Driven: Spotify
So my first month on Spotify is nearing its end and it may seem all too exciting to continue paying this subscription and reap the long-awaited rewards that we've been waiting for; almost-free access to music , legitimately. But have you questioned the reason why this business model is more rewarding to us users than the likes of iTunes and Ubuntu's One Music? Read on and we'll explore Spotify's hidden avenues.
What is Spotify
Let us start from the very top: what on Earth is Spotify. I posted an article earlier this month on How To Get Your Music and at an even earlier time one on Disintermediation of Television which is about the evolution of media consumption. Spotify is at the far right spectrum of this evolution curve, thus we would usually see adoption only from the uber adventurous and young kids whose subscriptions are paid by their parents.
It is essentially an online music portal that serves radio and music streaming by the artists, genre, playlists and every other method that don't really matter to me. There are two accounts available to Malaysians; the Free and the Premium.
Free
- Able to stream music and radio online, with advertisements attached here and there
- Able to save playlists for easy reference at a later time
- Able to do all the Social Network part of Spotify including Following artists and playlist creators
Premium
- Able to do everything the Free account can, but of course
- Able to save and export playlists to up to 3 devices for offline listening. (Most important, to me)
- Listen to music on mobile Android, iOS, Blackberry and Windows devices
- Able to create playlists and make them available to everyone in Spotify
- Able to listen and download music in high quality
So now that we already know what Spotify is and how they charge you for usage, now you want to know how their business model works. It makes sense because we as consumers can get music absolutely free from illegal torrent sites, but chose to pay for them. Why? Because we want to support the artists making these music we love so much. So it only makes sense we asks the question Is my money reaching the artist, and how much?
Their Business Model
Before we delve any further it is important to note that since it's initial release in 2008 this Swedish company struggled miserably at trying to generate decent amounts of profits for themselves, even with record-breaking market adoptions year after year. Wait, don't go jumping no guns yet.
The reason for this struggle is due to the company's aggressive push to strike a mid-point between consumers, producers and artists. They go to the trouble of negotiating special deals with every single producer, which by contrast with Pandora's model of striking generic deals with all producers and artists, uses a tonne more resources and time. The results were significantly higher costs and slower growth in music database. But why did they not adopt Pandora's business model instead? Simply because they believe there is a way to meet in between both consumers and artists in terms of pricing and value. The result? Spotify now has a whole lot more song database than Pandora, and they are available in more countries too. Something's going right, I'd say.
The advertisements in their Free versions do not make them quite enough to survive, but just to annoy the heck out of users into singing up for Premium. And it works, mostly. Unless you're extremely cheap.
Spotify pays out half a cent to artists per stream, which is not that bad considering I still have the urge to listen to some Abba and older material by Patti Smith every now and then. In comparison iTunes pays out 70 cents per album sold, period. No follow up royalty payments after. So I'd say Spotify is kinder to artists than iTunes.
But is Spotify kind to you? Well that depends on what is your definition of music. Because if you don't already know, Spotify is a music rental service. This means you never, ever own anything. Ever.
Criticism
Consumption of movies and TV series is different from music firstly because there are a hell loads more re-usability in music than movies and shows. Re-usability here refers to the number of times a single purchase is revisited. I may have only watched The Lord of The Rings trilogy once, but I have some of their songs constantly looping in my 'Workout' playlist.
Music is different, though. A single song can be replayed dozens of times and included into more than one playlist . So although this rental model works for Netflix and Hulu, many critics say it will not hold long with music. Then once music purchasing platforms die out, artists and producers will jack up prices of subscription which will eventually drive the cost over to our side. I'm not saying this will definitely happen, just that it could.
Simply put, users are being given the impression they're paying minimal amounts in subscription and in the end never owning anything. Sure thing, RM 15 a month for unlimited access to music is awesome and all that. But what if the price increases to RM 30 a month when you are comfortable spotting 20 custom playlists?
You can't stop paying now, can you? Because you can't take any of the songs out of Spotify, and you can't even export the playlists you painstakingly built. And you can't get music from any other method either since they'll all be gone.
The Consumers' World
We as consumers today are more informed and ethical (if I may use the latter to describe all self-respecting honest people). We know our favorite music will disappear forever if we do not start paying for them and supporting the creators. But how we contribute will also make a difference because we don't want to be over paying for something we think gives us more value that it actually does.
What may happen is the mainstream adopting subscription-based music services like Spotify and subsequently drown-out iTunes and it's equivalents, then have nothing to revert to when we realize we've been had by these services. But you're a consumer too, so you make the call.
