Spotify: Not So Lucky, Lucky, Lucky For Pete Waterman?

I took out my Spotify subscription for my birthday and I adore it. £10 a month and I can build fabulous playlists, listen to any number of interesting artists I may read about, anywhere, anytime. So is all well? Well, it is certainly a great product.

Unlike Apple and iTunes (which I never enjoyed) I am not paying to listen to a track I just want to check out. I am not tied to a particular closed source hardware. I can stream on my laptop at home, at a friend’s home, on my Droid phone.  Like my subscription to Sky or my paid for widgets I am paying a distributor to access the content they are aggregating and likewise just as I do not know how much HBO get paid from Sky, I do not know how much Spotify passes on to William Orbit or Elbow.  So is all well? Is this it? Not quite. Two recent and interesting articles in The Times by Spotimeister Daniel Elk – and Justin Stoneman’s article in Culture suggest that the great Spotify debate will be the mashed up mix in 2010 for anybody interested in content, monetising media and ethics and relevance of copyright ownership .Peekstats has valued Spotify at $1/2 Billion whilst Stoneman quotes £150M. Either way, it’s valued at a lot though its exact revenues remain a mystery. Sound familiar? Elk stated in October that ‘Our advertising revenues have now passed the millions of Euros per month mark‘. Not bad for a business that is about 15 months old and has not even launched in the USA yet. Whilst I am one of just 2% of their 2.8M UK users take out a subscription,it is this a ‘mixed model’ for streaming music to an increasing array of devices with a high-speed connection that makes it a potential gorilla. 98% of Spotify users get to play with 6 million tunes with just a few low-key ads interrupting your playlist once or twice an hour. The likes of Chris Anderson see the whole ‘Free’ economy (freemium) as being the future way for artists to make money. Give away stuff that technology know makes it easy to share, build your profile and make money in errrr….other ways. Simples eh? Though, whilst I love Anderson, he is a little light on quite how boutique artists that do not sell out massive tours and sell heaps of merchandising are to be recompensed for their actual work. Whilst developers of mobile handsets and laptops market their hardware on the basis of being ‘media tools’ – and I do not see Apple, Nokia and HTC lining up to give away their products for free, in the hope they can make money, errrr in other ways. Elk does not talk like a copyright pirate who wants to fleece owners of creative works (besides major labels such as Sony BMG, Universal, EMI and Warners share an estimated 18% share in Spotify) – instead he talks about Revenue Per User rather than Pay Per Play.

But not everyone loves the Spotify revolution. Pete Waterman, the   pop mogul who gave the world Rick Astley and Kylie  is not a fan of Spotify – nor many of the other technology brands that have a subjective view of copyright laws. “These companies try to appear cool friends of music. However they make money exploiting artists. Mobile phone companies, computer companies. They’re all at it – creating ‘music platforms’ making easy money from our art‘- says Waterman. Just as Murdoch and News International is raising the debate (and the stakes) re Google indexing their expensive to produce media content so music companies can justifiably cry foul against the techies. And to a point, I hope content creators have a way to control and monetise their material as they see fit. Murdoch’s paywall and Spotify are not all that different. If you want to listen to or read everything, then someone has to pay for it and as Sir Martin Sorrell says that advertising revenue simply does not exist to fund everyone’s great idea for a website. Maybe micro payments and subscription models are the answer. Maybe consumers can be persuaded to pay fees if the service is worth it. Maybe hardware and internet businesses and the creative media industries can learn to get along. In the meantime I am going to look up some Stock-Aitken-Waterman Hits Volume 1.

Author: Andrew Armour

Andrew Armour is a marketing and media professional, a specialist in business partnerships and the Founder of the consulting business - Benchstone Limited. His career spans from the UK music industry to the America's Cup, from winning agency pitches to securing key digital content deals. He is married to Viv, lives in Hampshire and works in London.

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