Spotify’s Bold New Transition from Streaming Music Service to Music Platform

Spotify today gave an update on the year to date and announced a host of new features.

5 Million Paying Subscribers

As expected Spotify has managed to hit the 5 million paying subscriber mark which is a fantastic achievement, as is the 1 million US paying subs also announced.  That translates to 1 million new paying subscribers in just 3 months.  Back in May I predicted that Spotify would hit 8 million paying subscriber in May 2013.  It looks like that prediction is going to be in the right ball park.  Spotify’s official active user count is now 20 million, which interestingly is much closer to the Facebook reported 24 million – those numbers have been very far apart for the last 9 months or so.  Which indicates that Spotify’s marketing funnel has got bigger as its profile in the US has grown.  i.e. more people are trying out the free service. (See the graphic at the bottom of the page for a summary of Spotify’s numbers).

Spotify also announced it has paid out $500 million to rights owners, which is impressive, but to keep a sense of perspective is about 2% of all digital music service money paid to record labels globally since 2009 when Spotify burst onto the scene.

A Bold New User Experience

But of more interest, to me at least, was a slew of new features that collectively transform the Spotify experience.  Spotify has made a bold UI transformation from a list-based approach to a rich visual experience with modules of music content (which visually looks like a cross between Rdio and Pinterest).  These include music, artwork, bio information, reviews from Pitchfork, Songkick gig information, recommendations based on your behaviour.  In doing this, Spotify has made a subtle but powerful transition from streaming music player to immersive music platform.

Spotify Thinks the Discovery Question Does Need Answering

Spotify also announced, as TechCrunch had correctly predicted, a new social discovery tool called Follow, whereby users can follow people’s whose music tastes they want to keep up with. People can follow friends or music influencers such as artists, music bloggers, music journos etc. pretty much in the way they would on Twitter, but here they get sent playlists of music to listen to instantly rather than 140 characters of static text.

Spotify are trying to answer the big discovery question which has so far gone largely unanswered, despite plenty of well-intentioned efforts to come up with a solution.   Discovery has been the centre of some pretty heated debate of late – as this and this post show – but whether or not it gets fixed in the wider music industry it is a huge issue for streaming music services.  What is the point of having all the music in the world at your fingertips if a search bar is all you have to find your way around.

Good music discovery happens in two main ways:

  1. Someone who’s reputation we trust (DJ, cool friend, family) makes a recommendation
  2. We serendipitously fall upon a piece of music that we love

Why Discovery Matters So Much to Streaming Services

Unlimited music services face the paradox of their being so much choice that there is in effect no choice at all.  People need a way to navigate through immensity of the music world. Spotify’s Follow function is a way of addressing this issue. It’s a smart way to do it, because good music discovery isn’t ‘we’ve seen you like this song, so we think you’ll like these three songs too’.  It’s much subtler than that.  Following people who have great music taste can be exactly that sort of subtle discovery.  But this isn’t a new idea.  Beyond Oblivion had built their entire service around the concept of following influencers (and they had a pretty cool atom-like visual navigation to let you get from influencer to influencer too).  Of course Beyond never got to market, but Spotify have picked up the idea and run with it. Rdio also have the feature.  In fact if I were Rdio I’d be feeling a little as if some of my clothes had been stolen.

Spotify’s Follow feature gets really interesting in an artist context.  If an artist posts a music playlist to his followers it gets delivered straight into their music collections.  A great way to launch a new album direct to your fans.  Though it does raise some interesting questions about whether this will increase or decrease album sales?  Does getting your favourite artists’ latest album delivered straight into your Spotify player sate your appetite straight away or simply whet it?

Spotify’s Follow feature is not the answer to the discovery question, but it is certainly one important step in the right direction.  In fact there won’t be a single answer to discovery, because we all like to discover music in different ways.  Some of us want to dive in and have an immersive experience, others want something music less. Some of us want both, but at different times.  And Spotify recognize that by offering multiple other new ways of recommending music, ranging from recommendations based upon user behaviour, collaborative thinking and context such as the age of the user.

