With a new free mobile offering, Spotify users can stream playlists and discover new music. But to pick a specific track to hear on demand, you must be a paying subscriber.
NEW YORK — Spotify founder and CEO Daniel Ek says fans of the popular Swedish-based global streaming service spent 4 ½ billion hours listening to music on the service in 2013. Unless those people happened to be premium subscribers forking over $10 a month, they weren't listening on their smartphones.
On Wednesday Spotify unveiled a new ad-based service for mobile users that will permit those folks to access to Spotify's 20+million song catalog for free. And in a major coup for Spotify, that catalog will now include the works of Led Zeppelin, the legendary band that until this deal had withheld its music from streaming services.
As part of the new mobile offering, you'll be able to stream the playlists that you created on Spotify or the playlists from other users that you follow, on your phone. You can also discover new music, or dive into a favorite performer's entire back catalog, without the kind of restrictions that would only let you listen to a track from that artist once every 20 minutes or so.
Indeed, given a chance to preview the new mobile offering ahead of launch, I listened to more than an hour of Frank Sinatra, interrupted only every few songs by short advertisements from the likes of the U.S. Postal Service and Xbox One.
"The smartphone is the predominant way that people consume music," Ek says. "And we want to be where people actually listen to music."
Ek spoke to me ahead of the Wednesday event in a conference room dedicated to Radio City Music Hall at Spotify's New York offices, with images of (among others) Sinatra, Stevie Wonder, and Elton John.
"While Spotify has very high reviews, if you look at the actual reviews in an app store it's quite polarizing," says Ek. He pointed out that Spotify gets a lot of 5-star reviews, but also its share of 1-star reviews. "And when you look at the 1-stars, almost every single one of them is like `I thought this should be free or it was free.'"
Of course, Ek is banking on the belief that the new free mobile offering will not only help Spotify expand a member base north of 20 million active users globally, but get more people to join the paid subscriber ranks. About 6 million currently pay. (The U.S. is Spotify's biggest market.)
"The strongest correlation to paying is usage," he says. "The more we get you to use the service the more likely it is you're paying."
Why continue to pay up? For starters while you can listen to any artist via the free new mobile tier, you must listen in shuffle or random mode. You cannot choose the given track you want to hear now on demand, without being a subscriber. During my listening session with The Chairman of the Board, I couldn't play It Was A Very Good Year or All The Way when I wanted to hear them, though I figured I'd hear such classics soon enough because they were in the Sinatra playlist I was shuffling. You can eyeball the songs in the playlist, you just don't know the order in which they'll play. (I couldn't listen to Led Zeppelin ahead of today's announcements.)
Moreover, only premium subscribers can download music to their phones to listen to offline, a boon of course to those of us who spend a fair amount of time on airplanes. And paying customers aren't subjected to ads. Ek says those who do get ads hear about 2 1/2 to 3 minutes per hour compared to 12 to 13 minutes on commercial radio.
Spotify also extended a big time benefit to people who access the service via the iPad or other tablets. As of Wednesday the company now treats them the same as if you were listening to streams on a desktop or laptop PC. What that means is that unlike on the mobile phone, you can choose songs on demand whenever you want to hear them, provided you also take in some ads, same as on other computers.
Spotify's latest moves come during a time of intense competition in a business that in one form or another includes Amazon, Apple, Google, Rdio, Rhapsody, Pandora, Slacker and others. Beats Music is expected to launch its own digital music service early next year as is YouTube. Google recently made available its Google Music Play app available for iOS. Last October, Rdio made its personalized streaming stations free to users on mobile platforms.
"I'm not necessarily afraid of competition. I think it will just further validate the space," Ek says.
Spotify's CEO admits the company isn't profitable yet. "We're still early on in this story. We're taking every single dollar that we make on subscriptions and we're putting them back both to the music industry (labels in licensing fees) and (in) launching new markets."
Indeed, Spotify has gone from 17 markets at the start of the year to 55 worldwide. "For me we're really focusing one, two, three on growth, and not on profitability."
"Not only are we licensing for every single territory that we go in we actually set up offices to have local people on the ground—ad sales, label relations, it's a huge investment on our end. That's what's keeping us from being profitable."
The addition of Led Zeppelin will only help.