Streaming music service Spotify has announced new features including adding podcasts and video; music that adapts to the listener’s running pace; and the promise of smarter abilities to serve the right playlists for the time of day, activity and habits of the user.
The company’s launch event in New York on Wednesday, helmed by its chief executive Daniel Ek, offered some deeper clues about how Spotify is evolving, and the key challenges it faces as it aims to grow beyond its current 60 million active users, of whom 15 million pay for the service.
Spotify is biting back at Apple
Recent months have seen a wave of stories about Apple’s supposed backroom machinations with music labels, encouraging them to clamp down on Spotify’s free, unlimited streaming service – which in turn would boost the prospects for Apple’s upcoming relaunch of its Beats Music.
Apple’s advantages include a massive war chest to pay for exclusives on big albums; the fact that it can push its music service on hundreds of millions of iOS devices; and the way rivals have to pay it 30% of any money they make from in-app subscriptions on iOS – which means many of them charge $12.99 for a monthly subscription to cover that extra cost.
This is no one-way fight, though. Spotify is already thought to be one of the key complainers encouraging US and European regulators to investigate Apple’s music strategy. But it’s also taking the fight to Apple with marketing partnerships: this week it struck deals with Starbucks and Nike, who have been two of Apple’s closest partners in the past.
What’s more, Spotify has been watching Apple keynotes closely, based on Wednesday’s evidence. When Daniel Ek used the words “incredible” and “profound” in his closing sentence before handing over to musician D’Angelo to close the show, it was straight out of Apple’s press-launch playbook. The rivalry has been emerging for a while, but it’s about to heat up.
Playlists are the new radio
In its early years, Spotify was basically a big catalogue of songs and a search box, like its rivals. In 2015, it’s becoming something very different as it seeks an ever-more-mainstream audience: something much more like radio. And this is a wider trend in the streaming music world.
Playlists have become very important to Spotify: they’re front and centre on the service, including its new “Now” screen – which is based not just on algorithms to understand where you are and what you’re doing, but on the entirely human compiling of thousands of themed playlists by Spotify’s in-house team.
Apple’s streaming service will have a similar focus: it hasn’t just hired Radio 1 DJ Zane Lowe but also several of his colleagues – and it’s also paying freelance music journalists to write copy for playlists. At Spotify’s press event this week, Ek made a point of praising some of his company’s hires from the world of radio, too, which was no coincidence. One of the key battlegrounds between these two companies will be who has the best curators, but also who has the best algorithms for matching those playlists to listeners.
Playlists are interesting for other reasons. Every major label now has a team devoted to creating their own playlists for Spotify and rivals, while independent labels are talking about the idea of banding together to create their own equivalent. And there are individual music fans with Spotify playlists that have hundreds of thousands of followers – with labels starting to focus as much energy on pitching tracks to those playlisters as they do to traditional radio stations.
Spotify’s key rival for video is Snapchat
The knee-jerk response to Spotify adding shortform videos to its service is to suggest it’s going after YouTube. Actually, the most direct competitor is Snapchat, with its Discover initiative. The two companies both want the people initially attracted by their music or messaging to spend more time in their apps, with video clips their first move.
Companies like Vice Media and Maker Studios, which have lots of viewers on YouTube, are keen for partnerships elsewhere to boost their income, and will want to explore partnerships with Spotify, Snapchat, Vessel and others. But these are complementary channels to YouTube, not replacements.
What’s unproven, for now, is whether Spotify is as ripe as Snapchat for video. The latter was always an app that you looked at with your phone in your hand, while the former was one you listened to with your phone in your pocket. Changing that behaviour isn’t impossible, but that’s Spotify’s challenge.
Listening to podcasts and news may be less of a stretch: Spotify isn’t the only streaming music service expanding in that direction, with Deezer having announced its own move a day earlier. In both cases, it’s another element of the pitch for streaming to become the new radio – something you can expect to hear more about when Apple launches its service.
Fitness is a new fuel for tech firms – Spotify included
What’s the most convincing reason to buy a smartwatch right now? Activity-tracking. What’s the new feature that Spotify is seemingly most proud of this week? Matching music to people’s running pace, and even commissioning songs that vary their tempo according to that pace.
Spotify is now hoping to be the music service that helps you get fit, just as Apple and Google are hoping to run the smartwatches that help you get fit. Millions of unused gym memberships show the commercial power of our desire to be healthier – if also (for many of us) our lack of drive to follow through on that desire.
My initial, cynical response to Spotify Running was that if it’s going to match my average running pace, it’ll need plenty of wheezing trip hop. More positively, there’s potential here, but it’s less about the original running music, and more about Spotify’s knowledge of me.
The solution to flagging pace in a run isn’t a speedy-up Tiesto track: it’s your battery-jolt tune. If Spotify can detect when I’m flagging in a run (ie five minutes in) and whack on Hey Boy Hey Girl by the Chemical Brothers, it’ll be on the right lines.
Freemium, payouts and profitability debates won’t go away
Spotify hasn’t just been watching Apple press conferences closely: the company has learned some lessons from Tidal’s recent relaunch under the ownership of Jay Z and other famous musicians, which provoked a swift backlash.
What they missed that night was the chance to talk about what Tidal would do for non-famous musicians, which is something they’ve been scrambling to rectify since – see Jack White’s comments this week for example.
Spotify’s pitch is that it will help emerging musicians find an audience: Ek announced at his press launch that Spotify users discover artists they’ve never heard before 2bn times a month, and he picked out singer/songwriter Sam Hunt and band MisterWives for having found 6m and 8m listeners respectively on Spotify.
This being a press conference, he didn’t talk about bruising negotiations with major labels for Spotify’s licensing deals – and he certainly didn’t mention the leaked contract between his company and Sony Music that was published this week by The Verge, providing an eye-opening insight into the business terms around streaming music back in 2011. The valid question of whether any streaming music can turn a profit was also off the agenda.
Ek also didn’t mention the industry debate around whether Spotify’s free tier should be restricted or even removed, although it was noticeable that everything announced at the event – more emphasis on radio-style playlists, videos, commissioned running music – bolsters Spotify’s free tier as well as its premium subscription. But all those things that weren’t mentioned will be as crucial to the company’s survival as the inventive new features and partnerships that were.
And artists? Making the case that Spotify can help musicians build an audience like Sam Hunt and MisterWives will be important in the coming months – playlists have a big role to play there too – while it will have to negotiate a related but even more sensitive debate around how songwriters get paid for streams of their compositions (in truth, a debate about how labels and publishers split streaming revenues, which companies like Spotify struggle to influence).
“Streaming is the growth in music, and Spotify is the growth in streaming,” said Ek, in a convincing pitch for his company to become the smartest streaming music service, thanks to its new features – at least until we see what Apple has planned.
But Spotify will have to be just as smart in its dealings with labels, publishers and creators in the months ahead to make that growth something that truly reshapes the music industry.
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