If you don't know what the fuss is about Spotify, you probably haven't used it. The company's co-founder Daniel Ek was at Music House last week, and treated attendees of the Music Publishers' AGM to the frankest public interview about Spotify I've yet heard. I also caught up with him after the session. It all adds up to the best picture yet of where the music phenomenon could be heading.
Ek admitted the ad business as not really launched yet, he also discussed delivering video in the future, using Spotify for P2P downloads, and even a public flotation. He also confirmed the popularity of the service which stealth launched in January and now boasts over half a million UK users, and is watching Last.fm and Pandora get smaller in the rear view mirror.
Spotify had "five to six times" the usage of any other streaming service, he said.
Doing a legal service is hard
First things, first, though. Ek described the original rationale behind Spotify. It won't surprise anyone who's used it, but the focus was on performance, performance and performance.
"We spent a lot of time looking in intricate detail about how to play music," he told Impact magazine editor Emmanuel Legrand. "What sound codecs you use, how you distribute it, how you stream it, and how you present."
"Spotify looks like it plays instantly but actually it's not."
Ek said that living in Sweden, he hadn't used a legal, licensed service since finding digital music services through MP3.com in 1997. WinAmp had been released in April 1997, and along with its companion software Shoutcast caught on like wildfire that summer. He'd been a Napster and Limewire user along the way, noting iTunes hadn't launched in Sweden - that came in May 2005.
Doing a legal service appealed, he said, because of the challenge.
"It's not hard to do illegal software... Spotify would be the most popular service in the world if it was illegal," said Ek. Apple badly needed some competition, he added.
"It's sad that the one dominant player, iTunes, doesn't care about the music industry," he said. "We want to be the second company that writes huge cheques to artists."
Making money. How?
Spotify is on a fascinating knife-edge between attracting P2P downloaders and not repelling them again with intrusive advertisements. Was Spotify on target with its revenue forecasts, Ek was asked?
"Not really, to be honest. We're in one of the world's worst recessions, and it's taken longer to get started. We view it as we haven't really started yet. In four months you can't build a self-sustaining model, like iTunes". Figures seen by The Register confirm that Spotify's revenues are negligable. But it's early days.
Ek outlined a range of future revenue options.
"We think the future of the music industry is an access model, where users pay either with their time by watching ads, or through ISPs or carriers, or through buying handsets. What is lacking in the industry now is what can facilitate those kinds of licensing deals."
Its best hope for now is making Spotify available in an offline and mobile player - that's "access" to an "access model" that people might actually pay for.