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Digital
Is Spotify considering additional Pandora-style service?
By CMU Editorial | Published on Monday 30 April 2012
Spotify will later this year launch a new service in the US along the lines of Pandora, according to Bloomberg, though it’s not clear if that would operate within the Spotify player – as a main function or optional app – or whether the interactive radio set up would be a standalone platform. Spotify hasn’t yet commented on the rumours at all, but Bloomberg is citing two sources as saying the streaming music firm is already talking to its content partners about the plans.
Pandora, of course, plays a personalised playlist based on any one individual user’s chosen artist, and enables users to rate, skip and block tracks. But it doesn’t provide the full on-demand functionality of Spotify, which enables users to access tracks, albums and playlists created by themselves or others on demand at anytime (subject to some limitations for free users in some territories).
Some reckon that Pandora-style services, with less interactivity, actually have more mainstream potential, with more casual music fans (which is most people) being put off by too much functionality. And British streaming service We7 said just that when it removed total-interactivity from its free-to-use option last year.
Pandora-style set ups are also cheaper to run, because generally rights owners charge less when a user has less control. Plus in many territories the operators of such platforms can licence both recording and publishing rights via collecting societies. Spotify-style platforms can only licence publishing rights (the money due to songwriters and publishers) via the collective licensing system, while sound recording rights must be licensed directly from the record companies, who will generally make more demands in terms of equity, up-front payments and ongoing royalty fees.
That means that a Pandora-style service would be more cost effective for Spotify in the freemium space. These days the ad-funded Spotify free service is run primarily as a sales tool to persuade music fans to upgrade to a proper subscription, with both the digital firm and its content partners taking a hit.
Original plans to make the freemium version a viable business in its own right seem to have been dropped, though restrictions put on the free option in Europe (to reduce costs and make paid-for options more attractive) have been reduced in some countries, and are still to be applied in the US. Going the Pandora-style route for Spotify Free might look attractive for both the streaming service and its content partners, though Pandora itself has always resisted launching outside the States, claiming royalty rates demanded by non-US collecting societies are too high to make their platform viable.
Opinion is divided on how Pandora, which floated on the stock market last year, is doing, though with a self-declared registered user-base of 150 million, of which 50 million were active in the last month, the twelve year old digital firm has much, much bigger reach than Spotify and, indeed, the current biggest player in the fully on-demand streaming music space in the US, Rhapsody.
