Business Matters: A $3 Billion Valuation Brings Spotify Expectations Back to Earth
Business Matters: A $3 Billion Valuation Brings Spotify Expectations Back to Earth

Facebook Says Spotify Has Hit 20 Million Users; Spotify Says It Ain't So
-- Spotify has reached 20 million monthly active users, according to a count seen at Facebook. Music industry analyst Mark Mulligan noted the mile market in a post at his blog Tuesday.

Spotify, however, is sticking with its latest publicly released numbers of 10 million active users and more than three million paid subscriptions. The number seen at Facebook is "not a good metric" and Mulligan's post is "a speculative piece," a Spotify spokesperson told Billboard.biz. The latest Spotify numbers are quite old, however, and it would be no stretch of the imagination to think the service is well past 10 million active users and, if it keeping up its conversion rate, three million subscribers.

The number of monthly users for any Facebook app can be seen when searching for an app at Facebook. The number of Facebook app users could be a fair proxy for the number of active users since Spotify has required Facebook for login since September.

For what it's worth, I added up all the monthly users of Zynga's Facebook apps and got 225.5 million. That's well short of the 290 million monthly active users claimed by Zynga, but its games are also played on other platforms such as iPad, iPhone, Google+ and Zynga.com. So it's seems plausible numbers available at Facebook reflects an accurate count of Zynga's total active users.

Spotify has publicly said its conversion rate in the U.S. is "over 20% and that is in line with our global conversion rates." Since Spotify uses active users rather than registered users to calculate conversion rates (the numerator is subscriptions, the denominator is the number of users), Spotify would have somewhere around six million subscribers if it has 20 million active users globally. But remember that 20 million is not an official number.

The latest number for Spotify's U.S. subscription count that was bandied about in the press was 600,000. This appeared in an April article in the New York Post about label executives feeling Spotify's growth has been disappointing. Spotify summarily downplayed by the article and called it "not accurate," although the statement was directed more at the characterization of its progress and less at the figures used.

A few clarifications are needed if you read Mulligan's post. Pandora is used as a point of comparison but is actually a much different product than Spotify. Internet radio and on-demand access services are different products with different business models and different cost structures. Consumer adoption will be different across the two products as well. It's arguably more difficult to get adoption for an on-demand service because free radio is -- by a wide margin -- the most widely used music product.

In any case, you'll need accurate numbers to compare services for yourself. Pandora has 150 million registered users and 51 million active users (Mulligan puts the active users number at 100 million), which the company announced earlier this month. In addition, Pandora operates only in the U.S. (where it enjoys statutory licenses provided to webcasters by the DMCA) while Spotify operates in 13 markets (it does not use statutory licenses for master recordings in the U.S. or elsewhere) in North America and Europe.

Spotify's U.S. numbers are probably in the range of its two main competitors, Rhapsody and Cricket Wireless's Muve Music. Rhapsody announced it had reached 1 million subscribers in late December but has not released an updated number. Muve Music told Billboard.biz Monday it had reached 600,000 subscribers roughly 17 months after its January 2011 launch.
( Music Industry Blog)

Spofity Promotion Targets U.K. University Students
-- Spotify is going back to the future with a promotion aimed at university students in the United Kingdom. As Washington and Lee University assistant professor David Touve notes at his blog, students who have purchased an NUS Student Card can receive a 50% discount on the £9.99 price of Spotify Premium.

"This sort of 'price discrimination of demand' -- to use a dismal term from Economics -- has been applied before on music services, but in the U.S.," writes Touve. "Via this method, a product or service is priced based upon characteristics of the buyer not the product/service itself. Here, students get a discount -- the price is a function of the buyer."

Streaming services have seen heavy discounting before, Touve points out: Napster offered steep discounts to university students in the U.S. in 2003 and 2004. But today's discounts on streaming services include a mobile product and get the student a service far superior to the one available eight or nine years ago. Times have changed, too. People are far more used to streaming (see YouTube) and even paying for streaming (see Netflix).

Touve suggests lower prices would bring a greater-than-commensurate increase in total revenue. That still may be a hard concept for labels to swallow. So in the meantime, look for more price discrimination of demand and services like Cricket Wireless's Muve Music that seeks new markets for subscription services.
( DavidTouve.com)

Senzari Raises $1 Million In Funding
-- Chalk up another Internet radio company getting funding to "take on Pandora" (as the tech and investing sites like to say). Senzari has raised $1 million from "investors in both Miami and Silicon Valley, including, notably Dave McClure's 500 Startups," according to TechCrunch, on top the $2 million it had previously raised from undisclosed angel investors and a private equity group.

Miami-based Senzari won't compete directly with Pandora, however. The Web-based service is available in the U.S. -- Pandora's lone market -- but is looking for growth elsewhere. The service, which now claims to have 10 million tracks, launched in Brazil last year and Spain this year.

"We believe that taking a global strategic approach will position us as the leading international Internet radio service provider within the next 12 months," Senzari CEO Bill Hajjar told Billboard.biz in January. "We are confident that this key differentiator, coupled with our proprietary and highly efficient recommendation technology, will allow us to break even in every new market in record time."
( TechCrunch)

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