Spotify knows how to brand a music service.
Last year, the ad-supported streaming service introduced “offline listening” to its mobile and desktop music applications for premium subscribers without ever mentioning the dreaded phrase “DRM” – in spite of the fact that access to the songs disappears as soon as you stop paying.
Today, it has announced a couple of new ways to access its extensive library in the cloud, whose limitations are so cleverly branded that you’d hardly notice.
“Spotify Unlimited” takes away the ads for €5/£5 a month but doesn’t let you take the music with you onto its iPhone or Android app, which still costs €10/£10 a month. (We7, a UK competitor which turned a profit on its ad-supported service last month, launched a similar option in January.)
“Spotify Open” is the really intriguing one, from a business-model perspective. It makes a more limited consumption of music available to those who are currently locked out of its invite-only free service.
Spotify’s blogpost makes its pitch:
Open offers new Spotify users the chance to try out the service without the need for an invite, giving access to millions of tracks for up to 20 hours every month – that’s equivalent to listening to 25 albums or 300 tracks EVERY month!
So if you’ve got friends who haven’t managed to get an invite but have been dying to get on Spotify, let them know about Spotify Open.
Like many popular services that want to keep a lid on the number of new users, Spotify began its life as invite-only in October 2008.
In February last year it opened the floodgates – and boy, did they flood in. By September, demand was so overwhelming that it had to re-erect the barriers amid questions about the profitability of its model.
Some label execs have been critical of the number of people converting to the premium service, as advertising struggles to cover the “minima” royalty payments which go out to songwriters every time a track is played.
Spotify’s ambitions to launch in the US seem to have been set back by such concerns. Daniel Ek, chief executive, will only commit to a US launch sometime in 2010, although the company is hiring and staking out datacentre space stateside, which implies some confidence.
A Spotify spokesperson said that it now had “significantly more” than the 320,000 subscribers that were announced in March, with demand for Spotify Premium “doubling” since last month’s player upgrade, although the company has not disclosed how its 7m free userbase has changed since going invite-only.
“We have been invite only to try and grow and scale the business in a controlled and sustainable way,” Spotify says. “We have [now] reached a stage where we want to grow bigger, faster, but in a way that makes commercial sense. We do have sizeable royalty costs, like anybody in this space.”
Labels will welcome the greater push towards subscribing that Spotify Open represents. Users of the free, unlimited service (not to be confused with the new €5 “Unlimited” offering) aren’t provided with many invites to offer to friends, either.
But the real question is whether Open marks the beginning of the end for Spotify’s original pitch as an all-you-can-eat music service, free to those tolerant of ads.
Low-level rumblings around the industry have suggested as much for a few months now, although they may of course have emanated from Spotify’s many competitors. The licences that the labels have granted to Spotify will not last forever, and if contracts typically last two years, some may be up for renegotiation in the coming months.
Spotify declined to comment on its commercial deals and stresses existing users aren’t affected by today’s changes. But if the more restricted model of Spotify Open is the future, the rest of its free service may soon become closed.
