Spotify is still a work in progress a year after launching and has a long way to go before it establishes a new model for online music, according to CEO Daniel Ek. However, he says the music industry needs to learn to “not squeeze as much as possible out of every single transaction” if it is to successfully adapt to changing patterns of music consumption.
In a company blog post, Ek claims the concept of “overnight success” is a harmful myth that holds sway over many in the record industry. He adds that other so-called revolutionary services such as Apple’s iTunes all took time to bed down. However, he insists that Spotify is committed to developing a new model for the music industry that could see it become a business worth USD50bn. “We are in this for the long haul,” he says. “We aren’t interested in just trying to hype the company and then ‘flipping it’.”
Ek admits he is not completely positive about the ad-funded part of Spotify’s business model, an aspect that was recently criticised by the CEO of Napster. The rival service has just launched a UK subscription streaming service which undercuts Spotify. However, Ek says Spotify is now bringing in “millions of euros a month” in ad revenues and its mix of subscriptions and ad-funded listening is capable of delivering profitability.
Spotify is part owned by the four major record labels, and Ek acknowledges that “continued support from the music industry in the face of a recession and rampant piracy has made the difference”. Commentators speculate that the record labels are giving Spotify favourable licensing terms in return for their stake in the service. Hefty licensing costs are often blamed for the “graveyard of music streaming services” that Spotify is hoping to avoid. More on StrategyEye...
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October 22nd, 2009 at 10:05 pm
[...] users to listen to a song as many times as they want online but that’s pretty much it. With Spotify and a number of other services offering free streaming of any song in their catalogue, buying [...]