Spotify and the Future of Music Ownership

IDIA 620December 6th, 2011

Malcolm Kemeny

• Massive online jukebox – access to over 13 million Songs

• 10 hours/month with ads for free

• $9.99/month unlimited ad free music on desktop and mobile devices

• “Built to be social”. Shares listening data with Facebook friends, account management done through Facebook.

• Integrates automatically with existing iTunes library

• First application of its type to gain serious market share. Over 2.5 million subscribers in the U.S.

Why is Spotify Important?

• Completely different from Pandora, traditional radio models. All music is on demand and tailored to the user.

• Instant, Effortless sharing and suggestion –

“Spotify and Facebook have come together to help you discover more free music than ever before”

• Easier than stealing –

“When it’s free and easy to listen to music on Spotify, who needs piracy?”

• Rent music rather than pay. Every month you pay $10, if you stop paying your music disappears.

How is this possible?

• Four record labels together own 18% of Spotify in the US.

• It is better for them to get a little money from streaming than none from a user who finds the music on YouTube or through P2P networks.

• A popular song has a steep demand curve, more beneficial to get all the plays possible before it loses popularity.

• Incredibly accurate usage data is reported. When you play a song, Spotify passes along to the record label your

• Age• Location• Gender• Streaming History

STHoldings

• Distributor for 238 Grime, Punk &

Dubstep labels

• November 2011 –Pulled all music from Spotify

• Artists were paid unfairly for plays • ≈ $.0041 per song played• ≈ $.04 per album

• People who heard music on Spotify were less likely to purchase the album

• ≈ $7 per album revenue if purchased through iTunes

• Users who relied on and paid Spotify to hear those artists were suddenly out of luck.

“Let’s keep the music special, fuck Spotify”

• For Artists –

• There is no reason to list music on Spotify if it will reduce your album sales.

• No guarantee that the people who subscribe are the ones who have been stealing.

• Becomes even harder to make money as an artist. A platinum record heard only on Spotify makes the artist $40,000.

• Devalues the individual song when it is sold as part of a monthly bundle.

• For Consumers –

• You know longer own your music. All your music is rented, someone else controls the content and can take it away for non-payment.

• For Labels –

• Users keep paying for music without gaining any ownership rights. Ensures payment over theft.

Implications

Questions? (rude) Comments?Concerns?