completely own the new music buying market.

So, maybe the free UK version of Spotify provides no reason to upgrade. But I can tell you that the Swedish version is getting on a lot of people's nerves. And many of those people are seriously thinking to upgrade.

- First, there are plenty of commercial ads, the stuff that used to run on the radios years ago. Cheesy.

- Second, they fill up ad inventory with non-profits ads. So for example the ad about safe sex that goes something like: "everyone loves music, especially in the bedroom".

- Then they have ads from artists promoting their albums and telling you that if you upgrade, you get the single 1 week early.

- Also, you have ads urging people to call in and leave a fans voice mail.

- And finally Spotify plays the voice messages from people to tell you how much they like it and how much they love the premium version.

In summary, Spotify is clearly playing a carrots & stick game to get people to subscribe - the carrot being the social networking features they want to launch, the ability to create playlists, etc.

And I can clearly imagine how the company is bringing the stick strategy to the UK soon.

I think one of the major problems is that it's hard to use. I struggle to find songs or artists on there - and it seems like there is no easy way to browse about and find suggestions etc. They could lear a lot from Last.fm's way of doing all that.

Plus the "radio" stations are useless - set it to metal and you get 90's punk......

So, I'd say their main problem is a poor product :)

Arctic startup has a go at success of Spotify and what it could mean to the future of iTunes.

http://www.arcticstartup.com/2009/05/12/the-future-of-spotif...

IMO, Spotify's popularity means that they're already a prime acquisition target.

There's an interesting comment about "passing information back to record labels" especially given: "It was stated that the labels own 30 per cent of Spotify through equity investments. It may be higher."

I'm not implying it's some big conspiracy, just that keeping user data private when you're (part) owned by the companies a lot of your users are scared of is _hard_.

I am using VPN to stimulate UK address in Manchester (from Brazil) and have not heard one ad in the two weeks I have been using Spotify. At the moment I have been listening for more than three hours straight, and still not one ad. My wife is using a similar setup and she has not heard one ad. I actually want to hear one so I can believe they exist :)

Call me cynical but isn't the music industry famous for business ventures that don't make any money. They just ensure they get their cut in advance, and cook the books if necessary to make sure there's nothing left for the artists to get a percentage of.

"Acquiring it may not be pleasant: doing so may help support a neo-Nazi with a grudge."

What? Is there some news story this is referencing that I missed?

I was told Spotify pays per play for music licensing. This is interesting because it means as Spotify grows at a crazy rate, so do their costs.