Music spies a Spotify sunrise
Some of the key figures in the music and video industries' battle against web piracy gathered this morning to issue a couple more dire warnings about the threat posed to artists and culture by file-sharing. The occasion was the publication of the IFPI's digital music report - and we were told that piracy was, among other things, destroying the musical culture of Spain and threatening the livelihood of hundreds of technicians who work on TV programmes like Spooks.
But one word kept cropping up in the conversation as a beacon of hope for the music industry - Spotify. Now, until recently, music industry insiders, while enthusiastic about the "freemium" music service launched a year or so back by the Swedish entrepreneur Daniel Ek, were cynical about its commercial prospects. Some went as far as to suggest that it might not survive through 2010.
But at this morning's press conference, one of the biggest noises in digital music, Rob Wells of Universal, had a very different message - Spotify was well on the way to proving its commercial viability.
"Spotify is a very sustainable financial model - full stop," he said firmly. And he explained that making the business add up involved converting just 10% of their users into paying customers - and they have apparently achieved that in all but two countries. That means that Spotify can now pay the music industry in those countries with a share of the proceeds from subscriptions and advertising, rather than on a ruinous per-track basis.
The two countries where it hasn't reached that threshold are the UK and Spain. In the UK at least, it appears Spotify has been a victim of its own success, attracting so many "customers" eager to use the free ad-supported service that it's had to deter new arrivals by making it invitation only.
Rob Wells says Spotify now has 250,000 subscribers around the world and in 12 months has become the fourth-biggest revenue generator among Universal's partners. Mind you, a bit of quick mental arithmetic tells me that those subscriber numbers only add up to revenues of around £30m a year - which may not yet be enough to warrant mass jubilation amongst music industry executives.
It's also worth noting that Universal has a stake in Spotify, so it's in Mr Wells interest to talk up the business - but he insists that Daniel Ek's team is cracking the freemium conundrum: "These guys are very good at what they do," he said.
One place where Spotify isn't doing so well is Oxford University, which has banned students from using the service because it relies on peer-to-peer technology. John Kennedy of the IFPI said he would go to the university authorities and ask them to lift the ban. Of course, the irony is that the music industry has been encouraging universities to block peer-to-peer, because illegal file-sharing has been rampant on campuses.
My sources tell me that plenty of Oxford students are still using Spotify in Oxford. Then again, maybe Daniel Ek would be happy to see them blocked - they're unlikely to be among those that upgrade to the premium service, so too many of them listening for nothing could actually delay his company's progress towards profitability.