The Road Ahead for Spotify in the United States
As some of you may or may not know, Spotify, the music streaming service that was founded in Sweden, is currently in the process of launching to the US. Spotify’s migration to the US is a big deal because many early adopters of technology — technology hounds, if you will — have been clamoring for the service to come stateside since it was launched in 2008. The allure? Free, unlimited access to its over 13 million song catalog. Well, at least until recently when it began limiting the number of hours free accounts could listen to music to just 10.
But the US music streaming service market isn’t exactly devoid of competitors. Pandora, Last.fm, Rhapsody and tons of other services all comprise of the crowded market that is music streaming. Fortunately, compared to those other services, Spotify is a little different. Pandora and Last.fm are intended to be music discovery services, to a degree, playing and suggesting music based on a users tastes. Rhapsody is a subscription music service that grants users unlimited access to their music profile for only $10 a month.
Spotify, on the other hand, allows users to hand select tracks and create playlists based on what they want to hear, not simply what the program recommends for them. That aspect of the service has definitely been a hit with consumers, allowing Spotify to reach 10 million users and counting as of September 2010. Additionally, premium users can access Spotify from their phone, and even access their music offline.
But the question isn’t whether or not consumers will adopt the service in the US. Surely, with the capability to access a 13 million song library for free, it’s hardly a question that people are going to flock to the service. The real question is whether or not the service will be able to find success in the form of profitability in the US.
According to Spotify, as of March, 15% of its users were paid customers. That’s important for a company that has had difficulty turning a profit (at least based on a 2009 audit).
Still, it certainly has a long, difficult road ahead of it. Despite recently receiving $100 million in funding from various venture capital partners at a valuation of $1 billion, the company must find new ways to get the US market, typically the land of the free, to actually pay for the service.
Additionally, it must battle against the US music industry and expensive licensing costs in order to keep the company afloat and profitable.
Fortunately for the time being, Spotify has money on its side. What will determine its ultimate success will be how they use that money to expand their reach and base of consumers. It’s a crowded market, but I feel that Spotify is just different enough to convince people to sign-up for their services. In a world where freemium is the new free, Spotify’s ‘listen to whatever you want’ model might just get people to pony up a few more dollars a month for something they might normally get for free.