Users across Europe may love Spotify's free, ad-supported music streaming service, but if their 2009 numbers are any indication, they might not get to love it much longer. According to Spotify's own disclosure, the company lost £16.66 million in 2009. That comes from £11.32 million in revenue, and £18.82 million in costs. Add a dash of taxes, and you get a pretty hefty operating loss.
Spotify clued us into how their earnings break down as well. They get cash from two sources: ads and subscriptions. In 2009, Spotify pulled in £4.51 million from advertisements, and £6.81 million from subscriptions. Only 3.57% of Spotify's users bought into a paid subscription in 2009; a rate that may not be sustainable.
But how has Spotify been doing in 2010? Well, they haven't let that cat out of the bag yet. Although, the company did respond to these numbers saying, "The groundwork laid in our launch year has been crucial to the significant achievements made in 2010." Taking bets, how will Spotify do come the end of 2010?
Spotify wants to the set the record straight. No matter what you've read, the streaming music service isn't about to become another notch in Apple's acquisition belt, a Spotify spokesman said.
The rumor first began when TechCrunch reported an anonymous tip that Apple was in discussions with Spotify about a take-over deal.
"Apple and Spotify are in on-again, off-again discussions about an acquisition, but at best it's very early in the process," TechCrunch reported. "No firm price has been offered, no term sheet tabled."
And apparently no talks have taken place either.
"We wouldn't normally comment on this kind of speculation, but we wanted to make it clear that we have absolutely no intention of selling Spotify," said Jim Butcher, a spokesman for Spotify.
Spotify is only available in certain parts of Europe but is trying to break into the U.S. market.
Europe’s favorite streaming music service, Spotify, is finally on track for a US launch. The expected release should happen in the third quarter of 2010. The Stokholm-based company is in talks with unidentified internet and cell carrier partners about the details for the launch. Spotify’s senior VP said to day that they are already in the process of buying servers space in the US.
Spotify currently has 7 million customers in Europe, about 325,000 of which pay a monthly fee for additional features. In Europe, Spotify allows users to choose specific songs to stream. This is different from US services like Pandora which just stream songs from a particular genre. However, it is currently unclear what form Spotify will take in the US.
Mobile apps already exist for the iPhone, Android, and Symbian. These would presumably be available for US users. Would you be interested in Spotify? What features would you need to see before paying for a premium subscription?
In a recent presentation to music and tech industry executives, NPD Group’s Russ Crupnick had some interesting things to say about music streaming. According to Crupnick, on-demand streaming services like Spotify result in a 13 percent decrease in paid downloads. He went on point out that services that follow the “radio” model, like Pandora, increase sales 41%.
Pandora doesn’t allow users to select specific songs like Spotify, but instead plays music in a chosen genre more or less randomly. The unsurprising conclusion is that people are less likely to buy a song if they can stream it at any time. Perhaps it isn’t that simple; is it possible to draw enough new users to increase overall sales? The key for Spotify may be the effort to convert free users to paid premium users.
This report is just the sort of thing music labels could use to justify keeping Spotify from launching in the US. Warner Music Group Chairman Edgar Bronfman said earlier this month, “Free streaming services are clearly not net positive for the industry.” If Spotify launched stateside, would you ante up for extra features like mobile streaming?
The record labels, if they were honest, would say they hate digital music. It’s a marketplace over which they have little control. And it’s a marketplace where they have to compete. Neither of these are they used to doing. So when Rob Wells, the senior vice-president Digital for Universal Music Group International (UMGI) declares that the music service Spotify is making money for them, one has to wonder what’s really going on.
What’s going is this: Spotify operates on two models. The first, in the United Kingdom and Spain, is royalty-based; payment received based on songs sold. The second, Sweden, Norway, Finland and France, is based on subscriptions and advertising revenues, which UMGI gets a cut. You don’t need to be a rocket scientist to figure out which UMGI prefers: “In all its territories bar two, Spotify pays the labels from a mixture of the money it generates from advertising revenues and subscriptions. That to me equates to a sustainable business model,” said Wells. Rather than worry about having to compete for royalties, UMGI wants a sure-bet piece of the action.
Wells’s take makes sense for the music industry. But does it make sense for the delivery of digital music? The big providers of music, Apple and YouTube, don’t pay guarantees but royalties or percentages--they make you work for your money. And iTunes is by far the dominate method of digital music delivery. (Except for Sweden, where it’s number two to Spotify.)
