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Spotify 'sold soul' to boy king Zuckerberg

Faustian deal

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Comment I can't quite recall serial entrepreneur Michael Robertson ever running a big, successful, profit-making internet business – and his latest radio venture seriously misjudges both the medium and the market. But as a pundit, he occasionally airs views that others are too timid to articulate. Robertson takes aim at digital music companies "selling their souls" to Facebook, and lands at least one arrow on the bullseye.

According to Robertson, Facebook's demands on its music partners have been so one-sided that the music partners appear have struck a Faustian bargain – sacrificing the control and access to data they need for future growth. In exchange for short-term gain, they've lost long-term growth.

"[The] tech CEO fantasises about becoming the next multi-billion dollar Zynga," he writes. "They think that if even a small percentage of Facebook millions experience their service and use/pay for it, then stardom will be their destiny. The reality is that they have committed their future to a deal they can never escape," he adds.

I made the same point a fortnight ago, because almost every expert overlooked it.

While Spotify may still dream of being a "platform" – and it is said to be working on opening its APIs further for app developers – it simply isn't in a position to be in this kind of relationship. It is really a commodity component supplier in somebody else's platform. Spotify is an ex-potential platform.

Users who only experience Spotify as a branded streaming widget in Facebook are not experiencing the impressive technology that made Spotify special and attractive (as described here) in the first place: a native client with a great user experience.

The Tesco metaphor is useful here. Just as with supermarkets, the power lies with distributors who have access to huge audiences. They set the conditions and prices for suppliers. So it is with Facebook. Zuckerberg got Spotify and MOG to bend, and then made Facebook's authentication system the only option for new users. The others refused...

Yet Spotify reckoned it was worth it: exposure to Facebook's massive user base would eventually drive some people to its paid-for service, it must have reckoned. There is little direct revenue upside for Spotify from the deal – for reasons I also pointed out at the time – and there's no new money coming into this system. What money there is, is now split more ways than before.

You do wonder exactly what Sean Parker, played by Justin Timberlake in the movie The Social Network, has been up to here. Behind the scenes, Parker has played the unofficial consigliere to both Facebook and Spotify: he was first president at Facebook, and is a board member and investor in Spotify. But the end result is that he appears to have delivered Spotify on a plate to the Boy King Zuck. Whose interests was he serving here?

Investors, take note. Facebook may have a plan we don't know about for monetising its music services, perhaps by charging money. Perhaps it is going to become a payment platform, and partners such as Spotify will eventually see a share of these new revenues, just as content partners get a cut from Sky's platform. Perhaps Spotify has a masterplan that we can't yet see, or views the Facebook pact as a short-term deal. But if none of these things are true, I think its value has just diminished greatly. ®

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