Spotify – A Business Perspective

A few days ago I told you what Spotify is, and I also told you the reasons I like it so much. I can bet that I am not the only one who likes it, and even though many people will probably just use their free service, there must be a reason they are still in business. The Copyright infringement issues are very openly addressed in Spotify’s commercials. They clearly state that the artists and copyright holders are paid in order for us to have the privilege to listen to their music, as “without them there would be no music to enjoy” (or something like that).

music moneySo, where do they get the money to pay the bills? The site, developed in Sweden by Daniel Ek and Martin Lorentzon in 2006 and launched in the UK in October 2008, is financed by audio commercials followed by call to action links included in their software. Spotify users can avoid the commercials by paying for either an “Unlimited” subscription or a “Premium” one. The “Unlimited” membership gives users the possibility of listening to unlimited, uninterrupted music on their personal computer for just £4.99 per month. The “Premium” subscription, however, seems like a more interesting option and, to me, to offer more value for money. For £9.99 per month you get unlimited access to music on all your favourite devices and the possibility to download all your favourite songs “for when you don’t have a connection”.

Lets crunch some number, shall we? According to a market research conducted by KeyNote back in 2010 the number of downloads in the recording market has been increasing continuously since 2005, with a whooping 557.9% raise until 2010. KeyNote estimated that the downloading market will increase from 14.1% of the total sales in 2008 to over 65% in 2012 and 87% by 2014, while the physical market will only be worth £350m in 2014. I don’t know about you, but it seems like a pretty profitable business to me that still has room to grow.

rdio vs spotifyBut lets see exactly if value is offered for the money where their music catalogue is concerned. The Bulletin mentioned back in 2011 that the Spotify music catalogue is formed by over 15 million songs and it has probably accumulated more songs between then and now. Andy Baio has complied a comparison for Wired based on the 5700 songs that have been in the Billboard Top 100 between 1955 and 2011. He found that out of the 5,700 songs in the top 100, 5,026 (88 percent) were available on both Spotify and Rdio. An additional 81 (1.4 percent) were only on Spotify, and 100 (1.7 percent) only available on Rdio. If we limit it to only the 570 top-10 singles, 518 songs (over 90 percent) were available on both Spotify and Rdio. Both services stream virtually every song every to appear on the Billboard charts, but they don’t overlap perfectly. Each has secured different licenses with record labels, giving each exclusive access to some songs and artists.

I don’t know about you, but I’m very satisfied with their licensed music collection, but you can always add your local files and have your most beloved music a click away.

Thank you for tuning in again. Until next time, have a delicious day!




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