Interview with Daniel Ek, Spotify Co-founder
The other day I wrote about what music labels think about the Internet: it needs to be regulated. No surprise there, although it´s shocking that they admit it wide open.
Newly created services like Spotify are trying to bridge the two worlds. But it just seems unfair that labels let online start-ups do the “dirty job” of innovating and then charge them hard for it. If everything continues as it goes, Spotify will either start charging for the whole service or go bankrupt in the future.
I don´t think the second will happen, as they are creative enough to find new revenue channels without annoying the user. But that´s exactly what labels should be thinking about instead of legally persecuting everyone.
I recently asked Spotify co-founder Daniel Ek about some of these issues (in the photo, on the right, next to Martin Lorentzon, co-founder of Spotify). Interesting insights from Daniel but, the fact that he is extremely cautious and “politically correct” in his answers, demonstrates the pressure that labels still apply (sadly) in the whole industry. Online and offline.
Here´s an extract of his answers, sent to me by email:
Q: Could Spotify become a strong revenue channel for label companies?
A: I‘ve found that the Spotify concept is quite hard to explain to them, but when they see it, they get a better feeling because it is so quick to access the content. That has been an immense help to us when trying to figure out the business model behind this.
On the monetisation side, I think that it’s fair to say we come with experience here; we know how to monetise ad-supported models. We’ve also developed premium models before so we know how to differentiate a premium model from an ad-supported one.
Q. Still, the majority of people use the free service offered by Spotify. What percentage approximately? Do you believe the revenue from advertising will offset in the long term the revenue demanded by labels and artists?
A: We haven’t announced details on percentages at present. Both sets of users are equally important right now, but as the volume of users continues to increase (and the likelihood is that the free users will expand far quicker than paid for users) Spotify’s value to advertisers will increase exponentially.
In terms of satisfying the labels, music is a hugely powerful medium and we believe we have the business model in place to harness that power. Plus being online and unlike old radio advertising, which has to rely on listener surveys, we can tell brands what specific audience they are reaching.
Q: How many advertisers have you signed in and what´s your revenue target for 2009 and 2010?
A: Some examples of advertisers include Ford, Xbox, Vodafone, Philips, Nissan and Sony Pictures. We’re looking to have broken even by the end of the year.
Q: What´s the revenue sharing model you have with label companies and how many do you want to sign in by the end of 2009?
A: Spotify aggregates content from right holders, distributes it to consumers through our technical platform and monetises both through a free, ad funded service, and a subscription service. We already have the majority of major labels and a large number of indies. We aren’t going into specific detail as to our business model, other than to say that this is based partly on click through volumes.
Q: Do you believe people will prefer listening free streamed music online in real time (in their PCs or mobiles) rather than download it?
A: The access over ownership debate is an interesting one, and it really comes down to preference. Some people are happy to listen to music in whatever format, so long as they can enjoy the music. Others will continue to prefer listening to CDs and vinyl. It’s all about choice and making music available simply and instantly, wherever you are.
Q: Will you launch Spotify for mobiles in 2009?
A: It’s no secret that mobile is definitely something we want to develop in the future - it’s the most requested feature from our users. We’re excited about platforms such as the iPhone and other devices as they enable third-party developers such as ourselves to develop interesting functionality. It’s good for the mobile industry in general if it becomes more open and we see people use mobile services a lot more. However, we want to make sure that we can provide a simple service that is just as easy to use as the computer version so we won’t release anything until it’s done right.
Q: Will listening to music be 100% free for consumers in the near future?
A: That’s not a question I can answer yet – but the fact is that millions of people already get their music free through piracy. We’re looking to become an alternative to piracy, making music free to listen to while also providing a revenue stream for labels and artists.
Q: Do you believe the real revenue generator for labels and artists won´t be charging for music, but rather the entire channel ecosystem around music (concerts, merchandising, advertising…)?
A: It will be a mixture of these things. More established artists are already seeing the majority of their revenue driven through touring and merchandising. But there also needs to be an effort not to devalue the music itself in its entirety and make sure it remains an open revenue stream.
Q: In the long term, is not Spotify a huge competitor for labels? You can promote and distribute artists, so… what do you (and artists) need labels for?
A: Spotify has been made possible by working closely with the music labels and we need to work together to support the music industry.
Photo: by Rsms