Resnikoff’s Parting Shot: Why Spotify Is Now Begging

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Spotify is offering access to the most well-organized, comprehensive catalog of music ever assembled in history.

So why are they being forced to beg?

Sure, Spotify is limiting offline and mobile access with its middle-tier, ‘Unlimited’ offering.  They needed to create some differentiation.  But at 5 pounds, 5 euros, 5 whatevers a month?

The internet did this to recorded music.  Removing the 2.0-friendly hat for one moment, the reality is that the perceived value of recordings has been eviscerated.  And Spotify just can’t ramp its premium percentages to a reasonable level.

This devaluation is the new reality.  At Digital Hollywood recently, one panelist spoke of the ‘awkwardness’ that arises when artists charge their fans.  At NARM, everyone was trying to figure out how to CPR the CD with cheaper price points and special packages.  And just recently, David Hyman of MOG stuffed an entire catalog of six million songs, a smart radio player, and a community of like-minded fans into a $5 monthly box.

USA Today called us when MOG All Access launched, asking if it would work.  When the answer was ‘maybe, let’s see,’ the reporter was a bit surprised.  But it’s only five bucks, how could it not work?  Sure, Hyman could convince the investors, you can almost see the pitch right now.  But consumers are getting high for free.

We’re talking about the price of a beer.  But MOG (and now Spotify) are giving you the entire keg for that price, always full and with whatever brand you want.  And for another five, Spotify (and later MOG) will give you a smartphone backpack to carry it around.  So why is it still a major question as to whether fans will pay?

Actually, Rhapsody and Napster – and labels – have been asking this very question since the early part of last decade.  When digital music conferences were packed and billions were at stake, subscription success was almost viewed as a future truism by some.  A matter of time.  So many songs, so much access, how could it not make sense?

Maybe the new rule is that if it looks good on paper, it’ll never work.  If it seems like an obvious winner, maybe it’s destined to lose.  But the seemingly-illogical consumer reaction can be dissected.

Let’s see.  They’ll still pay for Netflix, smartphones and endless apps, games, iPads, and Kindles.  And, far more than five bucks for cable channels, most of which they’ll never watch.  And, they’ll pay for broadband upstream, but music downstream must be free.

The toll booth is out of reach, and European labels are determined to do something about it.  Just take a look at the average hard drive and iPod.  Sure, the cloud will save the music industry, except that everyone is already carrying thousands of pre-selected, ripped or swapped (and occasionally paid-for) songs with them at all times.  Shuffling through playlists, tuning the world out with gigs of music.  So, why do they need more, cloud or otherwise?

And sure, they ‘pay for music’.  Believe that and you’ll believe that they also ‘go to the show’.  But online, rationalizations aren’t required, and music floweth for free.  To the point that consumers now expect it, they are entitled to gratis.

And that is why Spotify finds itself struggling to convince majors in the US.  And, why they are suddenly throwing their award-winning interface into the bargain bin and curtailing free access.  The recording industry was thrust into digital disruption before other media industries, and the perceived value of its output is therefore different.

So will the latest Spotify retread work?  The short, post-Napster history suggests no.  It says that even well-priced propositions will struggle against free.  And it shows that a consumer stuffed is not a consumer in need.  The gods of free have won, and Spotify is just making its sacrifices.

Paul Resnikoff, Publisher.