status

Free mobile version of Spotify to be introduced

According to the Wall Street Journal, Spotify is about to introduce a free mobile version.

The new ad-supported offering will allow nonpaying mobile users to play a limited number of songs on demand, but will mostly serve up music based on the user’s input, much like custom radio services such as Pandora.

This move makes a lot of sense.

The usual path of a Spotify user was to get the free desktop version and then they would eventually upgrade to premium. Either because of the ads or because of the mobile version which is currently limited to premium users.

But given that traditional computers are on the wane, Spotify is slowly losing their only channel for users to upgrade.

Of course the free mobile version will cannibalize some of the premium users. But how many users are there that would pay €10 for the full mobile version, that would swap that for a free radio service (with only limited on-demand songs)? Probably not many.

Hat tip for getting that deal with the record labels though. Must have been a nightmare to negotiate.

10
Dec 2013
POSTED BY Sebastian
POSTED IN

Music Industry

DISCUSSION No Comments
status

New Artist website from Spotify gives interesting insights into business model

Exciting stuff going on over at Spotify: Today a new website for artists, www.spotifyartists.com, was introduced. On this website, Spotify gives – among other things – some interesting insights into their business model.

Spotify Revenue Model

So basically, Spotify take all the revenue from paid subscription and ads, keep 30% and multiply the rest by the times the relative number of streams of an artist. This is what the label gets. The artist ends up with whatever is left after the label takes their cut as negotiated in the individual contracts.

So Spotify does not pay per stream, but rather pays according to the formula above (i.e., in relation to an artist’s relative popularity on Spotify). Of course it’s possible calculate the per-stream payout ex-post:

Recently, these variables have led to an average “per stream” payout to rights holders of between $0.006 and $0.0084.

Has anybody calculated yet how that compares to CD sales? Taking into account – and I believe that’s crucial – the long-term revenue stream? As far as I can see it one of the key differences is that Spotify will create revenue for every stream, long after the last CD has been sold. I’ll take a closer look at that…

04
Dec 2013
POSTED BY Sebastian
POSTED IN

Music Industry

DISCUSSION No Comments