Resnikoff’s Parting Shot: Spotify’s Battle

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Spotify is struggling through some monetization and model issues, and big licensing partners – including Universal Music Group – are saying it out loud.

But what about the consumer side?  Assuming everyone gets on board – particularly in the US – and Spotify solves its revenue and advertising issues, will the well-presented cloud ultimately swallow competing models?

Or, more realistically, should Spotify aim for a percentage of the pie, and take its place within a highly-fragmented consumption picture?

Perhaps it depends on the time frame in question.  In ten years, on-demand, cloud-based consumption could easily render the download a distant memory.  The four-year-old of 2009 may have little interest in his daddy’s download by 2019.  But anything that far out becomes a debate in educated guesses – most of which are largely wrong.  So what about the in-between?

Actually, in 2009, the cloud is doing quite well.  YouTube, MySpace Music, Imeem, Spotify, and the iPhone are drawing huge attention away from conventional download experiences.  YouTube has expanded the music video to new heights, and the App Store has already revamped mobile streaming audio.  Just ask Pandora.

On the evolutionary scale, the next step is to simply dial into an anywhere version of Spotify.  Just tap a song and listen, anytime, anyplace.  Sounds great, though newer models are frequently fueled by intense consumer pain.  Napster destroyed the CD because it addressed pain surrounding limited selection, forced bundling, and stifling prices.

But ten years after Napster, the voluminous iPod is hardly a painful experience.  Quite to the contrary, the iPod experience remains elegant, easy, and low-cost.  Combine a 120GB iPod classic and a session of BitTorrenting, and who’s complaining?  Especially during decidedly out-of-range places like long plane rides.

But wait.  What happens when you want that one song that isn’t in your collection?  Suddenly, the iPod falls short, at least in between downloading sessions and syncs.  But is that enough pain for Spotify exploit?  Is anyone so dissatisfied that they suddenly need 4, 5, or 8 million songs on tap, anywhere?  Especially if it has a price tag attached to it?

Actually, some will gladly make the switch, even those lacking painful gripes.  But these are competing versions of abundance, and the industry has learned that consumers already have access to the biggest collection on earth, for free.  Sure, well-tailored rivals like Rhapsody are walled and subscription-based, but that may be the point.  Only a certain niche are willing to pay for premium access to the world’s collection.  Because that same collection lives on the internet, and it will remain a serious, no-cost competitor to Spotify.

And none of these advancements happen in isolation.  The successor to the Pirate Bay is meaner, more flexible, more portable and totally cloud-ready.  It may involve downloads, it may involve cloud-based streams – or, the consumer may have the choice.  And a certain percentage will always stick with free, at least in the absence of a serious, feels-like-free competitor.

Can Spotify attract enough high-paying advertisers, enough paying die-hard listeners, or both?  That is the real battle that Spotify and the industry face, long after the hype dies down.

Paul Resnikoff, Publisher.