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Spotify is in the news following Taylor Swift pulling her catalog from the service.

In this article, Quartz details Spotify's growth challenges as new competitors that are much better funded (Apple, Google/YouTube, Amazon) all get into the music fray.

How would you grow Spotify if you were in charge of its growth, and how would you super charge it to help it lock in users as these new, massive challengers, enter the market?

  • SE

    Sean Ellis

    over 2 years ago #

    I would tell a high profile artist to publicly "break up" with the service. Ideally it would be someone who sings a bunch of breakup songs. Then I would publicly engage with her in the news media. I would make sure she emphasizes that it isn't fair that people get free music from the service. :)

    • JB

      Joseph Bentzel

      over 2 years ago #

      Sean is being humorous here commenting on the Taylor Swift incident, but from the standpoint of what's actually going to happen with Spotify it's not a joking matter.

      To frame Spotify's problem differently than most of the thread I would say that it's not a 'growth' problem per se, but a 'product/market fit' problem.

      Here's what I mean by this seemingly insane statement for a company with so many millions of users and a lot of revenue.

      Spotify's full 'product'---at its core---is really a form of 'two-sided marketplace' in which its 'producers', i.e. artists and writers---benefit from providing their offering via a paid and/or ad-sponsored revenue model.

      What Taylor Swift basically did was say that from the PRODUCER PERSPECTIVE of the two-sided marketplace model---she didn't see value in participating anymore. Rather, she saw 'channel conflict' between Spotify's model and her other revenue generation channels.

      What's clear in the wake of this issue is that in the realm of digital commerce, 'product/market fit' is not a static concept---it is fungible and evolves over time along with the market a given product catalyzes.

      So now that Spotify has serious revenue and 'user traction'---the producer side of the equation has issues with their piece of the action.

      The big takeaway: It's now necessary for Spotify to evolve and systematically address the issues of the producer side of its two-sided marketplace model---or its traction with the consumer side will have problems.

      Here's a link to a CNN piece in which the producers make the case I am making above from their own point of view.

      http://edition.cnn.com/2014/11/12/tech/web/spotify-pay-musicians/index.html

      • SE

        Sean Ellis

        over 2 years ago #

        Thanks Joseph, I agree completely that enough people on both sides of the marketplace need to accept Spotify's model for it to work. I also agree that Taylor Swift leaving could be just the start of a landslide of artists to leave the service.

        But I also was serious with my comment. The publicity that Spotify has gotten from this should be fantastic for acquiring a lot more consumers on the service. And the consumer dollars can potentially solve a lot of the producer concerns. What may need to happen is that they'll rethink the terms with the top artists. The top 10 artists may need to get a massively disproportionate amount of the proceeds. If the top 10 are on there, the rest don't have much power.

        • JB

          Joseph Bentzel

          over 2 years ago #

          "When I hear stories about artists and songwriters who say they’ve seen little or no money from streaming and are naturally angry and frustrated, I’m really frustrated too. The music industry is changing – and we’re proud of our part in that change – but lots of problems that have plagued the industry since its inception continue to exist. As I said, we’ve already paid more than $2 billion in royalties to the music industry and if that money is not flowing to the creative community in a timely and transparent way, that’s a big problem. We will do anything we can to work with the industry to increase transparency, improve speed of payments, and give artists the opportunity to promote themselves and connect with fans – that’s our responsibility as a leader in this industry; and it’s the right thing to do." Spotify CEO

          Sean: Spotify CEO doesn't see it as a user acquistion/growth problem either. He knows that he better fix his problem---perceived or otherwise---with the 'long tail' of producers, not just the 'top 10'.

          When there are fundamental business architecture issues that arise as a startup evolves and scales, user growth is not a panacea fix.

          • MB

            Morgan Brown

            over 2 years ago #

            It's interesting to here all the numbers. Swift's team says they made $500,000 off their catalog, Spotify says $6 million pro forma.
            The pro forma is tied to user growth, not better economics, so I do think that the business architecture is tied to growth and vice versa.

            But growth on its own won't solve the problem, but lack of it can certainly hasten the unwinding.

      • SC

        Shana Carp

        over 2 years ago #

        Her channel problem is the same for any streaming publisher, including apple, where she also sells music.

    • TW

      Tommy Walker

      over 2 years ago #

      I see what you did there ;-)

    • DM

      Dan Medcraft

      over 2 years ago #

      Thom Yorke from Radiohead did this about a year ago:

      http://www.theguardian.com/technology/2013/oct/07/spotify-thom-yorke-dying-corpse

  • DF

    David Fallarme

    over 2 years ago #

    Fun question! Hard to say without all the facts, but I'll take a stab at it.