Spotify is Now A Music Platform

This set of new features is the most important change in Spotify’s user experience, period.  It transforms Spotify from an excel spread-sheet streaming app into an immersive, multimedia, context rich music experience platform and app ecosystem.  Back in November 2011 I suggested that with the launch of its API platform that Spotify was taking the first step towards making music the API, and towards transforming Spotify into a music platform.  Now just over one year on we can see the fruits of that labour.

Much of what Spotify has done isn’t unique, but they have executed it in a manner akin to Apple in its digital music prime.  Execution is everything.  Spotify has just set the digital music experience standard for other music services to aspire to.

Spotify infographic dec 2012

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9 thoughts on “Spotify’s Bold New Transition from Streaming Music Service to Music Platform

  1. Very nice for them..still very bad for the songwriters they pay pittance to…I wrote about Pandora’s idea of what songwriters should get in royalty payment for their songs streamed on Pandora….I received $39.61 for my song, “Heaven Is A Place on Earth’, which was streamed
    3, 100,00 times in a three month period! Let’s look at Spotify”s idea of fair pay …in one three month accounting period—song streamed over 102,000 times…Pay? $9.22. Better than Pandora? Not by much….So, while it is interesting to read about their latest “bold transition”, I would still much prefer to look at the Big White Elephant in the room…pay the songwriters properly and then tout your horn!

  2. songwriters and artists both get essentially nothing — performers likewise make little tiny fractions of pennies that eventually add up to 20 or 50 bucks. who’s making pennies? artists and songwriters. who’s making millions? Spotify!

  3. Mark, I think Spotify’s new approach mirrors the 8tracks model, which is premised on the music discovery paths you mention — someone who’s reputation you trust (DJ, cool friend, family) makes a recommendation, and you serendipitously fall upon a piece of music that you love — but delivered through radio-style playlists.

    While still small in comparison, 8tracks attracts 5m monthly active users (so about 1/4 the size) and has taken a more economical approach ($1.5m in funding, most of which was raised in a 2011 seed round with Index, Andreessen Horowitiz, SoftTech and SPA). As a “Small Pureplay” webcaster, 8tracks has been profitable since July.

  4. Dear Ellen and Adam

    There is clearly a lot of confusion in the digital payments issue. 2012 has been a watershed moment for artists. Though they might not feel it they have more transparency than ever before (due to data like CD baby) and more influence than ever (the very fact songwriters might be able to influence Pandora into not cutting its rates contrasts with the fact that in previous decades artists and songwriters never got a serious chance of influence terrestrial radio broadcaster payments – or the lack of them).

    Is the current system perfect? Absolutely not, but there are so many moving parts in the equation it is hard to build an accurate picture. To my mind the single biggest learning of the royalty payment debate is artists and songwriters realizing that the nature of their deals with labels and publishers can be so dramatically different than one another. The role of what share of label advances paid to record labels (which are a big chunk of streaming royalty payments to labels)
    are actually paid back to artists is a major issue here too.

    It is clear than consumption based models (which are typically delivered by streaming technology) are going to be core to the future of the music industry. Napster threw the transactional ownership model out of the window. The CD is in a death spiral and the paid download is a transition technology.

    So the economics of streaming need fixing. Both to ensure that the right amount of revenue is flowing back from labels to artists, and also that the services are financially viable. The current streaming models are not. Spotify is in growth mode and will ultimately be looking to get bought or float. Deezer the same. They are not focusing on profitability and neither is close to net positive. So there is a risk here that these services will prime the market and then disappear because the model isn’t sustainable.

    So the payments issue is complicated on both sides. Consumption economics do need fixing, on both sides of the equation.

    Mark

  5. Reblogged this on head of music and commented:
    Astonishing growth of Spotify. I’d say nearly half a billion dollars returned to music is a good start and all built on very strong R&D. The next stage for them is creative development and some of their follow initiative seems to indicate that’s where they are going. The endgame is what we know as “radio”, not sure they’ll ever get there but interesting to see them at the head of that.

  6. Pingback: tech. magazine: all the stories in one place | Butingtech Technology Buzz

  7. Pingback: Infografica sul successo di audience di Spotify | Aggrega Blog

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