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Rory Cellan-Jones

Will Spotify change the music biz?

  • Rory Cellan-Jones
  • 26 Feb 09, 16:17 GMT

In the last couple of days, I've talked to three people about the future of music - the head of digital at the world's biggest music label, a very wired music consumer, and an executive at a fast growing new streaming service. I asked them all the same thing - will the arrival of that new service Spotify change the music industry?

Unsurprisingly, Roberta Maley from Spotify was convinced that this was a game-changer, not just another me-too service. She did give me some new figures on its growth - 250,000 UK subscribers, 800,000 worldwide, with Sweden and Spain the biggest markets.

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But she was less forthcoming about two vital issues for the future of the company - the split between those who listen to the ad-supported service for free and those who pay for an ad-free service, and the possibility that users could listen on the move. Spotify is keen to have a "mixed economy" with new arrivals drawn in by the free service then migrating to the £9.99 per month subscription deal to avoid the ads.

Right now you only hear one thirty second advert every twenty minutes, as compared with 12 to 14 minutes per hour on commercial radio, but Spotify plans an increase to two and a half minutes per hour soon. The trick will be to have enough advertising to make some money and convince existing users it is worth upgrading to the premium service - but not enough to put off those trying out Spotify for the first time. Roberta wouldn't confirm the story that Spotify is working on an iPhone application - I understand some work has been done, but mobile music is still some way off.

Rob Wells is Senior Vice President, Digital, for Universal International - in other words he is in charge of making sure the world's biggest music business finds a way to prosper in a digital age which has so far been pretty disastrous for his industry. When we spoke over a Skype connection to Los Angeles, he seemed pretty enthusiastic about Spotify - but keen to put it in the context of a whole range of new services, such as Nokia's Comes With Music and Sky's upcoming broadband service. He says consumers are changing, "away from the per-transaction model, where they buy a body of work, and into a subscription model where they pay for access to all music. That subscription could be bundled into the cost of a mobile phone contract or a broadband connection."

He was obviously keener that Spotify users upgrade to the premium service - the labels earn a bigger share of the revenue that way - but was also hoping that a free service would wean music fans off the file-sharing habit. "The consumers are already familiar with not paying for their music when they download it off the internet. So we have to do more and more interesting deals to make them listen to music in a legitimate format where we earn revenue."

But it is Dan Moon whose views really matter. He is the very model of a modern music fan. He has put all his CDs away, and has about 30Gb of music stored on his laptop, which he streams over his wireless network to an amplifier and then to a pair of big speakers in his attic flat in London's Maida Vale. But he has also started using Spotify, mainly to explore some new music rather than listen to stuff he already knows.

Dan says he used to go to file-sharing sites when he was a teenager - but now prefers to buy his music in the form of downloads from iTunes to be sure of a quality product. He's not entirely sure whether Spotify will kill file-sharing: "If I were a heavy file-sharer, there would be a pull on the usability front. Spotify looks nice, quite pretty, while file-sharing is a bit laborious." But he says it's difficult to beat the likes of Limewire on one front: "There isn't a better model than free - with file-sharing there's no adverts either." And the fact that he can't take his Spotify music with him is another downside: "When I'm on the tube there's no Spotify. I'm quite tethered to my laptop. It's not portable."

Spotify won't change the music industry on its own - and still has to prove it can attract both a big crowd and a lot more advertisers. But, along with a host of other new services, its arrival does seem to herald a change in the way we view music. Rob Wells of Universal thinks the fact that his industry has cut deals with the likes of Spotify shows that it has turned a corner: "These new deals show that the industry is maturing, the market is maturing and consumers are willing to pay for music."

Maybe. But let's wait and see what happens with the new U2 album, "No Line on the Horizon", so important to the revenues of Universal. You can stream it on Spotify, you can pay for a CD or download - or you can go and get it from a file-sharing site for nothing. The choices music fans make will show whether an ailing industry really has found a profitable way forward.

Comments

  • Comment number 1.

    I'm suprised you don't mention last.fm in the article at all. It's on the iphone and google's android, it's service is ad free and it's made me buy more new music than ever. I can listen to it whereever there's a wifi over my ipod and it keeps track of what i listen to and recommends new things occasionally.

    Last.fm doesn't let the me listen to a specific track by a specific artist on demand - not a concern to me as I'm more interested in listening to new music (and buying it if I like it - two clicks away with itunes) but within a genre, e.g. artists sounding like John Coltrane. I often discover great new music through stating a radio station with artists sounding like someone I already like.

    I wouldn't choose Spotify as it's ad driven and not on a mobile platform.

  • Comment number 2.

    Rory:
    Maybe Spotify will changed the music biz...
    ~Dennis Junior~

  • Comment number 3.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 4.

