Feeds

The Great Spotify Mystery

Part One: Who's really running this show?

Boost IT visibility and business value

The music business has set up a lemonade stand outside its house and it's giving away lemonade for free. Not surprisingly, people love the free lemonade, and the stall has drawn a large and enthusiastic crowd. The stand is called Spotify.

The business justifies this because it's so easy for us to get their music for free elsewhere. With very little effort, you can obtain it simply by appending a magic word ('torrent' or 'rapidshare' usually do the trick) to the artist you're looking for in Google.

Acquiring it may not be pleasant: doing so may help support a neo-Nazi with a grudge. But many people are prepared to hold their breath, because you can fill up your iPod or phone with music without paying any more than your monthly internet fee. That fee is a bit of a bummer - why can't it all be free? - but a modest outgoing on a computer and an internet connection saves a lot of money.

The business looks down on this free and easy access to its assets quite understandably. Because if it's all free, then investment in making sound recordings will evaporate. Only fools invest in businesses which aren't going to make any money. You're following, I hope.

So to compete with businesses which don't make any money and give away free music, they're backing a business which doesn't make any money, and gives away music for free. It's genius.

But it gets better.

A viable business plan? [*]

The more Spotify grows, increasing its music catalogue as it goes along, the fewer recordings you have to buy. The music you want to hear and the playlists are "in the cloud", for free. If you could be assured the free lemonade would never stop, you may as well get rid of the CDs you already have now, and will never have to be pay for a sound recording again.

The rival lemonade stands don't have to pay for the music they offer, while Spotify does. So keeping the Spotify tap turned on costs the music business an enormous amount of money. Last week, at the Great Escape music event in Brighton, we learned that Spotify has very little realistic prospect of making any money either.

It's all a little embarrassing, coming ahead of next month's Digital Britain report. The major labels must hope Stephen Carter hasn't joined the dots yet. They complain free music is destroying their income and regularly plead to legislators, regulators and the telecoms providers for help. Then they give away music, not just free, but at great expense. No business is obliged to go broke voluntarily.

On Friday, Paul Brindley from Music Ally :-[ interviewed Spotify founder Daniel Ek at The Great Escape. It was stated that the labels own 30 per cent of Spotify through equity investments. It may be higher. But most of that money is simply being recycled in royalties. (Spotify isn't just a lemonade stand, it's a laundromat.)

The Essential Guide to IT Transformation

Next page: "Pre-revenue"

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Sonos AXES support for Apple's iOS4 and 5
Want to use your iThing? You can't - it's too old
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
Joe Average isn't worth $10 a year to Mark Zuckerberg
The Social Network deflates the PC resurgence with mobile-only usage prediction
prev story

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
The Essential Guide to IT Transformation
ServiceNow discusses three IT transformations that can help CIO's automate IT services to transform IT and the enterprise.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
How modern custom applications can spur business growth
Learn how to create, deploy and manage custom applications without consuming or expanding the need for scarce, expensive IT resources.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.