Spotify this week announced a bold mission statement: to become the Operating System (OS) of music for the future. The company’s goal has been set in the wake of excellent take-ups of its app service, which was launched in November last year. Spotify director Sten Garmark stated: “We are in the middle of a transformation from being an app ourselves to being a platform.”
Spotify has been by far the most successful streaming service since its launch in 2008, becoming arguably the first widely-utilised streaming service – as opposed to platforms such as iTunes, which employ the traditional purchasing model.
Moreover, it is making relatively smooth headway in encouraging its users to pay for content. While the majority of users still prefer its free streaming option, Spotify had 1.6 million paying customers in Europe as of September 2011. Just one month after its US launch in August, it had notched up 175,000 customers. Combined revenues are currently standing at $10 million per month. Previous attempts at persuading music lovers to move to streaming have been far less successful, with the now-merged Napster and Rhapsody never achieving the widespread appeal that Spotify has.
In November last year, Spotify expanded from being simply a music-streaming space to an app service, striking deals with third parties to include their elements within the Spotify environment. These included the social gig-listings app Songkick, US magazines Billboard and Rolling Stone, and the ubiquitous music recommender Last.fm.
Among the most successful were TuneWiki, used to deliver synched lyrics of up to 100,000 songs; and Moodagent, the app that plays songs to match your mood – which generates 3.5m playlists a week. Garman has announced further apps of interest that he wants to bring in, including The Legacy Of, which will attempt to contextualise the music you’re listening to, enabling you to browse artist discographies and trace roots of influence between them.
Spotify’s goal to be an OS of music is an ambitious one – but with the apps service becoming successful, the necessary elements appear to be in place. But, certain questions still remain.
While the number of paying subscribers is healthy for a streaming service, it still doesn’t compare with that of the dominant, purchasing model. As of 2011, there were 225 million iTunes accounts with credit cards attached and ready to spend. In addition, while the service does pay royalties, there has been intense debate over how much artists actually receive from it – the famous case of one million plays of Lady Gaga’s Poker Face earning just $167 being a prime example. The company itself is also yet to announce a profit.
The most interesting hurdle could come from its hook-up with Facebook – which, itself, has stated an aim to become an OS of pretty much everything on the web. But perhaps Spotify sees itself as being the main gateway to music within the Facebook environment, which will ultimately become dominant.
Still, by setting out an ambitious, unequivocal goal, Spotify’s management has sent out the right signals to potential investors and rivals alike. It will certainly require more venture capital in order to expand, and by aping Facebook’s aggressive management style, it will improve its chances of securing this – especially in the wake of Facebook’s IPO filing and the riches it has promised. It will also undoubtedly blight the morale of potential competitors, thus entrenching Spotify’s position as the number one service. By maintaining its prolific integration with other platforms in the same way that Facebook did, Spotify will put itself in a great position to fulfil its aim.
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