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Marketing projections are often optimistic, but the leaked marketing documents predicting 50 million U.S. users in the first year are crazy.Spotify is a subscription music service with a free tier. European customers love it because it looks and works a lot like iTunes but lets you blend songs you do own — it uses “scan and match” to take your personal library and make it available in the cloud, just like Apple will introduce later this year — with songs you don’t own, which come from Spotify’s library. It also uses some interesting technology to make songs start fast and play with few stutters.
But after almost three years on the market, Spotify has only 10 million users, and only about 1 million pay for it.
There’s no reason to expect the U.S. market to be any better. In fact there are lots of reasons to expect it to be worse:
- The American market is crowded with subscription services — Rdio, MOG, and Rhapsody to name three. None have ever come close to those user numbers. Rhapsody has been around for 10 years, and has been available on mobile phones for more than two years. It just topped 750,000 subscribers. Nobody else is close.
- People are spending less money on music every year. Global music spending in a steep decline. There may be many reasons why this is true — the record labels didn’t jump on digital music soon enough so a whole generation grew up accepting piracy; there’s more competition for entertainment dollars from sources like video games; it’s harder to get consumers to place value on mere bits as opposed to physical objects. Whatever the reason, expecting millions of consumers to reverse a decade-long trend and start paying for music again requires extreme optimism.
- The labels probably won’t let Spotify be as generous with the free music here. Spotify offers up to 10 (it used to be 20) free hours of on-demand music per month before you have to pay. The company hasn’t revealed what the free tier will look like here. But labels and publishers have historically treated the U.S. market differently. No other company — whether small startups or big players like Microsoft, Google, and Sony (which is itself one of the four major labels) — has convinced the music industry to allow this much free music without restrictions. It’s hard to imagine Spotify somehow convincing them otherwise.
- The Facebook deal might not even be exclusive. TechCrunch and others have reported that Spotify won’t be the only service involved in Facebook’s music launch.
- Facebook didn’t help iLike. Remember when iLike launched free music playback within Facebook pages? Neither does anybody else. The service was hampered by the fact that users only got 25 free plays per month — the same as Rhapsody offered at one point — and later it got sucked into MySpace and the experience went downhill (for instance, it would launch a MySpace window whenever you tried to play a song). But Facebook integration can’t magically build a userbase for a service that consumers are fundamentally not interested in.
Spotify is a great service for people who love music and are willing to pay for it. Unfortunately, that number is small and shrinking all the time.