Social, smartphone penetration drive Spotify adoption in ANZ

Spotify expects to send $500 million to record labels in 2013

Spotify had its two most successful country launches ever in Australia and New Zealand, according to Kate Vale, Spotify managing director of Australia and New Zealand. The ad-based music streaming app opened for business in the two countries last May.

At an Innovation Bay breakfast today, Vale declined to disclose the exact number of customers Spotify has in Australia or New Zealand. But she said take up in terms of the percentage of population on Spotify in each country and the number of users paying for premium memberships are the highest the company has ever had so soon after launch.

Vale said the popularity of Facebook—a Spotify partner—and the high penetration of smartphones in Australia are likely drivers of Spotify adoption by consumers Down Under, Vale said. Also, Australia is the fifth largest music market in the world by overall revenue, she said.

“When those three things go together in a market, Spotify seems to do very well,” she said.

One audience member asked if the higher price of songs in the Australian Apple iTunes store compared to the US iTunes store could also contribute to Spotify’s popularity. For example, the Apple iTunes store in the US sells most albums between $9.99 and $12.99, while in Australia albums are frequently sold for $16.99 and higher.

“I don’t think so,” Vale said at first, but then admitted she “hadn’t really thought about that.”

“Normally when people do use Spotify, they tend to not use iTunes,” she said.

Spotify is not the only music streaming service to open for business recently in Australia. Telstra launched a similar service called MOG in June, one month after the Spotify launch. Pandora launched Down Under in December and Guvera relaunched at the end of January.

Vale said Spotify has tried to embrace both the music labels and the artists they represent, two parties that in recent years have often been at odds on royalty issues.

The music labels “own part of our business, and 70 per cent of everything we make goes back to the labels, who then in turn remunerate the artists,” she said.

Since its inception five years ago, Spotify has paid record labels $500 million, Vale said. Spotify paid $250 million to record labels in the last 12 months and expects it will pay another $500 million to the labels in 2013 alone, she said.

“Most [artists] embrace us,” Vale said. “Our top artists on Spotify are getting upwards of $300,000 a month on our platform.”

Artists also benefit from data and analytics on Spotify customer demographics, she added.

“We had an artist in our Stockholm office just recently who sat down with our CEO, Daniel Ek, and we basically showed them a heat map of everywhere in the world that people on Spotify are listening to their recent album,” she said.

“It actually really surprised them and they changed all their tour dates and tour places to accommodate where they were being heard.”

Vale said the success of Spotify’s ad-based free service may be lowering the amount of illegal music downloading worldwide.

In Sweden, where Spotify was created, music piracy has decreased by 25 per cent in the five years since launch, she said.

She estimated that 3 million Australians download illegal music every month and Australians illegally download about 1 billion songs every year.

Spotify is currently available on desktop computers and mobile smartphones and tablets. The company is negotiating to get its app on more platforms, including automobile dashboards of “a number of car manufacturers,” Vale said.

However, some of these discussions with car companies have been “really long,” she said. One ongoing negotiation has so far taken five years, she said.

While the Spotify interface currently relies on users searching for the music they want to hear, Vale said Spotify will soon add more music discovery features, customised to each user’s listening preferences. Also, users will be able to follow specific bands and receive recommendations directly from the musicians, she said.

While Spotify is strengthening music recommendation features, Vale stressed that the company’s business model is not converging with Pandora, another popular music streaming app.

Pandora and Spotify are “quite different,” Vale said. Pandora customers say what type of music they listen to and the service streams similar music.

“We’re becoming a little more like that, but it’s [still] very much a service where you need to tell us what you want to listen to.”

Follow Adam Bender on Twitter: @WatchAdam

Follow Techworld Australia on Twitter: @Techworld_AU

Tags New Zealandmusic streamingAustraliapiracyradioApple iTunesMP3royaltiesSpotifyrecord labelsmusiccopyright

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