Business Matters: Spotify Does Many Things Well, But Radio Isn't One of Them
Business Matters: Spotify Does Many Things Well, But Radio Isn't One of Them

Spotify's Radio Problem
-- Since June 2011 it has been quite easy to gauge what people think of the latest digital music service: see how much the market punished Pandora's stock. When Spotify launched on July 14, shares of Pandora fells 8.1% in intraday trading. The launch of the beta version of iHeartRadio's personalized Internet radio service sent Pandora shares down 10.1% in a single day. When Songza's popular new iPad app spurred a warning from BTIG analyst Richard Greenfield last week, Pandora lost 12% in two days.

Spotify Introduces Free Mobile Radio for iPhone, iPad

Now it's Spotify's turn to challenge Pandora's reign as Internet radio king. When Spotify announced a free radio service for iOS mobile users on Tuesday, Pandora fell as much as 6.5% before making up ground and ending the day down just 0.2%.

Spotify has created a fantastic ecosystem for enjoying music, but radio is what it does least well. And if Spotify's free radio service is going to (a) eat into Pandora's market share and/or (b) improve the number of Spotify users and subscribers, improvements will need to be made.

Spotify says its radio stations picks songs based on its social graph, or the connections between people, songs and playlists. Competitors take a different approach. Pandora, for instance, chooses songs based on musical characteristics and user feedback. Based on my use of Spotify's radio functions as well as competing products by Pandora, iHeartRadio and Slacker, I think it's safe to say Spotify has the worst radio product of the group.

The iOS app's genre stations seem to perform adequately, but Spotify's artist radio product - on both mobile and desktop apps - needs a serious overhaul. Artist radio stations often plays songs that are barely related and frequently repeats the same artists rather than tap into the service's huge catalog of music.

The Spotify desktop does pretty well with Tom Petty and the Heartbreakers. That station's artist during Billboard.biz's test included Pearl Jam, Rolling Stones, Dire Straits, David Bowie, Neil Young, Rod Stewart, Bruce Springsteen, Van Morrision, Fleetwood Mac, Nirvana, Eric Clapton, Ryan Adams, R.E.M, the Black Keys. The mobile app did a bit better in picking songs from the same era, if not genre, of music.

The weaknesses of Spotify radio shows up with a station based on popular E.D.M artist Skrillex. The desktop app played Skrillex, Nero, Avicii, Daft Punk, Lil Wayne, Korn (featuring Skrillex), Snoop Dogg & Wiz Khalifa, Kid Cudi, Jay-Z, Deadmau5, Mac Miller, the Lonely Island, Swedish House Mafia, Flux Pavilion, Lady Gaga (Skrillex remix) and Pendulum. These might be songs enjoyed by Skrillex fans (who probably have a varied taste in music) but this is hardly a good dubstep or E.D.M. playlist that takes advantage of Spotify's deep catalog of music. It was not a complete failure, but it would be hard to do worse.

For an artist station based on the Skrillex album "Scary Monster and Nice Sprite," the mobile app's radio station played, in order, "Lonely Boy" by rock band the Black Keys, "Champagne Showers" and "Sorry for Party Rocking" by pop-dance act LMFAO and "Ass Back Home" by Gym Class Heroes. That's not Internet radio, that's a stranger's playlist.

Spotify radio really falls apart with international music. These are the artist's played by the desktop app for a radio station based on Malian duo Amadou & Mariam: U.S. indie rock ground Bowerbirds, French rocker Catherine Ringer, a remix of a song by French group Mansfield Tya, indie rock duo Thao & Mirah, French artists Lisa Portelli and Liz Green, and dark synth-based group Polica. Spotify often got the right language (French is the official language of Mali) but was on the entirely wrong continent.

The mobile app performed just as poorly on a Amadou & Mariam station: "El Toro" by electronic artist Bonobo, "Bonnie and Clyde" by French legend Serge Gainsbourg and two songs that would fit well in a downtempo electronic playlist, "Unfinished Symphony" by Massive Attack and "Kelly Watch the Stars" by Air.

As a point of comparison, here are the artists played by Pandora in an Amadou & Mariam channel: Amadou & Mariam, Mali singer/guitar Ali Farka Toure & Ry Cooder, Zimbabwean artist Thomas Mapfumo, South African group Mahotella Queens and a reissue from a band from Benin, T.P. Orchestre Poly-Rythmo. All artists are African and the mix of songs made for a good listening experience.

And here are the artists played on a Pandora channel for Skrillex: Skrillex, DJ Fresh, Bassnector, Deadmau5, Skrillex (again), Nero and Ellie Goulding. This was a far better mix than the one offered by Spotify.

Indiegogo Crowdsource Funding Platform Raises Funding
-- Indiegogo, a platform for creators to crowdsource funds for their projects, announced earlier this month it raised $15 million in fresh funding from Insight Venture Partners and Khosla Ventures. Not as well known as Kickstarter, and not as focused on music as PledgeMusic, Indiegogo has become one of the more popular tools for independent financing of projects ranging from design to film. This round of funding is evidence of the growth of potential of crowdsourced financing (as if Amanda Palmer's $1.1 million in fundraising on Kickstarter didn't make that clear). When venture capital is flowing into the idea, you should expect a lot more innovation in this area.
( Indiegogo blog)

Reminder: The Future of the Music BizLivestreamed Thursday
-- Just a reminder: The Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights will hold a hearing on the Universal Music Group-EMI merger at 1:30pm ET on Thursday, June 21. Scheduled to appear before the subcommittee are: Lucain Grainge, Universal Music Group chairman and CEO; Roger Faxon, CEO of EMI Music, Irving Azoff, executive chairman and chairman of the board, Live Nation; Edgar Bronfman, Jr., director and former chairman and CEO, Warner Music Group; Martin Mills, founder and chairman, Beggars Group; and Gigi Sohn, president and CEO, Public Knowledge. Go to the subcommittee's web page for a link to the hearing's live webstream.
( Senate.gov)