    I've tried Spotify as a result of this report. I think it has been modelled on iTunes - which isn't a bad thing.
    It seems at first like a glorified internet radio which last.fm provides as does 181.fm of which I'm a huge fan.
    It has lots of tracks/albums missing, even at first glance, such as Coldplay's latest which it claims it can't play in the UK.
    A big positive is that I am able to listen to for example, the new U2 album and the King's of Leon that I was after, in a try before you buy kind of way. I'll probably use it alongside iTunes et al.

  • Comment number 5.

    Joined Spotify last month, its a great idea and much better than the last.fm experience, that site is just not user friendly and the iPhone app is terrible.

    I use Spotify quite often alongside iTunes and if I find an album I really like on Spotify and want to own it, i'll go ahead and buy it on iTunes.

    To listen to such a vast catalogue of music for free and have to put up with one short advert every 20/30 mins as a compromise is a good deal for the user as far as i'm concerned.

    I'm looking forward to how Spotify develops.

  • Comment number 6.

    spotify is a great music streamer but very easy to copy onto your itunes to keep ( lets you copy full albums ) then play them on your ipod or burn to cd and strip out the adds

  • Comment number 7.

    As long as they keep charging extortionate prices for albums, the industry will keep losing money.

    I can order albums for under £10, including shipping, that come from America - but to buy the same thing in a store here they're expecting me to hand over up to £25 for it!

    I think one of the big things that keeps illegal downloads going is the "exclusive" releases that certain retailers get, where you wind up with 4 or 5 different versions of the album with extra songs or extra content, leaving the completist to either fork out over £100 just to have ONE album, or going online and getting it all for free - it's not hard to see why people do that.

  • Comment number 8.

    i admit that i quite often download music though file sharing programs. The quality can be poor and its not entirly safe, but until record companies lower the prices of their product i will continue to use file sharing.

    Last.fm, although not mentioned here is good for discovering new music, and im sure spotify (although i havent used it) has its advantages, but i would like full contol over the music i listen to, partically on what i listen to it on. Untill a service becomes available where i am free to do what i want with the music (even is ad supported) i am staying put. and im sure many others will too.

  • Comment number 9.

    Goodness knows how you can be ignorant of Last.FM and if you're not then how you could have decided that it didn't warrant a mention in this article.

  • Comment number 10.

    A couple of people have wondered why I didn't mention last.fm in this post. The reason is I'd already written a comparison between spotify and last.fm a couple of weeks ago.

    http://www.bbc.co.uk/blogs/technology/2009/02/spotify_versus_lastfm.html

  • Comment number 11.

    HEAR ME OUT PLEASE

    The problem with the music industry is that 3 companies own around 4/5ths of the entire industry. Everyone is too busy debating how cool they are for listening to it in a certain way rather than the music itself. The major labels are incredibly worried about their entire infrastructure. Historically powerful and controlling they are now seeing themselves diminish.
    Their are many points of debate for my reasoning but don't worry i'll mention them all.

    Point 1. The technology for producing music (Or any digital entertainment) is easily accessible and becoming easier to use. People effectively have studios at home by using a computer (Up until recently I have been using a G4 wit around 500mghz to record 4 channels simultaneously for around the price of a playstation 3). Fair enough this isn't cheap but bearing in mind how expensive and limited the technology (Beatles did albums on two track tape) was until recently, today is a helluva different. So I probably over stated this point. But you get the drift. 7 digit record deals really don't need to cost this much. Which brings me onto my next point quite nicely.

    Point 2- The record contract.
    The media has been filled in modern times with famous spats between labels, artists and more recently these new internet based music providers.

    A big issue to explain, but the recording contract with labels and artists is a frail one. The 7 digit advance that the band receive gets spent on the making of the album. What is left at the end, they can keep. However things specified in the contract usually involve; The producer, the studio, marketing ect. Usually what the band will actually keep is a fraction of that 7 digit number, with the record label bagging some of that money by routing the band through their studios, marketting ect.

    This essentially means that the record labels have complete control over where the money is spent and how things are played(marketed) After this the band make their money in royalties(PRS and separate companies) but may make more if record sales are high(contractual).
    Now sorry if I lost you, but to me the systems major record labels adopt are dated, unfair and have a string of problems in economics in general.

    Point 3.
    The internet has not only given people the feeling music is free but also the freedom to find and educate themselves with what they like.
    Gone are the days of people waiting at the Liverpool docks to get the new vinyl from America. Gone are the days people used to tune in to pirate radio to hear the new sound. I'd like to think, gone of the days people watching MTV to find good music. RIP TOTP. LOL. I don't think the record labels can deal with this. The days of marketing making commercial music successful are coming to an end. It is difficult to market to an audience with so much freedom.

    SO i guess my point is, people are not really hurting artistic talent or freedom by downloading as this was already happening.

    Now after getting all that off my shoulders we're on the more crucial part of what's gone wrong. Recently apple were taken to the high court in the EU for failing to sell products on
    Itunes at an equal price across the EU because of the £ -E conversion. Apple tried to comply but were forced to sell the music like this by the record labels who have probably been guilty of over charging the Brits for years. Another annoying point with itunes and Spotify is that their is a split between the American and EU markets.

