Entertainment For Lively Minds
Spotify's dilemma in a nutshell!
Posted by grac on 30 March 2009 - 12:38pm.
"The problem is what's proven to be the successful part is the free bit."
I LOVE Spotify but the free option is really all you need so how can they keep going? Does anyone think this will work?
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I see the problem
The thing about it is, that without more advertising, the revenue streams will not be as good as the business plan. Therefore the only option is to up the amount of advertising, or reduce the premium package price.
I also love Spotify, and I am currently more than happy to put up with the ads. Also, if I like something enough, I will buy the download for my pod.
When they've reached what they believe to be a critical mass
they'll increase the advertising - perhaps 1 advert after every track - to encourage people to use the premium service.
They'll release an 'official' Spotify client for iPhone/iTouch and probably other mobile platforms (Symbian, Google Android) - this will require a Premium Account.
In addition, they'll release an API to allow third-party developers to build Spotify functionality into their own products. Not only will this generate license fees from the third party developers, but the users of their products will require a Premium Spotify account to access the music.
The founders will then sell the business to Google for $2.5 bn plus Google stock
Maybe...
It's just the end you got wrong
Microsoft will buy it in order to get a foot in the door before Apple close it completely.
Mmmm...
But Microsoft would, I suspect, then want some sort of Zune compatibility. Would that mean Spotify would become the Zune Store I wonder? Then again, if they did that without losing the streaming functions, would anyone care?
Thinking about it, perhaps some of the record company licenses terminate if Spotify sell out. That would prevent the record company losing control of their assets to (say) MS or Google
In which case...
the following article would be just the beginning.
http://news.bbc.co.uk/1/hi/technology/7971784.stm
It seems obvious
But the only ways to drive users to the premium service would be to increase the frequency of adverts (which presumably would also increase ad revenue for those not upgrading) or to allow access to songs not available on the free site. Of course, this might drive away the casual user and lead to a fall in subscriber numbers and consequently make Spotify less attractive to advertisers.
There are endless examples of...
... advertising-supported media, on the net as well as in the real world (commercial TV & radio, free newspapers), why has everyone assumed that Spotify won't get past this? Lots of digital TV channels start(ed) up ad-free to get people watching, then gradually introduce the ads later. Spotify (lest we forget) is still only a few months old, and though the current level of advertising clearly won't keep them going forever, there will be some sweet spot where they're getting enough revenue without making the service unlistenable, and that in itself could shift more listeners to the subscription model (though if they really thought that most of their revenue would come from subs, I think they were onto a loser from the start...)
That's the articles point
it would seem they HAVE underestimated subscription take-up!
At the risk of being pedantic...
... that's just "Mark Mulligan, analyst at Forrester Research" who's saying that, Spotify themselves aren't saying anything, and this could have been part of Spotify's masterplan all along...
Fair point
and I think I meant OVERestimated!