July 19, 2011
Spotify has finally landed on the shores of America, with the potential to change the paradigm of music distribution and, ideally, sales/revenue. The early reaction has been largely positive (see here, here, here and here, for starters); you may have already been invited to sample it - and if you haven't, getting one is as easy as clicking www.spotify.com. Largely responsible for generating the musical content in America, as well as overseeing its growth here is Ken Parks, who discussed the service and its potential in America.
Spotify had been in negotiations with the major labels for licensing in America for quite a while. Google and Amazon still haven't locked down the licensing, Was there any point in time when you thought Spotify wouldn't be able to get all of the majors on board ... and was there a turning point that led to Spotify finally getting all of the majors in the fold?
We never wavered from our belief that we'd make it to this point. We're thrilled we have gotten here. It's hard to say if there was a turning point. Obviously, we had many discussions with the music industry; we wanted to approach this market very carefully, as it's the biggest market in the world. We always had the ambition to get here, while at the same time we were keen to preserve the same business model that was launched in Europe.
Certainly we wanted to be careful about making it work for everyone. Anything that's as important as this will take some time, but in the end, we got it done and we're thrilled to get approval of the industry.
At around the same time Spotify launched in America, the company announced it's consummated a licensing deal with ASCAP. Was getting the publishing done as difficult as the licensing from the majors?
Publishing is slightly more complicated, because there are mechanical rights and performance rights. It was even more complicated in Europe, but what we did there helped us to get the publishers on board here. It was important to launch with the support of the publishing community, which we did in Europe and here.
Now that you are live in America, you're going up against a slew of rivals, from Rhapsody and Rdio to Pandora and Apple, Amazon's and Google's music clouds. Are you concerned that it might be difficult for Spotify to differentiate itself?
No, not really. Spotify is all about our product - and the users of our product. We're obsessed with making this the best possible service it can be. With all due respect to the others, we think we have a better experience for the user. You now have all the music in the world at your fingertips. You don't have to worry about having to upload music on your computer or match your music to a cloud. All of our music is at your disposal and you can bring your own tracks in, too, with just one click.
We have made it simple for the user to assemble a collection of music for playlists in a way that has a really social impact. One of the first things you do is connect with friends. With a simple drag-and-drop, you can share music with them and get recommendations on other songs from your friends. That way you can find a lot of great music you don't even know exists. It's amazing value ... and a great free service.
We're really targeting everyone who loves music.
What kind of marketing/advertising strategies do you have in place? Do you plan on raising Spotify's profile through TV and radio ads ... online ads ...or primarily through word-of-mouth?
We've been lucky enough that 99% of our users say they'd recommend us to friend, so we've launched what we consider to be an amazing music service. If our users like it as much as we think they will, we'll just encourage them to please tell their friends and do everything we can to optimize this network effect. We've got a number of other exciting marketing activities planned for the coming months, so watch this space.
It has been reported that a sticking point for the once-reluctant labels was the fact that in Europe, only one million users pay for Spotify's premium service, while 10 million prefer the free version - and they wanted more paid subscribers. Are you doing anything to increase the number if paid subscribers?
Actually, we're now above 1.6 million paid users. But we haven't done anything specifically to increase the number of paid subscribers. We have no other goal other than to make this the best service it can be. If people want to pay for our premium service, that's great; if they use the free version, that's okay, too. We want people to use our service and think it's great value, whatever tier they decide to use. The increased value of our service is differentiated by our three tiers. And the popularity of the tiers will reveal themselves over time.
We have seen the ratio of paid versus free subscribers grow over time -- and there's no reason to not expect that to happen here. But we also need to operate a service that returns money back to the creators of music; that is of paramount importance to us. I happen to think that the people who create music deserve to be compensated ... and I think we have found a business model that values the music, which is as great for the creators as it is for the distributors.
Spotify already has integrated Facebook into its service. Are there plans on expanding its integration with it?
We currently have a strong integration with Facebook, so our users can connect with it through our service. All of the user's Facebook friends show up right inside the program, making it very easy to share music. That's the type of relationship we value. As far as the future goes, Facebook is a great company; we're continuously working to make the social experience on Spotify the best it can be and welcome relationships with any company looking to innovate by building more social value into the user experience.
Are there plans for Spotify to incorporate video and Skype-like user communication?
Right now, we're only interested in becoming the best audio service there is. In the current platform we have, we can accommodate all those things, and I'm sure those type of things will be considered in the future.
Can radio, in any way, fit into Spotify's mix? If so, what kind of relationship can you see happening?
We don't have artist radio for launch in the U.S., but we hope to have news on that and other exciting features over the coming months.
Obviously the key to Spotify's future in America - as well as the rest of the world - is in turning a profit. As of yet, Spotify has yet to make a profit. Do you see that happening in the near or far future?
I should say for the point about Spotify's success that we are already the second-largest source of digital music revenue for the industry in Europe - and that's with us only operating in seven countries. We are already returning a lot of money back to the industry, so that's something we all can be very happy about.
Again, we don't compare ourselves to anybody. We think we're a different and better experience than anybody else. Naturally, we are interested in growing as big as we can; we want to be a global presence in music and reaching as many people as possible, so stay tuned.