When I opened my email-box this morning I was pleasantly surprised. Very pleasantly. Someone at Spotify had decided to send me an invite to their rather amazing music streaming service. This post I primarily about that I need to tell the world about that. Rest assured, the invite did not come with an agreement to mention them in every second post here, it came with no strings attached what so ever and I am no way affiliated with Spotify. Second to bragging this post is about the future of online music.
The very successful iTunes business model might be doomed. The iTunes/iPod package combination has been succesful because we, as customers, wanted to bring music on the go in unprecedented numbers. Sales of iPods led to sales of music in iTunes. It was convenient and the two entities fit together hand in glove. Even though only a few percent of each iPod is filled by legally downloaded MP3s through iTunes the model still worked. Due to the massive amount of users of the iPod (and a rather beneficial deal with the record labels) Apple could make a very nice business case of the model. Since each copy of a song costed them, well nothing to produce, critical mass in terms of downloads to cover costs for the infrastructure were soon reached.
Spotify and the streaming model is the next logical step. If marginal cost of providing a song to the listener approaches zero, why charge at all for each song? Sure, profit per song that is listened to by the consumer will drop significantly in a model as this this but by looking at that measure you miss the whole point. By changing model from price per song to a subscription model you can extend you market to people who would never download a song (either legally or illegally). Think about replacing the car radio with a Spotify-like application. Sell subscriptions to taxi drivers, commuters, truck drivers or just the common man. They might not be interested to download songs onto the limited space of their iPod and hook it up to the RCA-jack of the car stereo but with a streaming/subscription model a simple interface in the car would provide them will all the songs in the world at the flick of a switch without waiting for a download.
Spotify’s next step is in creating an application that we can download to our cell phones. As if they haven’t thought about that already. If they don´t do that it will be hard to truly challenge the iPod/iTunes-model since it is very much driven by the demand for on-the-go music. Even though Spotify might open completely new markets, a big portion of music is today consumed when walking and this must be taken seriously.
Let’s see if they manage to get it on Apple App Store as well. Apple have a story of, well, not being benevolent with the space on App Store.