I really like Spotify and I was wondering why I like it and what they are doing well and they could do better in order to become a better product and actually start making money.
3 Different Models for Entering
Spotify created a big buzz when released making people shout out in forums for invites to the new music service that lets you stream almost any music. This helped Spotify grow in a controlled manner AND get a lot of attention as people wants to feel special, that is either knowing peers that can share invites or be a peer that controls how invites are shared. But, it would be stupid to just offer enter via invites. As long as you have a good product, someone are willing to pay for.
The free account, which you get via invites is financed with commercials, jingles between songs (every 20 minutes or so) and banners in the client.
Spotify offers two different types of payed accounts, one where you pay per day, this is a way for the customer who is running the free version to test the full version for one day. This way the customer gets to touch the premium version for a small fee (9 SEK, approx $1.25). The second payed account is the monthly subscription, where you get all the extras available and no commercials for a monthly fee of 99 SEK ($14). For 99 SEK you get higher bitrate, possibility to use the mobile client, having music available while offline, more invites and some other fringies.
Big partners
Spotify has teamed up with the big players in music, but also with big partners for making their service known. In example Bredbandsbolaget/Telenor offers customers who use and pay for their services to get Spotify (the free version), this is a way for people who do not wanna pay, do not have the contacts to get invites, but still wanna play with the toy because they may have heard about the product.
Premium means premium
Premium members who pay the monthly fee gets better bitrate when listening to music, possibility to use Spotify on their iPhone or Android-enabled phone. They also get invites to share and special offers when tickets for interesting concerts are released etc. They get the possibility to actually make the music available offline (perfect for a flight or mobile users with a subscription plan where data is expensive)
Mobile
Bringing all the music you could think of when you travel by car, going to work, are having a workout or when you are on vacation is a killer application (the nineties called and wanted that saying back). What is even better is that in order to not kill any data-transfer-limit you might have on your mobile subscription, it is possible to sync music via WLAN to your mobile phone, making sure that you do not end up paying to much for the use of Spotify. Today there are clients for iPhone, Android-phones and some Symbian phones as well. There is talk on clients being developed for more mobile platforms.
Personalized and travel friendly
Why do everyone want one account? Couldn’t a family share an account? Of Course they could. But music as a product is very personal and the product Spotify easily lets you personalize your music experience people feel they want their own account and if they want to have some playlists in common they can always share their playlist and even make it collaborative.
Community without a Community
Spotify has one of the biggest communities right now. There are numerous sites out there who offers extra functionality for Spotify customers by letting users share and use playlists. And they do not even have an affiliate program!
Suggestions, Shared Playlists and Ever growing music catalogue = Sticky
The thing with Spotify is that it is growing more and more sticky, the more tools people get to share music in Spotify the more stickier it gets. Today we see people sharing playlists peer to peer, in groups or externally on dedicated websites. This combined with an ever growing catalogue that is pushed on the dashboard will of course make the content and product more and more sticky. I think the solution of actually enabling sharing via standard http-links is exceptionally smart, because if a user who gets the url do not have the product installed, he/she can be offered to buy it, this is something that more products could make use of.
API
Spotify has an API for Premium members (libspotify). This enables integration of Spotify into other solutions, such as websites or desktop applications. The API is a C lib and as such the audience may be smaller than if the API had offered other solutions for integration. But an API is still something that enables Spotify as a product to find distribution ways beyond their own desktop and mobile clients.
Brand Awareness
Creating a new brand is expensive, but now and then someone manages to create really strong brand awareness by offering a product that do not need traditional marketing. Traditional Marketing is often what makes brand awareness something really expensive. Spotify has managed to create a really strong brand within a really short period of time. I am absolutely sure that the somewhat odd name has enabled a better brand awareness than for example the product name had been something of a more generic music keywords.
What could Spotify do to earn more money
I am not sure that Spotify is such a success yet when it comes to make money, but they have the possibility to earn a lot of money as they have a good product, a large user base and the best content you can have. I have listed a couple of things Spotify could do in order to start earn more money and eventually showing positive numbers.
Affiliate Program & Revenue Sharing
Give affiliates 15% of all future revenue generated or a good CPA-deal ($50) for every single user they push into actually start paying for Spotify. This way combined with an open API, Spotify would see a lot of creative ways to use their content and drive traffic back to their product. The good thing with affiliation deals is of course that you only pay for actual paying customers and you leave the marketing efforts to the affiliation. This is a must have from my point of view. Gambling Sites, Amazon and likes would not be the money makers they are without the strong focus on Affiliation.
Sell extras (Lyrics, Genius)
People love music and are willing to pay in order to get something you cant have for free. What can Spotify offer more than mobile clients, offline mode, higher bitrate and more invites for paying customers? I think that selling packages that upsells 5-10% is a way to go. Like the telecoms do with their extra services (answering machine, number presentation etc). I would gladly pay an extra dollar a month to get hold of the lyrics to the music I am listening to. Why not offer the Genius (iTunes) functionality as an account upgrade for $1/month. In Apples case Genius is about upselling similar music and in Spotify’s case maybe an extra dollar a month for such a functionality would suit the product better.
Extended API
Open up the API to all developers and offer not only a C-lib, make sure Web Developers, iPhone and Android developers can integrate their applications with the communication solution that suits their needs best, that will make the third party applications driving traffic back to Spotify explode. Combined with affiliate programs it would for sure help development of smart products we are yet to explore. Create a big development community around the product, I think that we could be amazed what people actually are able to do when they have open API:s and the possibility to earn a dollar or two.
Bundle Premium in other subscription plan
Create subscription plans together with telecoms, broadband, TV-companies where the premium account is bundled into the main product, this could enable users who otherwise do not pay for music, to actually pay for it as those products have an history of actually getting paying customers. The other good thing is that is a win-win situation for Spotify and the company they work together with. Spotify gets a large user base to offer their product to and the companies joining forces with Spotify can differentiate their product offering by adding the hyped product Spotify to it. Lets face it, Spotify must get the ordinary people to pay, otherwise it will be difficult to actually show good numbers, this could be a good way.
Play in Facebook
Today it is difficult to share a song on Facebook. Often a link to Spotify or a video from YouTube is used. Enabling integrated playback in Facebook news stream would make Spotify become the number one service for actually listening to music. The absolutely best thing would be that Facebook recognized spotify urls (http or spotify:) and automatically embedded a Spotify Player in the stream as it does with posted Youtube clips.
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…would make Spotify become the number one service for actually listening to music.
Is that really something that you would like it to become?
web based Spotify-clone to enter the competition.
Don’t get me wrong, it’s a very nice service.
I’m looking forward to an open source, decentralized, P2P _open_open_open
Very nice and well written article, however
!
Thanks Robin!
I am not sure I would like to see that evolution, but they are properly set up to actually become one of the biggest players as music provider.
The main thing with the article is to point out things I think they have been doing right since entering the market and what they could learn from others.
A P2P Open Source solutions sound neat, but will probably need some Jedi Mind Tricks on the executives of the large music companies in order to become reality.