Proponents of the so-called “celestial jukebox” have had plenty to be excited about over the past couple of years. Online services that allow listeners to stream music “from the cloud,” coupled with broadband connections on desktops and mobile devices, have given music fans a sea of tunes to surf on-demand.
Yet the future of streaming remains uncertain. MySpace Music, a joint venture between the major labels and the Rupert Murdoch-owned social network, has underperformed, and there are rumors that the service – which originally allowed free streaming – may soon start charging. Meanwhile, Rhapsody, a company that offers subscription streaming on-demand and “tethered downloads” (as well as web radio and conventional MP3s), has had difficulty increasing subscribers. And the legal Napster has had similar troubles with customer retention. Then there’s Spotify, the much-ballyhooed Swedish “freemium” on-demand service that has taken Europe by storm. Though insanely popular across the pond, Spotify’s path to the US market (the biggest in the world) is still unclear.
In America, there has yet to be a streaming service that has won over consumers and had a business model which ensures profitable growth. Part of the reason is licensing costs and associated difficulties (to be legal, on-demand streaming services must secure the licenses to both the underlying compositions and the sound recordings of every tune on offer). Another reason is that American consumers are used to “ownership” of music – be it LP, CD or MP3. (Compare this with movies, which customers are perfectly comfortable with renting.)
The story is a bit different in Europe, however. Spotify has managed to not only won the “hearts and ears” of Continental users, but has also managed to do what was previously thought impossible: get habitual file-sharers to stop trading music illegally. According to a survey of 2,500 British broadband users, 66 percent said that Spotify has reduced their peer-to-peer filesharing activities. One imagines that labels and rightsholders would be intrigued by this figure.
Now, it’s important to remember that Spotify has a different business model than Rhapsody, in that the Swedish company lets you listen to whatever you want for free (as long as you don’t mind hearing to the occasional audio ad). If you tire of the commercials, you can get a monthly subscription for around 15 bucks US. Spotify also recently released an iPhone (and Google Android) app that is subscription-only. Yet the free version is almost certainly what’s driving the service’s popularity. Unfortunately, it’s also what could be keeping Spotify from reaching American ears.
Many tech observers have gushed over Spotify’s clean interface, ease of use and sound quality, leading some to predict that this could be the service that finally clicks with US audiences. Speculation has been rampant about the timing of a stateside launch – founder Daniel Ek has shifted the goal post a few times since the service launched overseas a year ago. During a live interview at the recent Future of Music Policy Summit, FMC Communications Director Casey Rae-Hunter asked Ek about when we can expect Spotify on these shores (video archive available soon!). Again, Ek quoted a late 2009 or early 2010 launch, but did not get any more specific.
This week has seen reports that Spotify’s US arrival may be further delayed. Yesterday, TechCrunch published a somewhat dour piece on the state of streaming:
Spotify is now saying that they must delay their US launch. They don’t want to launch here with a paid-only model, and the big labels are signaling that they won’t have it. From the NYTimes last month, quoting Sony Music: “We like Spotify as our partner in Europe, but we would like them to move more toward a paid subscription environment.”
And that isn’t the only bad news. MySpace Music is “almost certainly” going to severely restrict free streaming to users, say multiple sources, and move to a paid model. “They are spending $20 million/month on streaming royalties, and that just isn’t sustainable,” said one source with knowledge of MySpace’s relationships with the labels. Other sources have said that MySpace’s royalty payments are much lower, but don’t deny that the service is a cash hole.
Perhaps more bleak are the comments to the article, including this one from “DemonFish”:
If it hadn’t been for the free Spotify service to get me hooked I would not have become a paying customer, and would still be getting all my tunes from The Pirate Bay.
That sentiment is no doubt shared by other European users. Yet it remains to be seen whether services like Rhapsody and Napster can gain more subscribers and whether the US labels and publishers will allow Spotify to launch in America with it’s free/pay hybrid model.
What do you think about the viability of “music as a service?”