I listen to a lot of music, and I love the internet, so one year ago I was avidly following the race to capture the internet music space. Obviously this race isn’t quite over, but it’s been about 10 months since I handicapped the race (and some here, too) and about 9 months since I wrote what turned out to be one of the most popular posts on my blog, a rather harsh review of Spotify that garnered a couple hundred page views by itself (even the picture of Spotify’s interface that I included got a few hundred views alone, so there was clearly some interest).
In my original handicapping of the internet music scene, I gave a big nod to iCloud and Turntable.fm. iCloud seemed like it would have an immediate headstart based on the cross-promotion possibilities with iTunes and iPhone, and Turntable.fm saw explosive early growth and looked like a winner based on it’s ability to sell virtual goods. Plus, Spotify hadn’t officially launched in the US yet. What’s happened since? Spotify has grown after launch, but not incredibly (just 3 million subscribers, only 20% of whom pay for the service). Turntable has gone legit with licensing by the major labels, and they’ve raised a bajillion dollars. And most people still don’t know what iCloud is.
That gets us to my original review of Spotify. The highlights: On the day I signed up, Spotify was doing pretty poorly and users couldn’t play a large number of popular songs. And the discovery-through-facebook method wasn’t particularly thrilling because nobody was on the service yet. I’m happy to report that 9 months later I’m still using the service, and it has now gotten more money out of me than any single internet service in the past couple years outside of the Apple app store. The viral/social component is great as Facebook jumped on board with Spotify integration whole-hog, and now my news feed constantly shows me songs my friends are listening to. One click there and Spotify launches, and I’m listening to whatever it is my friend listened to. Popular playlists are also a cool feature, and one I actually use. The radio feature and app store are cool too, though I use those less. I gave Spotify a 72/100 in my review based on the nonworking aspects, and modified that to an 80/100 after they fixed the non-playing songs issue. Now that the social features actually work, I’d revise that up even further to a 85/100.
But is Spotify going to solve all of the world’s music problems, and take over the world? If the numbers are any indicator, then my original review nailed the problem:
It’s not better than downloading the whole album for free as a torrent. People who pay for music pay for music, and maybe for them this service makes sense. But people who don’t pay for music get nothing from Spotify that they aren’t getting for free at a torrent site – on both I need to know what I want, and search for it. As a torrent, I can have the whole thing in 3-5 minutes, on Spotify, I have to pay, they may not have it, and it may not stream if they do. The only chance the music industry has to recapture the people who don’t want to pay for music is to either ramp up enforcement (which they’ve tried, and doesn’t and will never work), or to offer them a value proposition that they can’t turn down – Like utilizing the social graph in a new and cool way (turntable.fm) or offering an interesting method of discovering new music (pandora). Spotify doesn’t do either of those things well. It’s just a legal version of Napster, which is cool, but Napster was cutting edge in 1999, and didn’t have the possibility of drawing on advanced algorithms or facebook friends to suggest new music. Spotify should utilize those things, but it doesn’t.
Spotify is absolutely loaded at this point with every feature you can eke out of a service that knows your friends and your tastes – it’s got radio, it’s got an open development app store, it’s got recommendations. It’s doing everything I said it would have to do to have a chance at revolutionizing the industry. But it still is only converting about 20% of it’s (rather puny) 3 million user base to paying customers. In the end, if utilizing the social graph to provide the experience Spotify is now providing can’t convince more than 600k people to pay, there probably isn’t much that will. In my original breakdown of the competitors in this space I noted that even Pandora, hailed as a blueprint for the new internet/music fusion, hadn’t turned a profit. Spotify is likely in the same position, and the music industry still hasn’t found the route to getting another company to make it’s product wildly profitable again.