Friday, March 19, 2010

Spotify -- Where's the Beef? Still Don't "Get" Your "Next Big Thing" Status

Spotify, the Euro-based online radio service, continues to be hyped everywhere in the news -- the company's CEO just gave a keynote at the SXSW conference, and the Los Angeles Times gives the company front page treatment in today's edition. Seems like Spotify continues to be publicly anointed as the "Next Big Thing."

But, why? I still don't "get" it (I wrote about this in a previous post).

Scores of companies -- literally -- have been offering Internet radio via a "Freemium" model for years (i.e., a "free" ad-supported service or a significant free-trial period for most, with the hopes of upselling a portion of those to a paid subscription model with additional features). Pandora (another tech darling), Slacker, Rhapsody, and Napster being just some of them (in fact, my own former company, digital music pioneer Musicmatch, offered Internet radio in this way years ago).

So, why Spotify? The underlying service is essentially the same -- the actual available music tracks are essentially the same -- and the business model is essentially the same.

Chalk it up to a great PR team that hypes Spotify's European roots and millions of users. But, virtually all of those users simply listen to the "free" ad-supported service (320,000 out of 7 million purported users -- i.e., about 5%) -- even the company's own clever home page video loudly proclaims "Instant, Simple, AND FREE!" as its call-to-action.

And, Spotify's subscription numbers pale in significance to even the much-maligned Rhapsody service (which still has hundreds of thousands more paying subscribers). Don't forget that Spotify -- like all subscription music services -- also sheds a portion of each users each month (via "churn"), meaning that it needs to continuously fill that void as well as add incrementally new users.

Finally, of course, Spotify still isn't legally available in the U.S. due to its inability to close deals with the major labels to date.

So, where's the "beef"?

Will someone "fill" me in on Spotify's special sauce?

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