    Meanwhile there is the on going battle of DRM which has nearly been won. But to me it's a no brainer.
    Why is it still so expensive to buy modern music ? It's made for cheaper. Imagine the costs of vinyl compared to today. Don't need to transport it ? It takes a small number of people to keep the server alive and the database working. Seems like madness to me. Annoyingly as well the quality is worse than CD quality. The fact I can join a porn site for £20 a month and D/L as much HiDef porn as my connection can handle shows my reasoning for the over pricing and gives them no excuse to not sell WAV quality music.

    It mentions in the article about the person who has his big speakers. Well if he cares about the quality of the music he listens to he must surely be able to hear the difference between a downloaded file and a CD. Music is still way behind when it comes to better definition.

    The music industry made a lot of money the first times around when industry standards changed. They sold all The Beatles on vinyl, on tape and then on CD.( Talk about keeping products fresh...) So why does it have to happen again ??
    Why can I not buy full collections of blues/jazz (older music) for a cheap price ?? Artists, who were ripped off anyway(Some of whom I would deliberately not buy purely because morally they were given a raw deal by the very people who are selling it to me.)

    Why do bands need record labels and anything like Itunes to sell their music if they can sell directly, on their own terms through their own website to the fans ???

    I think Itunes is great but it cannot keep up with the changing world around it. It will do it's best to please but I doubt the record labels will submit their power to apple.

    I love Spotify while the adverts remain morally correct and government or whatever. I would stop if it turned like TV. I also think artists would complain but maybe not. They are with the labels in losing what they have. Secondly it is easy to rip things off Spotify. So if needs be... And the way labels re-act could see its repotoire disappear over night, so be warned. Plus they might sell what you are listening to for marketing ect.

    Meanwhile though their are numerous ways to download music. Some of which are not effectively illegal. Torrents, Limewire and things like mega upload and Rapidshare all supply free entertainment. Some of which can not be traced easily. Unless you share the music it is also legal to D/L .(Unless there has been secret legislation? Someone enlighten me.)
    So I guess that brings us up to where we stand today. Far too many older bands re uniting for tours, killing new music.
    Too many pop bands re-uniting because the labels have ran out of ideas and are capitalizing on the older audience reminiscing. Goddamn killing new music.
    Music that is too expensive, not good enough quality and controlled; killing new music.

    The live side of music is just as depressing (The recent merger between ticket master and Live Nation is worrying considering Live nation was setup because Clear Channel were effectively running a monopoly and had to split the company). I just know at some point things are going to change...

    Cheers if you read it all the rant, but does anyone see what I mean ???

  • Comment number 12.

    I'd like to know why my post has been removed?

  • Comment number 13.

    @11 Melodymaker

    I get the drift..music production doesn't cost the heavens, music distribution doesn't cost heavens either. Artists and marketing do cost something. But an industry born with a silver spoon in its mouth needs to get to terms with this fact. Also, audio quality has clearly been overrated (by technophiles, and especially IP holders).

    So, change is on it's way. last.fm and spotify, amongst others are ushering it in, in the western world. Certain other parts of the world are less worried about legalities and payment structures etc for their entertainment. And why not.

    Hopefully, I will wake up one fine morning to a world of free entertainment - free as in beer and as in freedom. Of course I would need to pay if I seek a premium (such as ad free, high quality, portability etc etc). The internet is to entertainment what a tap is to water. And a bit more. Because, for the discerning audience, the internet can offer the premium bit too...So, one can go ahead, get her evian. I'm happy with the tap water.





  • Comment number 14.

    I don't really get what your trying to say... That if you could watch a film in black and white instead of colour for cheaper that you would ? Or that if you wanted to buy your favourite album you'd buy it for cheaper in mono ?

    Water is a pretty basic thing. Everyones opinion on water is going to be pretty much the same, unfortunately the world round. (Errm I need it to survive) Where as entertainment is an opinion.

    I see some of your points but I think you missed some of my more crucial points. It ain't about the internet being a tap of entertainment. It's about the industry having an infrastructure. If you can't deduce some of the major failings within the major music industry from my post then I doubt you ever will...



  • Comment number 15.

    I think you have to admire and commend Spotify , its already hit the million mark for usurs. Why would someone pay to download music from iTunes when they have the same service sitting there for free.
    LastFM is also a great service, as is www.we7.com who have the same programme but its web based and probably hasnt caught on as well as Spotify as they have an actual programme.
    You also have www.dittomusic.com who are now uploading unsigned artists onto Spotify for free, giving more than just major label content and a great way to promote your music to a massive audience if your an unsigned artist.
    Whatever happens, we are in a great position , the power is back in the hands of the audience and the major labels have very little control .

 

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