Panel: Keynote Interview with Spotify’s Daniel Ek
Participants: Daniel Ek (Spotify), Eliot Van Buskirk (Wired.com)

A next generation of streaming services are the newest hope for the digital music business. Will they attract mass adoption or fizzle like previous access models? Spotify, a music service that has over seven million users in six countries, has to live up to a lot of hype when it eventually launches in the U.S. CEO Daniel Ek discussed his company with Wired.com’s Eliot Van Buskirk for SXSW’s Tuesday keynote.

Why You Should Care:
Thestakes are high. Record labels and artists need a great new product to lead innovation and consumer adoption, and Spotify just might be that product. But many throughout the industry are doubtful of its business model. Spotify offers both a free, ad-supported model and a paid, ad-free model. The latter includes mobile access through apps for the iPhone and Android phones. Ek said the company is making strides in converting free to paying users and has a big vision for the future.

The Takeaways:
A U.S. Spotify Could Be Different Than European Spotify
Ek sounded optimistic about working with US labels to launch here. Labels are looking at how to support Spotify, he said, but they don’t want people to stop buying CDs. Ek pointed out that CD buying and the music market is up in Sweden, although he did not mention that anti-piracy laws could also play into that change.

DRM Lives On…But Is Hidden
“It has DRM in some shape or form,” Ek said of the Spotify service. But they want to make it so user-friendly that DRM is not noticeable. “I think we can protect content and give users the flexibility they want.” That statement was sort of unbelievable. I don’t recall ever hearing the term DRM used in a conversation about Spotify – even though it obviously has it.

Mobile Is Key
Portability is a main driver, Ek said. When Ek showed the audience the Spotify app for Android, the audience applauded when he showed how to play music in the background when performing other functions. The iPhone does not allow third-party music apps to play in the background.

Spotify Is More Than Recorded Music
“We want to be a platform for artists to reach out to audiences.” That could mean merchandise, ticketing or other things. But Ek doesn’t believe free is the right price. “People will pay,” he said. For music they’re discovering they pay one price, he believes. For music they love they’ll pay another price. The key is to offer value to a large number of people. “I really think on a massive scale we can get it to work.”

It’s Already Popular in the U.S.
When Van Buskirk asked how many people have used Spotify, hundreds of people raised their hands. During the Q&A period, one person admitted (to much applause) he was one of the persons who was using Spotify illegally in the U.S.

Bundling
Has bundled with Telia in Sweden with three to six months of free service that is subsidized by Telia. With exception of iPhones, devices lack media players, he said. Users like to use Spotify as the media player on many phones. “We want to make music like water,” says Ek.

Ek Believes in the Freemium Model.
“Total amount of revenue matters more than the conversion rate,” Ek said. On converting users from free to paying customers, Ek said the company is “making a lot of progress.” In six countries, he said, they’re over 320,000 paid subscribers. Last time they mentioned it it was 250,000. Ek did not specify which countries he was talking about. But he did say streaming won’t replace purchases. “The reality of music industry today is there isn’t one business model that will save the music industry.” Ek said he believes that if people could have music on any device and the music industry would be much larger than it is today (to applause in the audience). It’s an argument he has made many times.

Billboard.biz Panel Rating?
Three out of four. There was little new said in the keynote, other than technical topics that were a good fit for the interactive crowd at SXSW. Ek has done so many keynotes that Van Buskirk could not do much to get new information. But the conversation did include a few good tidbits of information, and the audience’s positive reactions were a powerful endorsement of the service.


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