Opinion

Spotify’s global business head talks piracy, getting better with data and who will survive in the Australian market

Levick

In seven years Spotify has changed the way a generation listens to music, and claims to have cut music piracy drastically in the process. Alex Hayes sat down with Spotify’s chief business office Jeff Levick to discuss how many services can survive in the Australian landscape, improving the use of data and how it works with telco partners.

Is it better to have paid subscriptions?

We’re a feemium business – it’s hard to separate the two.

The whole reason for free is to basically have a platform to allow consumers for free to find music, listen to music and engage with it, and obviously for us it’s a big part of our push into premium which is paid.

You can’t have one without the other now and the magic of getting 15m people to pay for music through subscription came via the fact that we have that free platform. For us its about finding out how we can make those two platforms work together whilst monetising them to support ourselves and more money back to the music industry.

Radiohead frontman Thom Yorke is one artist who has protested against Spotify's payments to artists

Radiohead frontman Thom Yorke is one artist who has protested against Spotify’s payments to artists

A lot of artists have complained about the money they see from streaming services, how much money is going back to them?

So far we’ve put back in over US$1bn and that will continue to grow over time. How it gets sorted amongst rights holders we don’t have as much visibility in to, but we know we’re a source of revenue that otherwise wouldn’t exist. This is a revenue line that was all but lost to piracy, and what’s encouraging for us is our core audiences are millenials – 18-34. We’re creating a way for this new generation to pay for music, otherwise these channels seem to be disappearing.

What are you doing to optimise revenues coming out of the free channel?

Absolutely. The growth in freemium has a lot to do with the growth of mobile and we’re constantly rolling out new products to help monetise that. That will be even better with the introduction of new targeting coming out, monetisation is something we’re focussed on.

Where do Australia and New Zealand figure in your thinking?

It’s one of the top of our 58 markets globally, thats for all users and revenue. It’s growing really quickly.

Streaming now makes up 25 per cent of the entire music industry in New Zealand – up from 9 per cent the year prior, and piracy is down 30 per cent in New Zealand. Not only are we swapping out theft, but we’re also growing a new revenue stream for the labels and that’s pretty exciting.

We’re the biggest in Australia, which is probably the most competitive market globally, I think everyone’s got a platform live and available in Australia. To remain in the number one position is good for us. We’ve got a sizeable team and we can continue to invest in innovation there.

Telstra's service MOG is one of a number of local competitors to Spotify

Telstra’s service MOG is one of a number of local competitors to Spotify

If Australia is a competitive market how many platforms will survive? 

When you study the history of rate internet there’s typically one or two players who end up owning a space. In the world of friends you’ve got one player, Facebook, and in real time communications there’s Twitter, and in the world of search you’ve got Google.

I don’t think it’s going to be as binary as just one player, but I don’t think it’s going to be long term seven players.

Is Spotify’s international footprint an advantage against the local players?

It helps the global experience, plus the fact we’re a music and technology company, so this is all we do, innovate the experience and make it better and better as we go. I think to the extent we’re constantly innovating to create a better experience.

Following the recent ruling on net neutrality in the US how do you feel about the way Australian telcos charge for data packages?

We have telco partners and we work with them to create unique packages for their consumers. So whether that’s having zero rated plans for Spotify or certain allocations of data, it’s something we do all around the world and something we continue to explore in the marketplace.

The telco relationship in Australia is fairly new and its something we continue to work on. [Spotify has a relationship with Vodafone in Australia]

spotify vodafone

How does Asia track globally?

They are smaller markets for us, hubbed out of Singapore and growing nicely there. We have a telco partner Globe in the Philippines doing some of the most innovative things with us we’ve seen around the world. So it’s very progressive in terms of what they are willing to do.

The Philippines is such a great music market, they are huge music enthusiasts so we’re pleasantly surprised by our early success there and we’ll continue to look to places to expand to.

It’s hard to call it one market, with so many different countries and many different cultures, we’re very careful not to think it’s a one size fits all approach.

We do have more Asia launches planned but we won’t talk about which ones.

What message are you giving to marketers and agencies around creativity on the platform?

We spend more time with digital shops, rather than traditional broadcast agencies. We’re an interactive platform, not a radio platform. We have the data to understand it’s not just a demographic you’re hitting, there’s an audience behind that. We have the first party data and it really gives brands the opportunity to have a much more one to one connection for messaging as well.

What we find is best in class is when people create adverts for the Spotify platform and actually use that in their copy, the fact you’re talking to your user on Spotify to try and enhance their experience.

The things we’re really excited about is having brands create unique content, whether that’s audio or video, that we can distribute across Spotify. The fact we’ve got this engaged audience – on average 144 minutes each day they use it for, it’s a real chance to speak in a more authentic voice rather than put a 30 second ad up.

spotifyIs there an option for you to integrate some form of advertising to the premium model?

Right now one of the differentiators is the fact it’s ad free.

That’s not to say in the future brands can’t have access to premium but it would have to be in a way it was really focussed around content, and that would be content premium users would be as excited to have access to as a free user.

What part does video have in the Spotify platform?

Did launch video advertising on mobile and desktop – it gives the brand an opportunity to put any content they want in that 30 second window. It can be a music video or a celebrity endorser they can do that, but for us it’s a content module.

What are the main challenges for next year for Spotify?

It’s a year of execution. We’ve focussed a lot in the past on expansion but we have a lot of product plans and new product releases we want to roll out, both on the product side and the advertising side, so its going to be a big year of innovation for us.

Are agencies taking Spotify more seriously?

Part of the role of agencies and advertisers is to follow consumers and know where they spend their time and have a presence there. And with the growth of streaming just in general whether its video or audio its created a new class of consumers they have to plan and buy for, and that’s kind of where we are right now.

Agencies are starting to realise there are mass volume of streams out there and they’ve got to work out how to participate in that.

Spotify is doing over 1bn hours of streams a month – that’s a lot of time spent by really a engaged audience and it’s all opportunity for brands to participate in it.

What are your plans for optimising the data from the platform?

echo nest spotifyWe bought a big data company last year called the Echo Nest to get insights around machine learning about direct music consumption and also recognising cultural music trends – it brings both those things to our platform so we know how to plan music better. But it’s also for looking at music consumption and different types of taste profiles, what these people are actually doing, thinking and would be more inclined to purchase. That’s a lot of the data work we’re doing right now.

On the data side we’ll see a lot more innovation.

On geo targeting – we’ve always had geo as targeting layer – it’s not just location but context. Anyone these days can tell you where somebody is, but not many can tell you what they’re thinking or doing, and that’s something we’re working on.

We might know what mood somebody’s in and extrapolate where they are going – we might know its 5pm and someone’s on their way to the gym so they’re listening to the workout playlist. These are the kind of big data problems we’re working with.

Could Spotify bypass the music labels and start working with artists directly in the future?

We see our role as the platform for music discovery and distribution. It’s out of our core focus to act as a principle in music and act as a label. They’ve done a great job in that.

The real opportunity in labels is to work with their artists in how to leverage their great platforms like Spotify and Facebook for content distribution.

  • Alex Hayes is editor of Mumbrella
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