Original URL: http://www.theregister.co.uk/2009/06/25/spotify_exclusive/

Fifty Quid Bloke, meet Spotify's 14p man

The first real numbers tumble out

By Andrew Orlowski

Posted in Media, 25th June 2009 11:18 GMT

Exclusive Move over Fifty Quid bloke - and make way for 14p man.

Statements seen by The Register indicate that's all the hit music service Spotify makes per user from its advertising-supported business. The difference is the middle-aged spender coveted by the movie, games and music businesses plunks down £50 per week - but Spotify earns its 14p per user per month.

The figures - which we can disclose for the first time - make for interesting reading. They confirm Spotify's explosive growth - topping half a million registered users in the UK in May from a standing start in January.

But revenues at this stage are negligible. Advertising income was just over £82,000 last month, hence the 14p figure. We can also reveal that despite the phenomenal growth, the takeup of the tenner-a-month subscription program is small, and as a percentage of users, is falling.

Fewer than 17,000 UK users were signed up to Spotify Premium in May, an increase of 2,700 over the previous month - despite the service adding 170,000 registered members overall.

A free lemonade stall]

It's early days for Spotify, and its potential is largely untapped. Spotify has yet to make its Premium service compelling; currently, it merely removes the already-unobtrusive advertisements. An offline version could be one way of luring subscribers - as you can see here - the mobile Spotify caches songs to be played offline, with iTunes-like easy synchronisation. An iPhone version is in the works, the company has confirmed.

So who is Fifty Quid Bloke, and why does he matter? And what's it got to do with Spotify?

The Imelda Marcos factor

Publisher David Hepworth popularised the phrase in a 2003 speech to the BPI. Word magazine's Andrew Harrison defined him for us.

"It's someone who buys CD box sets like women buy shoes, they make him feel good. Then he takes them home and never listens to them."

The phrase stuck because from the beginning of the decade on, the 40 to 49-year-old age group had overtaken the 12 to 19-year-olds in the amount they spent on recorded music. But competition was always tough for 50QB's dosh - as this graph shows.

Music revenues vs "wallet share" [click to enlarge]

Spotify's demographic is around 40, and precisely the sort of impulsive media buyer defined by 50QB. (50QB was always a big internet user, the first on the block with broadband, and likely to be the first to use new services, either licensed offerings like Spotify, or unlicensed ones, like Oink.)

The puzzle - as we raised here - is why the major labels seem so content to back Spotify, which encourages customers to defer purchases (the music's always there), which ensures someone else bags the Fifty Quid - such as games or movies companies.

Unlicensed services such as Bittorrent trackers provide a "box set" experience, of sorts. Pirate Bay's Top 50 include fan-made compilations of Pink Floyd, Coldplay and "Rolling Stone Magazine's Top 500 Songs of All Time"; and much of that music will lie around on a hard disk without even being played once. So the consumer demand that 50QB represents still appears to be there, but the demand isn't being met with licensed services. It's hard to see how the major labels' enthusiasm for Spotify helps meet it.

In the next instalment of the Great Spotify Mystery, we'll examine how long the business can be sustained. ®