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15.08.14 Music Week 13
WHERE NEXT FOR SPOTIFY? POSSIBLE FUTURE AVENUES FOR THE WORLD’S BIGGEST STREAMING SERVICE
The Nordics is regarded by many as a crystal ball for the future of global music consumption. But what of Spotify itself? What innovations can we expect to see emerging from its Scandinavian HQ in years to come? MD Jonathan Forster told the Way Out West conference in Gothenburg that he was particularly excited by the current growth in connected Bluetooth speakers, as well as Spotify’s connection to live music and Spotify For Business - a division which aims to get more companies using Spotify in the workplace. (“If Spotify was played in every McDonald’s, which isn’t a scenario outside the realms of belief, then it would be bigger than every radio channel in Sweden,” he noted.) But the conference audience wasn’t going to let it lie there: they had plenty of ideas of how Spotify could evolve - and wanted to get Forster’s thoughts…
Video On the surface, this seems an obvious next step for Spotify: an unlockable area of streaming artist videos on the site, perhaps for ultra-premium users only. Not so fast, said Forster: “We’ve had conversations about it, but then you remember YouTube has these videos for free. Video is so complex. Our view is that unless we could do
as anybody else. If we can reach out to them and educate them to use Spotify - and if they like it and they pay - we can keep having really nice growth [in the Nordics] for a good few years yet.” Naturally, Spotify’s ambition isn’t merely limited
to its homeland. At last count, the company had accrued over 30 million active free users and 10 million paying subscribers across 57 countries, with Canada set to be officially added to that list imminently. This, though, isn’t nearly enough for Daniel Ek or Forster, who says that while he’s “really proud of 40 million users… I look at the likes of Facebook with over a billion users or Instagram [with more than 200 million users] - and think: we’ve got the Rolling Stones and Al Green”. Spotify can now claim a truly worldwide
foothold, but it was slower than some of its competitors to enter key international markets such as the US [July 2011], Germany [March 2012] and Australia [May 2012]. And despite a flurry of new launches in the past 12 months, it remains out of the game in huge potential markets like Russia, Africa and The Far East. “We’re expanding as fast as we can, but
before we enter a new market we have to get everything right with the local labels and publishing companies,” says Forster. “Maybe it takes us a bit longer [than others] because we have the free service, but we don’t think we could win without it. Sometimes it’s actually nice to go to countries where someone else [has launched] as people already know what streaming is - we just have to convince them that using Spotify is like cooking with butter instead of margarine.” In terms of a launch in Japan, the world’s second
largest recorded music market, Forster says that “we’re making progress but still learning” and that Spotify continues to work on both an optimised local product and territory-specific licensing issues. In the Nordics, as well as a strong affinity with consumers, Spotify has enjoyed impressive support from artists and managers. Yet in the US and UK, a handful of performers still show reticence towards streaming. Despite the announcement of recent high-profile converts like The Eagles, Metallica and
ABOVE
“Spotify in the Nordics is a very healthy business. As soon as we get bigger markets anywhere near this level, we know our commercial model holds up” JONATHAN FORSTER, SPOTIFY
Pink Floyd to the platform, there have been a few less positive reactions: witness the continued unavailability of Sam Smith’s debut album on Spotify, or Thom Yorke’s infamous-if-tautological suggestion that the platform was “the last fart of a dying corpse”. Responds Forster: “If [a big artist] doesn’t think
they’re making enough from Spotify we can try and help them get their music out to more people. “One thing I’ve noticed is that the debate is
becoming self-regulating. After Thom Yorke-gate happened, to have someone like Billy Bragg come out and defend Spotify was amazing. Aside from being an artist I adore, I couldn’t think of anyone who was less of a corporate shill. “In the Nordics, we don’t really have that conversation with artists anymore. There’s a bit of growing pains going on [in the US and UK]. We
Spotify’s secrets:
Forster told the Way Out West crowd last week that 53% of music listened to on Spotify is actively sought out by users. He said: ‘Our mission is that wherever there’s a speaker, we want you to be able to play Spotify.”
something better than the likes of YouTube or Vevo, then we still have a lot to achieve with audio streaming.”
Songwriter credits It’s a problem as old as digital music itself: artists are always credited, but what of the songwriters behind the tracks? Forster had some (possibly) exciting news: “I think I’ve actually seen an internal hack [of something that lets you search by songwriter]. The biggest problem is that the current metadata you get is hopeless. I don’t know what they were doing when they originally entered some of this stuff. But it’s getting better and I genuinely hope that’s something we could see quite soon.”
Tiered pricing Spotify offers a single paid-for tier, at around £10 per month. Could we see new, more expensive tiers in future - perhaps offering additional premium content to users? “We’ve certainly had that discussion in the Nordics,” said Forster. “When you think about growth, that would be the easiest way - but we have to balance simplicity and just trying to eke out more revenue. Our research suggests [a single premium price] really helps keep our offering simple.”
Discovery & analytics Spotify acquired music digital data specialists The Echo Nest in March for a reported $100m. Forster said: “This is going to be a really key piece of Spotify. In the beginning, Daniel [Ek] said there were two things really important to Spotify: (i) Giving people the song they want faster than anybody else and (ii) Helping people to know what to listen to. We realised the first one was a problem we could improve - but the second part is so complicated. That’s why The Echo Nest is super exciting to us.” He added: “Spotify is sitting on so much data: we have over a million playlists with the word ‘barbecue’ in the title in the UK. The Echo Nest guys can build a profile, a fingerprint of your streaming activity, and cluster that into a huge taxonomy of different genres. What we’ve seen internally so far has blown us away.”
feel really positive, but if you’ve been doing really well under the old model then we understand why something new can be scary.” Aside from debates over what artists get paid,
an even bigger recurrent financial quandary hangs over Spotify: the company keeps on increasing its revenues each year, but is yet to turn a profit. Some detractors cite this as evidence that the streaming music business model is not fit for purpose long- term. Forster is adamant they are in the wrong, and that these losses simply reflect a period of fast (and expensive) expansion. “We’ve always said we want to grow quickly and
be global: There was a period last year where we launched in Taiwan, Argentina, Turkey and Greece on the same day,” he argues. “That’s not a company being really cautious and thinking about quarterly results - it’s a company that’s in hyper-growth. “Spotify in the Nordics is a very healthy commercial business. As soon as we get the bigger markets anywhere near this level, we know our model holds up - even with us giving 70% of our revenue back to the industry.” Convincing the masses of the US, UK and
Germany to start behaving like the Spotify-philes of Scandinavia will be no walk in the park: not only will Forster and co have to metamorphose mainstream public music consumption in these markets, they’ll also have to outsmart a trio of aggressive digital Goliaths along the way. “We firmly believe that we have enough
people focused on music to give a great account of ourselves and maintain a leadership position,” says Forster when asked about the emerging threat from Apple/Beats Music, Google Play and Amazon Prime. “The history of the internet shows that Facebook came along after MySpace and Google came along after AltaVista. We know it’s really important that we don’t slow down or start drinking our own Kool-Aid. “The other side of it is that we were born
fighting The Pirate Bay, which had no rules, didn’t have to pay any money and could not die. Once you’ve fought a zombie, you’re not really scared of anything else in quite the same way.”
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