Opinion and analysis of the day’s music news.
Two Issues Spotify, Music Services Must Overcome
— Speaking at the Daily Beast’s Innovators Summit on Friday, Spotify investor Sean Parker (Founders Fun) explained the music service lures users by letting them build their catalog of music on the free, ad-supported version or the cheaper computer-only version. When the user wants to take that collection mobile, Spotify is able to charge more. “You have no choice. We’ve got you by the balls, you’ll have to become a subscriber.”
Do Spotify’s conversion numbers to date back up Parker’s “by the balls” claim? Not especially. Parker’s assessment is based on two requirements: that Spotify users truly are not content to have the service only on their home computers, and that there are no viable mobile alternatives.
The service has over 10 million registered users in its seven active markets. Somewhere in the area of 500,000 of those users are paying subscribers. Spotify has not broken down how many paying customers have the more expensive mobile option.
Just for the sake of this example, let’s assume all Spotify subscribers are paying for the mobile option. That’s a 5% conversion rate – not exactly proof that Spotify is yet benefiting from the advantageous position Parker described. And it’s safe to assume not all of those subscribers will be long-term subscribers. Spotify has partnerships with telcos (Telia in Sweden, 3 in the U.K.) that bundle the Spotify service with mobile and broadband services. Those are short-term deals and some of them will expire. Again, Spotify has not broken out these numbers, but it’s safe to assume not all Telia and 3 customers who get the Spotify free trial will become long-term paying customers.
Spotify and all other subscription services have to overcome two related issues: alternatives and perceived value. First, there are less expensive alternatives. American consumers, who do not yet have access to Spotify, have shown they are more than happy with the non-interactive, lean-back approach of Internet radio service Pandora, which has over 65 million registered users.
Second, most consumers obviously don’t appreciate the value proposition of subscription services. This is a difficult pill to swallow for people in the music industry, but they need to appreciate that mainstream consumers do not share their willingness to spend on recorded music. At a lower price the value proposition might match consumers’ willingness to pay. Or maybe subscription services will be seen in a different light once Steve Jobs gets in the game. Right now and in their current form, however, access models are going to have a difficult time getting consumers to part with their money. By the balls? Not yet. (Daily Beast)
Rhapsody Product Chief On Advantage Over Start-ups
— Related: Brendan Benzing, Rhapsody’s chief product officer, tells Business Insider the opportunity for subscription services is real but believes established companies have an advantage over start-ups. “I’d rather be in our position than in a start-up’s position entering this space today, where you have to raise money on a six-month or yearly turn just to build up to the subscriber numbers we already have.” (Business Insider)
Compact Media Lands Funding
— London-based Compact Media Group has landed a £17 million ($27 million) investment from Lyceum Capital. Compact is a rights administrator and distributes royalties for TV, film and music. Its clients include BBC Worldwide, ITV Global Entertainment, National Geographic and Discovery Communications. The company expanded its U.S. operations back in July. (Cap Note)
Keith Richards Week Begins
— Sirius XM’s Underground Garage channel begins “Keith Richards Week” on Monday (Oct. 25). The week of Richards-related programming will include a four-part interview with Stevie Van Zandt. It precedes the release of Richards’ biography, “Life,” as well as the November 2 release of a compilation by his X-Pensive Winos band. (Press release)
Zune Pass For $150
— Microsoft is offering an annual Zune Pass subscription for $150. It normally costs $14.99 per month in the U.S. The plan lets users keep ten songs a month – all other songs download will be protected by DRM – which effectively lowers the price of the unlimited subscription service to $2.50 per month. (Unused credits do not carry over to the next month.)
Zune Pass works on PCs, mobile devices with Microsoft’s Windows Phone 7 operating system and on Microsoft’s Xbox 360 gaming units. The $14.99 price tag is higher than peers such as MOG and Rhapsody, although neither of them include ten downloads each month in the price of mobile subscription plans. (Ars Technica)
New Royalty On Movies In China
— China’s National Copyright Administration has imposed a new royalty on the playing of movies in Internet cafes and on long-distance buses. (Xinhuanet)
Appreciating The Album
— Underworld has quietly been one of the rare groups that uses its website for blog posts, live mixes and direct-to-fan sale of recorded music. Talking to DCist, Karl Hyde explains that the band enjoys the freedom allowed by the Internet but appreciates the value in an old-fashioned album release.
“Since we’ve started releasing on the internet, an album is just a thing we release. We publish on the internet every day and have done for 10 years; music, short films, words, links to other artists. The internet has given us the ability to break out of the traditional format of records and racking in record shops. But the truth is we love records. And records today are a calling card. Unfortunately they don’t sell in the way that they used to, even when we were an indie band in the early 90s. A record is a calling card to say we’re here and we’ve got something new to play for you.” (DCist)
