POV: Spotify Goes Mobile

MINDSHARE POINT OF VIEW – In a major development for the Swedish music streaming company, Spotify has announced that it is adding free mobile & tablet offerings, is launching in 10 new markets and will have exclusive streaming access to Led Zeppelin’s back catalogue. The moves are most likely aimed at driving reach and competing more directly with products such as Pandora and iTunes Radio as well as locking in more new users with the Led Zep deal. The new products will, like the free desktop version, be ad-supported.

Spotify has long had a freemium model; this allowed free access via desktop (unlimited in some markets, such as Australia, curtailed to 10 hours per month in others like the UK), with the service commercialized via advertising, whilst users could then pay a subscription to unlock an ad-free unlimited desktop listening (in relevant markets) or a higher price for access to the product on mobile and tablets, as well as the ability to cache songs for offline listening.

In contrast Pandora has a free ad-supported version on all devices though it is not possible to choose to listen to a particular track – rather people select a song, artist or genre and Pandora creates a radio station based on that. Spotify’s new tablet product will directly mirror its desktop version; the mobile product will be different, allowing someone to pick an artist but not a particular track – instead the entire catalogue will be played on shuffle. Users who have created playlists on the desk-top version will be able to listen to these in full though.

Music streaming is an increasingly competitive and indeed complex sector and Spotify’s moves highlight that it is very serious about catching up with Pandora (with 150 million users, compared to Spotify’s 20 million, having been available in the US for much longer). 2014 is likely to see a concerted push by the likes of headphone manufacturer Beats as well as a new YouTube subscription service.

With these moves Spotify has massively increased its potential reach and with mobile advertising likely to be the biggest growth area in most markets for the next few years has potentially unlocked a major new revenue stream. Meanwhile the Led Zeppelin announcement could well sway many affluent older listeners, audiences clients increasingly want to target. One would imagine that Spotify CEO has The Beatles firmly in his sights as his next target: their addition of their catalogue as downloads to iTunes in 2010 made headlines around the world.

What neither of these announcements will do is end the controversy about the business models behind streaming services. Many artists claim that the likes of Pandora and Spotify are treating musicians unfairly, though the streaming companies counter that they provide more money than the alternative, illegal downloading. Spotify recently launched a PR offensive and having won over Metallica, who famously sued Napster, will likely continue to try to win over the content creators as well as record labels and advertisers.

Spotify has clearly set its sights on becoming the main music streaming service as it can now compete much more directly with Pandora, both for users and mobile ad dollars. By locking in Led Zeppelin they are also clearly trying to ring-fence high value audiences. With 2014 likely to see a lot more announcements from new and existing competitors in this highly competitive space, it will be interesting to see whether the addition of a free mobile product and very loud guitars will put Spotify at the front of this race.