    I liken Spotify to Uber and Netflix: product is best in class, acquisition model is working, but growth is limited by legislative and licensing barriers. So I'd tackle those. I'm guessing that the winner of the 'streaming wars' will be determined by who's got the biggest global footprint and the largest, highest quality catalog. The battleground for growth will be in boardrooms and executive deals, not in UX or CRO or social network integration. Poach some record deal execs, continue expanding international partnerships, get some lobbyists.

    • MB

      Morgan Brown

      over 2 years ago #

      Interesting comparison @davelocity seems like in that case they'll need more cash to fight those battles. Uber raised their billion dollars specifically to have runway to work through those issues. Spotify has raised about half that in seven rounds (including $250 MM in 2013). Will be interesting to see where they put their money to work and how far they get on what they have in the bank.

  • LA

    Luke Angus

    over 2 years ago #

    2 steps:

    1) Allow artists that our very popular on the platform-say (10 million streams a year) the ability to lock certain content. New albums etc. This locked content is only available to payed subscribers.

    2)Allow artists the ability to earn an affiliate commission of every user that they bring to the service and then converts to a payed subscriber.

    Example: Taylor Swift

    Taylor doesn't want to lose out on the $2.50 she's going to earn per album for her new album release.

    She locked the new album to payed subscribers only-maybe has 1/2 songs unlocked to the free users.

    She's leverages her massive social media followers to come to spottily where they can listen to a few new songs/old albums for free.

    Spotify now can advertise to these users to sign up to a payed subscription to unlock the Taylors new album.

    Spotify pays Taylor an affiliate fee for every converted paying subscriber, making sure its more than the $2.50 tailors getting payed by album sales.

    Taylors happy. She earns more money for each album "sold" and very easy for her to promote the service.

    Sorry this is a bit of a ramble-was a shower epiphany!

    I hope I got the idea across. The ability to produce scarcity and leverage artists to market the service.

    Feel free to reach out to me: lukea238@gmail.com for further clarification/ideas.

    Lets do the numbers first:

    For every album sold Taylor earns a conservative $2.45 from physical sales and iTunes etc

  • AA

    Anuj Adhiya

    over 2 years ago #

    Get acquired by Netflix.
    Netflix then offers an unlimited Movies + Music subscription level for $5 more/month than just the movies subscription.Even if half of the 50M+ Netflix userbase takes that, that's a huge chunk of change.

    Spotify on it's own then becomes like Whatsapp.
    Free for a year and then $5/month thereafter.
    No more free, ad supported version for life

  • R8

    Ren 85

    over 2 years ago #

    I would add a middle tier that lifts or reduces some of the restrictions from the free tier such as the number of skips. Could also let users select a certain number of tracks a day to play outside of having to shuffle all the music. Reduce from 2 ads to 1 etc. Whatever way makes most sense from a financial standpoint.

    Perhaps even just remove the ads and increase the number of skips per day for those on the middle tier. This would help convert those that want to upgrade but can't afford the current premium plan.

    • SD

      Sean Doggendorf

      over 2 years ago #

      They had an ad-free option (all else the same) at $5 that was removed a year ago. I was going to subscribe to it before they moved to only having the $10 ad-free/any device option.

      That lower price point may have converted some additional users into subscribers (myself included) that wouldn't pay the $10 price point.

  • AM

    Adam Miller

    over 2 years ago #

    Having worked in the music industry (it was my first major before marketing) back east, I have a certain perspective having worked with these folks. Unfortunately, changing the industry isn't an option in the near-term. If legacy industries move at glacier speed, the music industry moves at rock speed. They're simply too hung up on what they have (had) to accept the new for at least another 3 to 5 years when they'll have nothing at all. They're in defense mode, not offense as we so often prefer. They also believe that every streaming user would have otherwise been a purchaser...a fallacy. Listeners sample music on Spotify *because* they don't have to buy it.

    I also disagree with likening Spotify to other streaming services. It's not like Netflix. TV and movie producers have an initial big avenue/opening, like theatrical releases and primetime slots that still can draw significant audiences in the millions, but aside from Taylor Swift's latest breakthrough, album sales haven't had a good sales week in nearly 15 years. Even then, it's a pittance compared to streaming.

    So what can be done?

    1.) Delay new releases for non-paying users, not have artists pull out wholesale. For some reason, artists have decided that they're "part of the problem or part of the soluton" (a la Thom Yorke and Taylor Swift) by being on Spotify. It's dividing them along with management, labels, producers, etc.

    But if Spotify agreed to make artist back catalogues available and delay new album or single releases on the service for, say, a month, you could a.) drive paid subs for early access and b.) satisfy artists who claim early sales get crushed by streaming.

    2.) Reduce ad load for free users. Rarely ever has annoying someone into submission by running a 2:1 content to ads ratio been a good practice. 33% of my free listening is ads, and it's getting old.

