Daniel Ek, founder and CEO of music streaming service Spotify, says he wants to build on the early popularity of the ad-supported free model by developing a portable service and attracting users to the premium service.
Spotify launched in Stockholm in 2006 and now also has a London HQ. The free version is available in the U.K., Sweden, Norway, Finland, France and Spain, while the premium service is additionally available in those countries as well as various other European territories.
Ek spoke of its notable growth in the U.K. market during a session at Brighton’s annual music conference and festival the Great Escape today (May 15). Since fully opening to the U.K. public on Feb. 11 – it was previously an invite-only service from existing users during a beta phase – Ek claims the site now has over a million users in that market. It also boasts 700,000-plus users that have amassed in Sweden since launching in 2006.
Ek attributes the growth to its ease of use and the “quickness” of the service, adding that only around £5,000 ($7,600) was used to market the product when it was initially set up.
Spotify is not currently available in the U.S. but Ek says there are plans to expand into new territories in the future. Ek also talked about a portable device to partner with Spotify.
“There are lots of things we’re working on, such as portability,” he said, when asked about expansion. “We get such a massive response from people in the U.K. and Europe, so we feel pressure to produce something that is great. The problem with the music industry is that there’s not a lot of great integrations, with the exception of iTunes and iPods.
“It’s a hard problem to solve so I won’t commit to a timeline but before the end of the year hopefully we’ll have something that people can move with. For us, it’s more important to scale the revenues we have and bring artists revenue than expanding. U.S. is definitely on the list so I hope we’ll see something end of the year or beginning of next year for the States.”
Asked if Spotify was working on mobile applications, Ek said: “Not across all handsets but I can confirm we’re working on something that will work on mobiles.”
And there was a strong hint about a partnership with Last.fm: “We definitely want to have music recommendations but we would never recommend tracks ourselves. I’d love to work with someone like Last.fm and in a couple of days, you’ll see an announcement for something like that.”
Looking to the future, there was a focus on how to make the subscription model of £9.99 per month ($15.23) more appealing through the development of more “social features.” These would include interoperable applications, the ability to share playlists and bringing the user closer to their favorite artists.
According to Ek, the user base has a skew of 55% male against 45% female, and the largest demographic using the service was between 25 and 35 years old.
“We haven’t tried to change the behavior of people, we’ve tried to cater to what they’re already doing,” he cited as a major factor in Spotify’s success.
“Piracy is not happening because it’s illegal, it’s because it’s the way people want to consume music,” he added. “I think music has a value and I think Spotify is a service that recognizes that. It’s not a question whether music is free or not, because it already is out there on piracy networks, it’s about how we can find a way to monetize [that].”
Giving little more than “high value content” as an attraction for advertisers, Ek said companies that are advertising are seeing the users’ “engagement” with ads. He claims Spotify has almost five times the click-through rate of other popular online advertising space.
While stressing that the “user experience” was the most important factor to Spotify, he also recognized that the service offers a different experience for a new generation of music consumers. “If you look at our usage number, we’re at the point where people consume more music [individually] through an access model than their own music collection,” he said.
As a result, Ek believes streams should be reflected in music charts. “We know that we can break artists well and I think that should be reflected in the charts,” he said. “The music industry is not going to be about CD sales any more, that area is dead. We’re not trying to become a record label, the only thing we want to be is a technology company.”