One Spotify to rule us all...

March 26, 2012

According to this post on TechCrunch, startups like Spotify that depend on premium licensed content have a fundamental problem: If they succeed, the content owners will jack up their licensing fees. But I think there is another problem, that affects us users in a big way, and that will essentially turn Spotify (or any other startup that happens to be even more succesful) into a monopoly.

The thing is this. In the old days, the carrier to distribute music to the consumer, i.e. the CD (or the LP), was standardised. We had one CD player, that could play all CDs, irrespective of the record company that our favourite artist happened to be signed up with. Things worked this way because used to buy CDs one at a time, released by different record companies.

We have tried to do similar stuff on-line with MP3 and the like. But with subscription-based services like Spotify thinks don't work the same way. When I subscribe to Spotify, I get a Spotify player that I need to play the music I like. If I also want to listen to music available through Google Music, I need a different player. It's like needing several CD players, one for each record company that happens to release CDs that you like. Clearly undesirable: you are not going to switch player whenever you want to listen to a different song.

Of course, we could develop a meta-player, that will collect all players into one, with a unified user interface (like eBuddy did for instant messaging). But the problem is even more fundamental than that: if you have paid 10 euros a month for a Spotify subscription, will you pay 10 euros again for another music service (that happens to have a few more songs that Spotify doesn't have)? I think this is quite unlikely.

Therefore, a service like Spotify quickly converges to a monopoly. It will essentially control the on-line music distribution channel (like the record companies controlled that channel in the physical world). In other words: Spotify will become like a record company, with the added disadvantage that there is no other record company that will compete with it.

This spells trouble for fringe music acts, that already had a tough time earning money in the physical world. A monopoly like Spotify can impose arbitrarily bad licensing agreements on them. If they don't accept, the only way to reach their audience is setting up their own website and build an audience this way on their own. Sure, they will reach their true fans. But anyone with a broad music taste and interested in a few dozen acts will quickly give up...

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Robin
, 2012-07-12 10:28:35
(reply)

I think you are somewhat missing the point of Spotify subscriptions. The cheapest subscription allows you to listen to an unlimited amount of music. Double that $4,99 and you buy yourself a license to use it on your f.ex. iPod which you can hookup to your HiFi system/car/etc. If you want to own the music as files, you must buy the song as a ‘special license’, just like in f.ex. iTunes.

Someone that really listens to music has been spending more money on CD’s, then before these services became available.

A good product and marketing often results in what you are labelling a monopoly position. I bet, that another company can -and will- build a better variant in time. When this happens, you will realise there is no monopoly, but there were just no competitors that really got the whole perspective on building a business.

Or, I am missing your point.. ;-)

Jaap-Henk
, 2012-07-12 17:59:12
(reply)

I think you are (partially) missing the point.

Indeed, a music lover would easily have spent much more money on CDs in the past, than what he spends now on a Spotify subscription - Spotify Premium even comes ‘free’ with certain ISP subscriptions here in the Netherlands. Moreover, he can now listen to all (well..) the music he likes/wants. That is the really good part of Spotify, that I myself enjoy as well.

However. In the old ‘CD’ days, you would have CD’s issued by many different record labels, that you could all play in a single CD player. These days, I believe users will typically not want to subscribe to several different music services like Spotify (why would they, if one provider basically delivers all the music). Moreover, it would mean they would have to have several different players installed and would have to manage their playlists in each of these players separately. Not very user friendly. Switching music service provider is similarly awkward: you would have to rebuild your playlists from scratch…

This is way I think music services like Spotify tend to converge to a monopoly. This has severe disadvantages for the musicians, as explained in the blog post.

Robin
, 2012-07-12 19:26:55
(reply)

I took time and feel blind, sorry ;-)

Currently the record labels have lowered taxes, likely to allow a new era for listening music legally. They must be intelligent enough to understand there’s a thin line of where artist, record company, service and end-user will remain happy(~ish), and as far as I can tell (as an end-user) we’re walking it. So when prices will rise, services will go down (again - due to end-users demanding fair prices), and there will be no place for a monopoly to exist. - Maybe the record companies will collectively take down such services, buy the services (software = end-users) and run it themselves..

The issues towards the end-user you are addressing are mainly signs, of that these services are the first attempt since the music industry became Napster’d.  People need to get used that there is no universal portable medium (needed) anymore. That not ‘all’ music is being offered yet, is because this medium transition is fresh (deals are still being made. For example: since a couple of months we can finally listen to the Red Hot Chili Peppers on Spotify (and they have no problem getting around). If I like a song that isn’t on the service I use, I have an issue..? Well, you likely have specific taste, and f.ex. Spotify allows you to imported music from iTunes to (freshly) bought CDs. I believe, given time, this problem will become minor/irrelevant to the main public (as seen with RHCP).

It is interesting you talk about a decentralized music provider :-) Let’s not limit the possibility factor on paying for multiple services, of which one you only listen to 5% of your songs from.

I feel the services like Spotify should look at these ‘issues’ and see possibilities (in the early phase they are in now)! What would be wrong if they could offer being a provider of the artist’ music towards the digital listeners? Why would they need to have sole ownership of the rights of the music. The income is all about quantity, and if multiple artists can sign up with multiple providers, finally stuff comes down again to who is doing the best job on what they are doing.