    3.) Bring back referral. It still baffles me that despite the success of referrals to grow paid services, Spotify ended there's months ago.

    4.) Limit the amount non-subs can listen to one song in a given time period. If I like a song enough to listen to it 10 times in 2 days, it means I need to be directed to purchase.

    5.) Add value with other merch. If I've bought a subscription, help bridge the gap with "360" deals that the music industry loves. First crack at concert tickets, exclusive tees, etc.

    Just some food for thought.

  • ME

    Marcus Emne

    over 2 years ago #

    Spotify struggle a bit with their social and viral engine. Not that what they've done and tried has been all bad, its the product per see that is less of interest to share. We like to share stories that are visul (info graphics, videos etc) or interactive elements (what 80's artist are you). Not links to a song. I have not found a comparison between the amount of music videos shared via YouTube vs songs via Spotify. But I'm quite confident YT would beat up Soptify badly. Conclusion; Spotify should build a machine to add videos to their portfolio.

  • LT

    Luke Thomas

    over 2 years ago #

    Rachet up the frequency of ads on the free plan.

  • AA

    Ayman Abdullah

    over 2 years ago #

    Get mom and dad to start using the product.

    Facebook and Netflix both started with small niches but eventually expanded for mass appeal. Now even grandma watches dexter on Netflix and posts about it on Facebook.

    Spotify needs to revisit its licensing model and facilitate junior teaching mom how to listen to the BeeGees for free.

  • DM

    demetrius michael

    over 2 years ago #

    God this is fun. B2C is the easiest.

    I'm with @sean
    She posts on youtube. It's not always about the money. https://www.youtube.com/user/TaylorSwiftVEVO

    Growth.
    Here's a couple:
    - Expand International: https://support.spotify.com/us/learn-more/faq/#!/article/Availability-in-overseas-territories
    - Allow payment that's not Credit Card. You'll create a monopoly if you accept other payment options. http://www.capgemini.com/resource-file-access/resource/pdf/wpr_2013.pdf
    - Change the ads engine. You can easily access all the lyrics, and you can serve contextual ads to what the song is talking about. Then you can pay artists a fucking lot.
    -- Breakup song lyrics? Serve dating apps.
    -- Rap song about Beamers / Benzs / Bentley ads? Serve luxury car ads.
    -- https://www.youtube.com/watch?v=rF-hq_CHNH0

    For fun.
    - Acquire Soundcloud. They just lack music, but have excellent mechanics. Might be a complementary.
    - Try radio ads. "Want to hear that song again, download our app. www.spotify.com" (contextual marketing)
    - Become a label, represent new artists. This sucks: https://www.spotify.com/ca-en/about-us/labels/
    This doesn't: http://en.wikipedia.org/wiki/List_of_original_programs_distributed_by_Netflix

  • MB

    Matthew Buckley

    over 2 years ago #

    I would take a deep dive into in app behavior and usage data to identify common conversion activities of users moving from freemium to paid and formulate a marketing/sales strategy on how they can capitalize on their learnings to influence product UI, and freemium user engagement to drive higher paid conversions.

    • SE

      Sean Ellis

      over 2 years ago #

      Their premium upgrade rate is already one of the highest I've ever heard for a freemium service. Not to say there isn't room for improvement, but I think they need more top of funnel free user acquisition.

  • VV

    Visakan Veerasamy

    over 2 years ago #

    I wonder if there are some social elements that are still untapped. I like to think small- what's something that Spotify could do to get ME to share Spotify with my friends, and cajole them to signup? You want viral loops for this sort of thing, yes?

    Incentivize mixtapes? Maybe mixtape competitions? Encourage people to make party playlists, incentivize that, make that easier. I'm sure everyone would like to have a copy of the mixtape that reminds them of their school days, etc. Encourage people to send mixtapes to friends, lovers, schoolmates. Encourage comments, encourage upvotes...

    TL;DR: Encourage me to make a playlist for my wife and share it on Facebook, so that we can show off how loving and adorable we are to the rest of our friends. That sort of thing.

    People want to feel connected, want to feel a part of something. The more Spotify encourages that, the more users they'll get. If this increases users significantly, I think that'll help with the boardroom and exec battles that @davelocity mentions. (I never think enough about that stuff.) Lobbyists will be really important. How do we persuade the lobbyists, though?

  • KD

    Karolis Dzeja

    over 2 years ago #

    They are in a tough position. Spotify is selling a commodity (which is produced by other parties). Their competition just needs to break even on streaming to support their primary business. Apple doesn't need to make money from streaming because they make money from selling hardware. Google doesn't need to make money from streaming because they make money from search ads. Amazon doesn't need to make money from streaming if it gets people into Amazon's ecosystem.

    The music industry can watch Spotify's profits and negotiate contracts based on that. How is Spotify ever going to survive long term with that?

