Thursday, September 24, 2009

Is Spotify Spot On?

The new buzz in online music services is Spotify. As discussed in class, Spotify is only available in certain countries in Europe. Daniel Elk, the co founder, promises it will soon come to the U.S. after negotiations with the major music labels. The negotiations should go smoothly considering the popularity of this on-demand music service. Currently, there are seven million users that are mostly in the U.K., as well as Germany and Sweden. Surprisingly, these numbers reflect business operation in under a year.
Consumers will have to download a simple software that will let users listen to music instantly. According to the article, "the true appeal is the quick ability to build an eclectic online music library and discover new songs without having to spend a lot buying tracks". This has proven to be a very effective marketing tool for the company and artists. Allowing users to explore and discover music with hassle free services builds exposure for both sides.
Spotify mainly generates from advertisement and monthly service fees. The benefit of paying a monthly service allows users to dodge advertising. In addition, Spotify makes money from users downloading songs and by spurring physical sales. Overall, the popularity is there to drive investors to pour money into this company, which is why an estimated $250 million has gone into this company already. Spotify declares that their business model is an alternative to piracy. Ninety five percent of music users get their music illegally and this business is targeting this audience with precision. Ultimately, Spotify wants to provide users with the largest music catalogue in the world. If they are able to continue without losing any licenses and label cooperation, they should have no problem becoming the most popular free music service.

-Ryan Dolan

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