Spotify – another business model on the hoof?

I was very interested to read the recent Guardian coverage of the music streaming service Spotify, especially having been part of the beta programme and written about Spotify quite a while ago and a couple of times since.

My initial impressions were very positive. I liked the clean interface and the incredibly quick response times. But on using the service more, I started to notice that there seemed to be issues with the sound quality, and whereas I recanted to an extent, it does seem that others have picked up on this. And then there’s the adverts, which I do feel intrude on the music. I’ve been told this is why the service is free, but Last.FM and Musicovery are free and they don’t interrupt your listening pleasure with ads, that I’m aware.

But the real problem with Spotify seems to have been its licensing situation. It would appear that overnight, thousands of titles were recently removed on orders from the publishers. It’s even been noted that a lot of Radiohead is missing, which I find very peculiar considering they’ve been quite literally giving their music away.

So, the service is launched, then radically changed. Sounds horribly familiar to me. Isn’t this what happened with Pandora, which was my previous service of choice? Lovely interface, nice algorithm, then suddenly the plug is pulled for anyone outside the US. And only this week we have Facebook attempting to hold the rights to users’ content – forever – then deciding it needs to think about it some more, in a manner reminiscent of its recanting of the Beacon advertising system.

What is going on? Exactly how thoroughly have these services really thought about their business models before going to market? I would like to think Facebook in particular would have thought long and hard about the legal complexities of what they want to achieve. At the very least they should know that the very networks they enable have collective voices powerful enough to give them real problems. But it seems Pandora and Spotify have also gone like a bull at a gate to get their services online, then suddenly realised they haven’t quite thought it through.

Is it the mentality of the ‘permanent beta’, the idea that software is in constant development when delivered over the web? If so, it’s a powerful way to deliver software, but I’m not sure it’s such a good way to run a business.

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4 thoughts on “Spotify – another business model on the hoof?

  1. First, the sound quality issues have been resolved.

    About the restrictions: Of course it is annoying but I don’t think it came as a surprise to anyone. The Spotify team aren’t very fond of them and would like to give them away. I expect the big labels to soften up on this issue with time.

    Why is music missing then? Apart from the usual suspects (The Beatles, Led Zeppelin, Pink Floyd et al) chosing not to participate, there are two explanations. 1. The album or artist missing is on a record company not yet having an agreement with Spotify. 2. The album or artist hasn’t yet been added to the library.

    As of now there are a bit more than 2 million songs in Spotify, but they have the rights to more than 6 million. This means there are plenty of stuff to be added.

    As for Radiohead, I assume you are talking about In Rainbows. The difficulty there is that Spotify need to have an agreement with the band themselves. Since at least some of them seem to be Spotify users I’m sure this will be resolved eventually. (It’s interesting to note that in this new digital era it’s not an advantage to be a small independent label.)

  2. All fair comments I guess – and I did go to some length to explain myself regarding the sound quality issue at the time – but it would surely have made more sense to clear the rights before you came out of beta, wouldn’t it? Unless I’m misunderstanding the chronology here.

    I’m sure you got a lot of interest off the back of the Guardian piece so it’ll be interesting to see if you can use that to your advantage in negotiations.

    On a slightly different note, it’s interesting you’re clued up with your social media coverage, a bit like Virgin Media. Perhaps I’ve uncovered a way to identify companies with a close eye on what’s being said about them online: whinge online, and they will come!

  3. Facebook explicitly started without a business model – Mark Z said last year that it was still a couple of years away from having one, and there was a discussion in the blogosphere yesterday of how it’s leaving about $1bn in conventional brand ad revenues on the table this year as it works towards a business plan that’s more interesting than just running the same network banners as Yahoo et al. There’s nothing strategically wrong with launching something as a land grab and then worrying about whether you can make money from it ex post facto, and they’re pretty up-front that that’s what they’re doing.

  4. OK, so at what point do they stop making up policy on the hoof and then recanting it when their communities complain? I can accept that they’ve done the ‘grab the land then think how to grow on it’ thing, but did that work particularly well for dotcoms, or the web industry as a whole?

    I’d just hate to see another bubble burst when we realise that the people at the top of the industry are very bright but cannot see business sense. And, in the case of FB changing its mind, communications sense.

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