Leading the pack in digital music, Spotify has been making strides in the business world lately. Posting increased revenues for the first half of 2012, returns for the online music streaming service are expected to more than double as we ring in the New Year. With a money smart business model, and a customer-centric music service, Spotify is certainly providing a sense of hope to the much troubled music industry.
Established in 2006, the self-proclaimed, on-demand music site stepped onto the scene providing customers with the ability to generate custom playlists for their listening pleasure. Hailing from Sweden, the subscription-based service also enables users to share their music interests with friends via social media. Spotify has virtually captured every music lover, enticing everyone from hardcore punk rockers to easy-going reggae lovers.
Spotify’s broad appeal to the masses lends a hand to the company’s financial success and subsequent growth within the music industry. Since the Internet boom in the early 2000’s, the music industry has experienced a difficult time in regulating (and profiting from) online sharing of music. The likes of Apple’s iTunes software has certainly reinvented the process of gaining profits for music labels and artists alike; however, Spotify has created a lucrative deal structure with music labels, requiring them to pay either a $200 million annual fee or 75% of Spotify’s revenues in exchange for their artists’ presence on the site. This is not to mention their subscriber based business model where users have three options to either stream music for free with ads, pay $5/month for ad free streaming, or $10/month for streaming without ads and mobile access-which is an absolute must if you ask me.
So, exactly what are the implications of Spotify’s portended success? Well for starter’s, the company’s label deal structure and subscriber based business model are inherently profitable for the company. These two key factors have the potential to reap financial success for the company in 2013, something to the tune of $500 million. Secondly, the service’s customizable offerings are a total draw for new and existing users. From an editorial app that enhances your musical experience, to an app that locates local concerts, Spotify has created a new and improved portal that (legally) gives you everything that you could imagine where music is concerned. This is vital for the modern day music industry that was rocked by the likes of Napster and other illegal sharing sites.
The fundamental takeaway from Spotify’s success is to create a service or product that is equally beneficial for consumers, as it is profitable for your business. Not only must your product or service be beneficial, but it must also carry distinctive qualities in comparison to what is offered in the market. In a nutshell, draw you potential patrons in with a new and innovative product or service, and keep them engaged with relevant and valuable features. For Spotify, up next on the horizon is a web-based version of its desktop software that will enable users to access their custom library while away from their computer or mobile device. This is truly one step for music lovers, one giant leap for saving the music industry.