Spotify is a great product, I use it every day. It's an online music streaming service available for a number of countries in Europe (sorry, Portugal is not in the list yet... shame on you Spotify).
Warning: This is my own opinion... a long one.
I have been using it since its early days, when signing up was open and free and their ads seemed "amateur" at most. They even had a "Spotify voice mail" into which users left their messages of spotify-glory eventually ending up in self-advertising ads.
Discussions with business aware people led me to believe that there is something not quite right with their business model. To users it was music on tap for free, high quality, high availability, nagging ads but nothing we couldn't live with. I know that the key of success in online services is the ability to create a critical mass of users. Hence it made sense to give away music on tap for free.
Starting a business is difficult and incurs a lot of risk. Most technology companies have significant losses during the first years of operation, but often after braking even, the gains far outweigh the losses. In other words, losses in this case == investment.
But this is not sustainable forever and something was bound to happen. They would have to change the revenue model or increase the density of ads (a lot!) in the free accounts to make people switch to the paid version or go bust or be backed up by a company that made money some other way...
Adding to this, they implemented some serious anti-tampering stuff into their windows client since the very initial versions, including fancy anti-debugging and obfuscation code. Clearly they either over-engineered it or just prepared for a longer-term reality... Not that it is a bad thing, implementing decent security measures since day one, but it was also a visible sign that they did not want people cracking it.
The way I see it, there's a thin line between giving away enough to attract interest and new users and charging enough (from whatever multiple sources) to keep the business afloat, or at least following to the almighty business plan. Giving away stuff keeps people happy and attracts new users, etc, but does not pay the bills. Shutting the service to paid customers would kill the expansion of their user base. I think they never got this balance exactly right (assuming of course it was possible in the first place).
Over the past year or so they introduced various changes that affect the afore-mentioned balance. Their initial model was something like:
- Paid ads;
- Free accounts to everyone: Lots of music available, ads that could not be skipped;
- Premium accounts for £9.99 per month: No ads, higher quality streaming;
Shortly after the following features also appeared:
- Paid ads: Arbitrary companies were able to advertise in Spotify, spamming free accounts forever. Artists were also advertising their work via Spotify ads;
- Premium accounts: Offline mode, mobile access for some smartphone platforms and unrestricted international access, even higher quality streaming, invites were provided;
- Free accounts I: access out of allowed countries was limited to 14 days, [the mac client paused ads if sound was muted - sneaky, eh?];
- Mobile access: Various applications were created and deployed for the most widely used smartphone platforms (iPhone, android, any other?). This is, of course, restricted to premium accounts;
- Free accounts II: All existing free accounts kept working normally. However, free accounts could no longer be created without an invite. Invites were being handed to paying users and could be used as tokens to create new free accounts. So free accounts stopped being free, essentially;
Now the free user base could only expand with the help of the paying user base. Clever! The number of invites given to premium account holders was now controlling expansion of the free user base. So if you didn't have an account, you'd be left with 2 choices: either find someone with a premium account and get an invite from them or buy a premium account yourself.
Also there was little choice to the user base. Either you have a free account with nagging ads or you pay £9.99 per month... or the ridiculous £9.99 for one day. There weren't too many commercial ads, most were artists promoting their music/albums/singles/whatever and the rest were self-advertising. Targeted ads seem to work so-so. Some ads my wife gets I never heard and vice-versa. However, I still get spammed by Rhianna's promotions... something's very wrong there... My playlists are little more than Iron Maiden, Bruce Dickinson, Megadeth, Manowar... you get the picture...
Fast forward to 2010 Q1/Q2 (IIRC) and here's some more changes. I think these prove what I described above. Spotify decided to press on and attempt to expand its paying user base now. This was expected, and as far as I'm concerned, overdue by now. What we have now is:
- Paid ads: Arbitrary companies were able to advertise in Spotify, spamming free accounts forever. Artists were also advertising their work via Spotify ads;
- Free accounts: Left untouched. All free accounts are kept working, but can only be created with an invite coming from a premium account;
- Premium accounts: Mobile access for some smartphone platforms and unrestricted international access, even higher quality streaming;
- Integration with locally stored music files: The Spotify player can now play locally stored files and even share them with mobile clients. I don't know exactly how and when this works, but it sounds 'local'. Nonetheless, it makes sense to me;
- Open accounts: Free version of Spotify, no invite necessary, but limited to 20h per month. Like a demo, really;
- Unlimited accounts: Poor man's premium account. Half the price of a premium account but no mobile access, no offline mode and no streaming abroad. Pretty much all the good features gone except for the music, of course, and with no ads;
There it is, another shift towards expanding their paying user base. This starts to open up the choice range of non-paying customers and the game just might start changing. I'm not yet willing to invest £60 per year on a Spotify Unlimited account (the premium is still too much), particularly because most a lot of the music I enjoy is not there (which I reckon is mostly my own problem). However, it begins to become more and more reasonable to a wider and wider range of users and potential users.
I must also say that my ramblings about expensive and cheap are, of course, relative. What's expensive for me may be very cheap for you and vice-versa.
Good stuff, Spotify! Now get those label contracts going (get Rammstein back on the lists please, btw), as well as Metallica, AC/DC and every other song in the world :] A bit like Google! Hmm.....
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Spotify is a great product, I use it every day. It's an online music streaming service available for a number of countries in Europe (sorry, Portugal is not in the list yet... shame on you Spotify).
