Spotify, for those that are not aware is a Peer-to-Peer service that allows for users to listen to streamed versions of approximately 6 million-plus songs that are contained within its library. Think about it simply as going to iTunes, picking a song from it’s library and streaming it to play on your computer, over your cell phone, etc. Of course the big key to this service is that it is free.
Now there was an announcement recently that R.E.M.’s record company, Warner Bros. pulled the plug from it’s catalog, a very odd move considering they already own part of Spotify, but more about that later.
Spotify makes money by offering essentially two types of accounts. The first account is a free account which allows users to access it’s catalog whereby receiving an interval of advertisements every certain period of time (for example, a 30 second spot every 30 minutes) and then a second premium model that allows for no advertising, better quality stream and a monthly fee. Since I am in the US and currently do not have a Spotify account, I cannot speak of how user-friendly it is however, word is that it is very simple for users to access their favorite music.
But there are some concerning aspects of the Spotify agreement that must be discussed.
Now, I am not really sure how I feel about Spotify as a product, Spotify is a start-up company that is trying to offer a revolutionary service to it’s customers, basically for free, and the best way to do that is to offer the company itself to the big record companies. How else are you going to allow them to provide their catalogs to be accessible to customers?
So, yes, Warner, Universal, Sony, etc. all have a stake in this company and from my understanding came at a fairly measly sum.
This has also been an issue among artists as well as small labels who see this product as another way that they are being manipulated. This issue has come up in many circles as being against the idea of fair trade. So the question of course was a “Wait and See” strategy even from many fans that feel a level of cynicism that their money generally goes to the labels rather than the artists themselves.
Lastly, the question of course is about profitability. Is this actually a profitable venture? Is Spotify trying to promote or relate ads based on your music preferences? Will playing the Smiths and Belle and Sebastian make specific ads pop up based on your music listening? If you listen to Led Zeppelin and Van Halen will you receive a different set of ads? And then how much money can you expect to make in a business model such as this?
Are record companies going to put up with scenarios whereby start-ups try to make a profit on an idea or service using their product? If Spotify comes in, creates a product, stock rises, sells company, what is the stance of said record company in that deal? That deal is based on the premise that the product, in this case music is offered freely. Warner is basically saying that we are going to play hardball.
Lastly, if you are sitting there and appreciate smaller labels or love your indie bands, I would not cry all that much about this. Spotify is not the solution, at least currently which appeared to be equitable for all parties.
From the R.E.M. perspective, this is an interesting story because of course resident R.E.M. fanboy Ethan Kaplan who has a vested interest, both in his fansite www.murmurs.com as well as his position as VP of Technology at Warner Bros. records. Initially, I saw this story as Warner not being receptive to new technology but I have a feeling that the expectations of new technology have to be met and you cannot just support business models that would not work. At this point, we do not know the details of this news, we can only speculate. If details emerge and Mr. Kaplan emerges from his WBR bat cave, this fan will eagerly await his response.