All You Wanted to Know About Spotify But Were Afraid to Ask

Clinton Global Initiative

Spotify, the latest entrant into the relentlessly high-turnover music streaming service industry, made its U.S. debut last week after two years of wrangling with record labels. Currently accepting new users on an invite-only basis, the so-called “celestial jukebox” arrives riding a wave of good press and will soon be publicly available to American users (and if you’re impatient, any number of work-arounds to the invite problem are a Google search away).

Spotify’s concept borrows liberally from the U.S. service Rhapsody  -- a monthly subscription fee grants you access to the service’s entire catalogue. Like another streaming service, Grooveshark, it allows internet-connected users free access to its catalogue, and monetizes these page views with advertising. And, similar to Apple’s 800-pound iTunes gorilla, it’s a standalone application -- not just a website -- accessible by smartphone.

Of course, it differs from all these services in important ways -- some of which may, indeed, make it a true competitor to iTunes, which still basically rules the digital music realm with an iron fist and a three-tiered pricing scheme.

Spotify limits the amount of music non-paying users can stream -- in Europe, where the site launched, down to 20 hours per month. That’s a healthy amount of focused listening, but it’s unlikely to be viable for passive listeners or multi-tasking users who want some background sound (this is where Pandora and Grooveshark Radio come in).

Upgrading to the $5/month Unlimited subscription plan gets you (surprise) unlimited streaming, plus a Spotify browser absent of regularly timed audio ads or sidebars. It’s an upgrade, certainly, but not one that any rational individual will pay for (more on that later).

Spotify also lets you import your existing musical collection -- probably from iTunes, which is where all your music is anyway -- into a so-called “library.” It’s a disingenuous designation: Spotify’s borrowed the term from iTunes, but their version more resembles an public library, one where members don’t own all the contents as much as they have permission to use them. But it’s also more versatile -- in addition to the music you’ve acquired outside of Spotify, you can add songs and playlists from the Spotify catalogue to your library at no extra cost.

But these are, after all, somewhat minor distinctions. The ability to import your own collection is nice, but it’s hardly a huge draw -- especially since most Spotify users will have iTunes as well. It’s the “freemium” model that sets Spotify apart: it’s really offering two different products. One is the free, ad-subsidized iTunes-biting software application that offers web-connected users access to a whole lot of music. The other is the top-end subscription plan: at the same $10/month that Rhapsody charges, you get Spotify Premium: unlimited streaming access without ads, a cloud library available on your computer or an impressively intuitive smartphone app, and an offline mode that allows you to listen to your playlists without an internet connection.

This is the real innovation of Spotify, the so-called “killer app” that could give iTunes the serious headache that other subscription services never did. The possibilities for a smartphone user with Spotify are impressive, and way beyond what Rhapsody or iTunes can claim. Incidentally, it’s also the reason why the $5/month Unlimited option is dead on arrival: the upscale Premium service is so vastly superior in terms of functionality and value that anyone willing to spend on a subscription plan will undoubtedly shell out the extra $5.

Spotify is also the beneficiary of ongoing discord between Facebook and Apple. The latter introduced Ping, a social networking tool designed to facilitate sharing and recommendations across users, to its latest iteration of iTunes in 2010. But without the help of an uncooperative Facebook, there was no good way to find friends using Ping, and the concept sunk. In an what could be perceived as a face-slap to Apple, Facebook threw their weight behind Spotify instead: users log in to their Facebook account using Spotify, and can share songs and playlists with their friends -- or collaborate with them on shared playlists. It’s another handy feature (you can share songs through Twitter, as well), but its value is largely dependent on the number of users who take advantage of it.

The software itself doesn’t break a whole lot of new ground, aside from the Facebook integration, and in practice is something of a mixed bag. The iTunes-inspired window design is clean and easy-to-use, though it’s not quite as intuitive as iTunes (probably just because it’s not iTunes). The cross-device syncing feature is simple and efficient, and Spotify’s Facebook sharing is a significant upgrade from the old standard of posting a YouTube link on a friend’s wall.

Searching the service’s catalogue is the software’s most noticeable flaw; instead of the intelligent and aesthetically pleasing search results of the iTunes browser, you get long, poorly sorted lists of songs. The search results most closely resemble Grooveshark’s -- right down to the various spellings of the same artist’s name (“Pusha-T” versus “Pusha T.”), which is curious because, as mentioned, Spotify’s catalogue isn’t user-uploaded. Apple has worked out most of these kinks over 10 iterations of iTunes; given time, the developers behind Spotify could likely do the same thing.

Whether or not they get a chance to is anybody’s guess. The road is littered with digital music start-ups whose business models never justified their initial hype (LaLa, imeem, etc.). Spotify does have a couple visionary features -- the smartphone-accessible cloud catalogue and social media integration, in particular -- that could make it an institution in the digital music provider realm.

On the other hand, it has to contend with an iTunes behemoth that could co-opt some of these features (and, with iTunes in the Cloud, may have already started doing so) and find better ways to monetize its site. Spotify has reportedly been valued at as much as $250 million -- without ever drawing more than $200,000 in annual ad revenue. Long term success depends on Spotify first making an enormous splash in the U.S.

Time -- in all likelihood, not even very much of it -- will tell.

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