There’s been a lot of buzz lately about Spotify and the resistance that they’re reportedly getting from major labels about launching in the US. From what I gather, the labels seem to be concerned about cannibalizing their biggest market with a free streaming service. There also seems to be a lot of chatter about whether or not Spotify would get the same kind of traction here that it has in Europe. Many pundits say that the service is not converting anywhere near enough free users into paying customers and that this is worrying the labels.
Frankly, I don’t see why Spotify couldn’t succeed in the US. The reality is that it could only succeed if the labels are willing to make it economically viable. I’m sure that their Imeem experience hasn’t given them a lot of comfort. Five years ago it was so difficult to deal with the majors for licenses that it became easier for many sites to just start up illegally, build up a ton of traffic, wait to be sued by the majors and reach a settlement that included licenses, then sell to some sucker. That strategy made a certain amount of sense at the time. The only problem was that the deals the labels insisted upon made it economically impossible for them to make it. Last week Imeem was sold last week to MySpace for bus fare.. Evidently nobody made any money.
It seems to me that everyone has to start looking at streaming services as not giving away music for free but as sampling services, just like radio. Now labels will argue that radio is different—it’s programmed and not on demand. They’ll argue that if they allow their customers to have free access to their product it will eat into their existing sales. In my view, its apples and oranges.
I’ve been looking into a lot of research lately that seems to add a lot of clarity to the current landscape. Recent studies claim that p2p users spend about 50% more on music than their non-pirate counterparts. This suggests that a large number of music fans use file sharing to sample new music. It also suggests that users prefer to own their music, not rent it with DRM or streaming. Other surveys show that people are overwhelmingly willing to pay for a subscription service if it is unfettered and priced right. Streaming services offer a new opportunity – not to up sell to an ad-free streaming service, but to up sell to a product that customers really want and are willing to pay for.
The funny thing is that the majors have been wishing and hoping for the subscription model to take off for years now. It hasn’t, mainly due to their insistence on DRM. The industry is making progress with governments on anti-piracy issues and pressuring ISP’s to be more proactive in fighting piracy. There’s a window of opportunity now for the labels to make some real strides toward transitioning their business. Making it difficult for the Spotify’s of the world won’t help. It’s services like Spotify that generate excitement about music, and that’s needed for the industry to have any chance of rebounding.
