Thursday, April 14, 2011

Spotify makes free marginallyless attractive

Spotify has tried to please the labels by cutting the hours on offer for its Free Users from 20 hours to 10, and introduced an arbitrary rule meaning you can only play a track five times. (Presumably, since the system struggles to recognise a track that appears on an album and a compilation, some tracks there might be a workaround that doesn't involve AudioHijack Pro).

The Guardian's Charles Arthur is very good on the real story:

To put it bluntly: Spotify is cutting the amount of free music people can listen to in order to please the American labels with which it is agonisingly negotiating to try to get permission to launch in the US. The fact is that the labels there – and for that matter in Europe – don't like Spotify allowing people to listen to so much music for free (even though Spotify pays them the stipulated amount per track, whether the customer is listening for free or on a paid subscription).
[...]
That overlooks the reality, which is that the internet's openness means that if you can't get your music for a low cost in one place, then you'll find someone ignoring the rules and offering it for free somewhere else.

It also ignores the reality about the effect Spotify has on digital revenues for the music business. It's the second single largest source of digital music revenue for labels in Europe, according to IFPI's latest report. And last week, Billboard magazine reported that countries where Spotify is licensed saw an average digital revenue growth rate of 43% in 2010. By contrast, neighbouring countries – including Germany, Austria, Belgium, Denmark, Italy, Portugal and Switzerland – saw only 9.3% digital growth last year. That's based on IFPI data too.
Spotify insist the move isn't about trying to transition free users to paid, nor to cut back on costs. Indeed, in its blog, Spotify stresses that if this was the idea it wouldn't really have much effect:
The changes we’re having to make will mainly affect heavier Spotify Free and Open users, as most of you use Spotify to discover music – on average over 50 new tracks per month, even after a year. Plus, the average user won’t reach the limit on plays for 7 out of 10 tracks, after a year of using Spotify. For those of you using Spotify to find new tracks to enjoy and share with friends, these changes shouldn’t get in the way of you doing that. Rest assured that we’ll continue to bring you the biggest and most diverse music catalogue available.
They might as well have called it Project Empty Gesture To Stop Freaking Out The Old Guys.