Still, Wells isn’t giving up hope this can’t change. According to Wells a music service needs only convert about 10 to 12 percent of its user base to subscribers, and the economic model becomes viable. The problem of getting that 10 to 12 percent to change is simple: restrict access, which Spotify has reverted back to. (Its returned to an “invitation only” sign-up.) This, however, isn’t so much a new economic model as putting lipstick on the pig that was the old model.
And then there’s the grain of salt: major music labels, including independents, have an equity stake in Spotify. Naturally they’d like to see that pan out. Promoting the superiority of Spotify is a no-brainer.
All this means nothing to us. Spotify isn’t yet available in North America. That’s expected to change sometime this year.
The internet music application everyone loves, Spotify, has released an app for Symbian phones. The new app was created in conjunction with UI design firm The Astonishing Tribe (TAT). The technology behind the new app has been used to produce a number of user interfaces across the mobile and desktop spaces. The Symbian platform is the most widely used mobile OS in the world at this time, so this entry was certainly overdue.
The release of this app means that the 250 million users of S60 devices running 9.2 or later can enjoy the Spotify service. “We have thoroughly enjoyed working with Spotify to help realize their visions for a mobile version that can now reach hundreds of millions of music lovers that use Symbian based phones,” said Charlotta Falvin, CEO of TAT. Regardless of your feelings about Symbian, that’s more than can be said for US music lovers. Spotify is still only available in Europe.
What not to expect, says Arrington, is a service similar to the one Google presently has in China. This services allows users to search for songs by song, artist, or album title, and download the licensed music files for free. (Why can’t we have that here?) According to paidContent.org, the revenue stream, split with the Chinese music company Top100.cn, comes from ads.
As rumors go this one is not a big surprise: there’s some serious coin to be made in music downloads, and it would have been more of a surprise if Google didn’t make this move. However, the entrant of another heavyweight into an increasingly crowded marketplace, even without Spotify’s impending entrance, raises questions about how many will actually survive.
Update: First screenshots of Google's music service after the jump.
Spotify is scheduled to launch in the US later this year, or early 2010, but the details of how it will work stateside are still up in the air. In Europe the free version is ad supported, and the ad-free version runs €10 (about $16.60) per month. Due to the competition Spotify faces in the US from services like Pandora, the London based firm is considering a single “freemium” service. Users would be able to pay for specific features.
The service allows users to browse and play any of over 6 million tracks. It even supports offline caching for those times when an Internet connection isn’t available. There is no word yet on the fate of these details for a US release. Licensing negotiations are currently all that stand in the way of US access.
It's no secret that the music industry has been in a bit of a bind over the past decade or so: they claim illegal downloading has lost them millions in sales while distribution deals with companies like Apple have left the labels feeling as though they've lost control over pricing.
Meanwhile, consumers have seemingly endless ways to download, stream and discover music. Streaming sites like Pandora, Blip.fm, Hype Machine and Last.fm are all great ways to listen to music from your browser while you're online, but picking specific artists to stream can be a haphazard process. Buying music presents a whole new set of problems, with companies (iTunes, Rhapsody, eMusic, Amazon, Zune Marketplace) that all offer different pricing models and collections of artists.
Spotify (Windows, Mac, Linux, Free BSD), which has had a popular debut in Europe and the UK, is a new music service that hopes to streamline the way we both stream and purchase new music. The company was launched with the blessing of several major labels, in a refreshingly forward-thinking move on the part of the music industry. Because of this, Spotify is able to stream full, high-quality tracks from these labels without fear of retribution. Though not yet available in the US, we got our hands on a beta-code to test out the service.
Microsoft is preparing to launch a music streaming service by the end of July. Peter Bale, executive producer of MSN, told UK’s Telegraph about Microsoft’s plans to foray into the music streaming industry in the UK. Its service will rival Spotify – European company that provides both ad-supported music streaming and paid downloads. In fact, Bale said that Microsoft’s music streaming service will mimic Spotify’s revenue model.
“We are looking at how other similar businesses have structured their business models and trying to figure out what will work best for both consumer and Mircosoft.” Bale said. He added that the service may eventually become associated with the Xbox 360, though he would not say how.