The European market was easy to conquer, but U.S. music industry will not be that easy. July 14 2011 was the day Spotify got the legal backing to go live in the United States – the biggest market and the domain of happy spending music fans. Spotify is an online jukebox that streams free music making it possible for friends to share along the way. In Europe, 10th of its users (about 10million) paid for its services.
U.S. music industry is very competitive. Many have come and gone in the online business of trying to stream music. First huddle is getting the contents owners in line. But right there, Spotify got it nailed with the agreements with Sony, Universal, EMI and Warner. But the road is not paved with gold just because you have the contents. There are battles to be fought.
Who remembers Lala.com. It came as Spotify and has fizzled – one of the signs of how competitive this industry is in US. The greatest threat to the success of Spotify is Apple iTunes. Pandora is there also, but with Spotify, it looks like an old lady right now. While you need to pay to listen to iTunes, Spotify is free. And in Pandora, you cannot share playlists with your friends. It allows you to use a desktop app to stream music even when you are offline!
So, with a few clicks, you open an account and 15 million library of music is available for your delight. Hold on, things are going to change soon. This honeymoon is going to be over soon. The unlimited cannot be unlimited. They will surely cap how many free hours of free music you can enjoy for free in the next few months. Recall Yahoo Music that came free and then instead of full music, they started sound bites and if you like, you buy. Free will also impose how many free songs you can play.
These are potential payment benefits system you can expect
- Better sound quality will be available for paid customers
- No ads which is the way, right now, the music is being made free
- Offline stream so you can listen anytime and anywhere
Besides iTunes, Pandora, Rhapsody, and MOG, other competitors are Rdio, Google and Amazon. The last two are building competing products in the cloud. There is also AOL partnership with Slacker and of course the remake of Myspace as it goes back to its root of music.
How the business model of Spotify will play out is not clear. But they have to move fast before the contents owners decide to think otherwise. If they do not see any revenue stream coming in, there could be problems.