Why Spotify will be worth the wait

spotifyThe rumours about Spotify’s launch in Australia have been buzzing around for months.
The platform will be familiar to Brits, Swedes and Americans, but  due to licensing restrictions it is as yet unavailable to Australian users – but when it does in the next few days, it will change the Australian content market significantly. “It’s how music should be” claims the copy on Spotify’s website, and as a long time fan and user, I absolutely agree.

Spotify is a web platform that allows users to stream music, offering a real time, no-buffering-required listening experience of a vast back catalogue of music. It makes it easy to listen to millions of tracks on your desktop or on mobile, and crucially it makes sharing those songs and discovering new ones a seamless experience.
One possible reason for the delay in launching in Australia is the slow process of getting all the major Australian labels on board to ensure the music selection is robust enough at launch not to disappoint first time users. Something the Spotify team are continually working on is the size of the inventory, adding an estimated 10,000 tracks per day.  Some artists have flatly refused to allow their tracks to be added to streaming sites databases – the Beatles and the Black Keys amongst them – but the majority of UK and US-based labels seem to take the view that some revenue is better than none.
What makes Spotify so interesting, and so relevant, is that it acknowledges the fact that people are no longer buying records and CDs in the volume and frequency they used to. It’s not just The Youth that are pirating music and downloading tracks illegally, but more or less anyone with a broadband connection, and this has had devastating consequences on traditional music revenue models.
Rob Reid in his TED Talk, “The $8 billion iPod” points out that according to copyright mathematicians, the cost to the music industry per pirated song is $150,000, which means the iPod Classic, holding 40,000 songs has cost an equivalent of $8bn dollars in damage to the content producing market. He makes a compelling argument that while the industry figures about the cost to jobs as well as profits for labels is exaggerated, there is a need for a new model. According to David Whittle, MD at M&C Saatchi Australia, the secret of Spotify’s success is  “making easy more appealing than free.”

I’d argue it offers a way of connecting with music fans that other platforms, advertisers and record labels themselves have lost. And it’s timely – the overall global music market decline is at around 3%, sitting at $16.2bn last year. Shortlisted for Best Overall Startup of 2011 by Techcrunch, Spotify is claiming 12 million subscribers, three million of whom are paying to skip ads or download content to mobile thanks to Spotify’s various payment tiers. Obviously that’s not straight profit for Spotify; it means a return for the labels who have licenced their archives of music, and it means a return for advertisers who benefit from targeting users via demographic data as well as by music genre.

According to Kate Vale, new MD of Spotify Australia, the audio ad has been very effective for brands elsewhere, “they work incredibly well to target highly engaged listeners. Jaguar in the UK targets men aged between 35-50 who listen to classical jazz, and that works extremely well for them.”

Spotify screenAnother reason for this engagement is the crucial element of discoverability. Unlike iTunes, Spotify’s open nature means users can compile playlists and share them easily.  Spotify’s social dimension is paramount; the Facebook and Twitter integration is genuinely very smooth, and means that you can create connections and share music with anyone. It offers a Pandora style radio station function that generates playlists based around a particular artist, but the main focus is on what my friends are listening to. I very much enjoy the eclectic selections that iTunes Genius offers me, but this is only a juxtaposition of records I already own plus suggestions created by an algorithm, whereas I primarily look for recommendations about new music from people I know and trust.

It’s open and syncs easily with the social web, and gives us that feeling of serendipitous discovery that reminds me of the heady days of the mixtape.

Cathie McGinn



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