Spotify’s voice platform problems

In addition to the struggle of finding a path to profitability, Spotify, the pioneer of music streaming (and a company which I have been following since its closed beta launch in Sweden in 2007), has two new problems, one right now and the other in the mid to long term.

The near-term problem is Apple’s smart speaker HomePod which will go on sale in the US, UK and Australia this Friday, with additional markets to follow in the upcoming months.

HomePod will only play well with Apple’s own music streaming service, Apple Music. Other streaming apps can be used via AirPlay, but HomePod owners won’t be able to control playback through their voice.

In the US, Apple Music is already said to be gaining subscribers at a higher rate than Spotify. For every new owner of an HomePod, Spotify will be a worse choice than Apple Music. Existing Spotify subscribers in the US who decide to purchase an HomePod will have a big incentive to switch, and Apple makes it easy by offering a free trial for Apple Music. Continue Reading

Amazon Echo and Spotify are a dream team in the smart home

It has become a rare occurrence that a piece of consumer software manages to impress me. It’s 2017, after all. But Spotify has just pulled that off. More specifically, Spotify’s seamless playback and sync ability across different devices.

Since I purchased an Amazon Echo speaker some weeks ago, I now frequently access Spotify on four different devices. Already before buying the Echo, I appreciated Spotify’s handover procedure to switch the device that you are listening music from (e.g. from the notebook to the smartphone). But with the addition of the Echo, the complexity of the cross-device integration has risen, without that I noticed a single issue so far.

I can ask Alexa (the smart assistant that runs on the Echo) to play Spotify, and then control the playback on the Echo either through voice or from any other of my devices that Spotify is installed on. I can skip the song playing on the Echo from my iPhone, hand over playback from the Echo to the iPad via my notebook, or reduce the volume of the Echo’s Spotify playback from my iPad. Or anything in between, except one thing: I cannot control playback on the other devices through the Echo/Alexa – but I never have felt I needed to either.

Having this kind of freedom to control one’s music playback at home is truly liberating, and it makes me wonder a bit what Apple plans to make better with its upcoming HomePod speaker. HomePod is supposed to offer a superior music experience in the smart home. But with Echo’s  outstanding music playback performance and a seamlessly integrated third party music app (such as Spotify, in my example), I wouldn’t know what to wish for more.

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The deeper meaning of Spotify’s Discover Weekly

Discover Weekly

Streaming services have changed how people listen to music. But they have not changed the fundamentals of the music business: Labels sign artists, invest lots of money into turning them into sought-after superstars, and collect royalties from third parties who want to use or redistribute the music. Since most listeners would not be willing to commit to a digital music streaming service that lacks releases of the big label artists, Spotify & Co have to enter into expensive licensing agreements with the major labels. These licensing fees usually have to be paid per user and month, which makes it challenging for streaming services to ever achieve economies of scale. That explains why a service such as Spotify still isn’t profitable, despite 40 million paying subcribers: The more users it has, the more royalties have to be paid to the license owners, who then in turn pay the artists signed with them based on how popular their tunes are on the service. Here is Spotify’s own explanation of how it pays royalties.

For streaming services, the most desirable change in market dynamics would be if subscribers stopped seeing the availability of major label releases as a requirement for agreeing to pay the monthly subscription fee. So far, such an approach has not been successful for any serious contender in the streaming race. In fact, SoundCloud tried to grow without costly label deals and official licensing, focusing on independents instead, but didnt’ manage to turn this strategy into a working business model. The Berlin-based company is now adopting the conventional paid subscription model.

However, a seemingly trivial innovation introduced by Spotify last year, could lead to a paradigm shift in the streaming business: Continue Reading

Mobile platforms and retail – comparing Apple(s) with Oranges

You can read this article in German here.

Spotify and Apple are in yet another vocal battle over the app store, payment conditions for apps on the platform and the underlying question of whether competitors to Apple Music are being discriminated.

Whenever this topic comes up and the point of a potential conflict related to Apple’s double role as platform gatekeeper and platform user (= app publisher) is brought up, someone responds by referring to the widespread practice among retailers of selling their own store brands alongside products of competing brands. According to this argument, because store brands are a very common and accepted practice, Apple or Google becoming their own platform customers and offering products that compete with those of other platform customers must not be questioned, either.

Something strikes me as problematic with this comparison. Continue Reading

After years of struggle, 2015 looks to become big for Spotify

When Spotify released its user numbers in the middle of November, I wrote a piece on (in German) stating that the on-demand music service finally seemed to have initiated some kind of exponential growth. In order to illustrate my point, I created a graph visualizing the growth in users and paying subscribers over the past years.

My conclusion was certainly quite early, as the curve only indicated a possible trend of exponential growth. But I felt it was a bet I could afford. Fortunately, I do not need to revoke my statement: Only 2 months later, Spotify announced new numbers: 60 million users in total, of whom 15 million are paying. In November, the numbers were 50 million and 12.5 million.

Correspondingly I updated my chart, which now clearly shows an accelerating growth (for users reading via RSS the embedded Google sheet might not be shown).

Quartz realized that it was time for a visualization of the Spotify user growth as well. The site also correctly points out that since Taylor Swift withdrew her entire catalog from Spotify in November, the numbers increased by 20 %. That suggests that the massive media attention that was generated by Swift’s decision actually might have helped Spotify to acquire more users.

For a couple of years, Spotify, the pioneer of legal on demand streaming, had something of a growth-problem. Now, for the first time ever, the curve points at the right direction. Unlike some other online industries where a niche can be lucrative, the on-demand music business with its significant licensing costs and complex stake holder structure can only work if there is massive scale.

We still need to wait and see whether the current trend continues. If it does, 2015 will become the big year of Spotify (and, if the market allows for, the year of a Spotify IPO).