    In the short term, Spotify can grow by offering the most convenient way of listening to music across all devices. It's the best service for me to listen to music on my desktop/phone/car and I'll credit Spotify for putting an end to my music piracy habits.

    The main thing Spotify has going for it is that it doesn't have any conflicts of interest with the consumer about providing them with the best music listening experience. Apple wants to lock you into using Apple hardware. Google wants to track you. Amazon wants to sell you other things. My only optimism is that Spotify's lack of such conflicts will lead it to create the best experience for consumers. But my pessimism is that the competition will make the business unprofitable.

  • SC

    Shana Carp

    over 2 years ago #

    their ad sale capabilities are a disaster. The data matching capabilities for their ad sales capabilities are a disaster. I know of an agency in NY that last year let go half of it staff. Basically it was an arm of spotify - and it fell apart because brand advertisers couldn't figure out if it drove sales.

    They need to fix their ad operations from a strategic point of view. My bet is their data as a product is also a mess, from knowing at least one data scientist they tried to hire. Even facebook works with the IAB (and I think twitter now does too) - I don't know if spotify does.

    They should talk to people like the 614 group. They need to get their house of cards in order so someone like Xaxis can make a purchase in an efficient manner. They need to prove to the market that they have reach in an orderly way. And not only that, they need to prove to Taylor swift that her earnings will rise - and the only way to do that is to bring in more money in an orderly way as a segment leader.

    Growing the user base isn't going to help them because the user base isn't what needs to be grown. It is a mirage. The growth has to come come from something that involves cash. AKA, ads.

    • TW

      Tommy Walker

      over 2 years ago #

      You would think that if they did something like firing a self destructing tracking cookie when the ad played, and the advertiser could put that on their site, they could more reliably track referral traffic from spotify.

      • SC

        Shana Carp

        over 2 years ago #

        No.
        Go into your shower, and get a shampoo bottle. The conversion process for the shampoo bottle you are holding may or may not have involved a website. There is a very complicated process for determining its creative budgets and its ad spends and where which pieces go where in order to get you to hold the shampoo bottle. (And people like P &G are nuts about this process, word on the street) The presence of the website may or may not at a given point for certain people and certain potential customers be important. (Depending on the shampoo bottle, you may not even be able to buy it from its brand website, so referral traffic may not be its end all be all for that question)

        Ads as a sales driver, OTOH, is a different question. Compared to its analogue, radio, it is very hard to place and price a spotify ad for a target audience. If I were a local pizza place with teenagers from my town, and I wanted to by radio spots to tell teenagers in the next town over about my pizza, root beer floats, I actually can do this and measure what happens. I actually can't figure out how to make this ad with spotify. Conversely, I can't plan to do the same thing if I am a national chain of pizza, rootbeer floats, and swing dance music.

        Cookies are one part of that puzzle, but it isn't the only piece. And there is more than one way to track a conversion, especially if you are digital to a not digital purchase (as may the case with your shampoo, given that I don't know what you use to wash your hair, or where you buy your shampoo) What I was hearing end of 2013/into summer 2014 basically made it sound like there were larger operational issues that was basically making that process a headache.

  • TM

    Tony Mariotti

    over 2 years ago #

    Here's another not-thought-out idea or two. Why not copy proven strategies from the past like original programming a la MTV (MTV News all the way through The Osbournes) or appointment radio like Stern moving to Sirius? Or live programming. Maybe a version of Netflix's original content strategy - Spotify becomes a label and signs acts. I don't think the wheel needs to be reinvented here.

    And, they might consider doing things that don't scale. Like offering audiophiles some wicked, high bit rate music at a great price. At least generate a reputation for being the best at something. Reputation does have a way of scaling (word of mouth).

  • DM

    Dan Medcraft

    over 2 years ago #

    I think adding more social elements would help - a few months ago they had some problems with their social feed (private messages to people were being made public, etc), so they removed it while it was being fixed. When they did this, this bummed me out way more than I thought.

    - I would create the social feed to be a little bit more Facebook-ish. If my friend who claims to love metal suddenly starts listening to Lady GaGa, that's something I wanna comment on. Or maybe I found a new band that I think my friends would like - let me comment on the song I'm currently listening to "just found these guys, they sound like ____ crossed with a little bit of _____"

    - Give each artist page a Reddit-style message board within the desktop app. Musician announcements, especially for the smaller names, are really hard to do.

    - Make it easier to share tracks. I want a 1-click method.

  • VH

    virgil hare

    over 2 years ago #

    It's impossible. They're not only competing with other streaming services but, you guys forgot about pirated music taking a large chunk out the market space.

  • KS

    ken Schmidt

    over 2 years ago #

    If Netflix can thoughtfully use their own data to create content they think will sell or expand memberships (House of Cards etc...) and distribute via streaming or DVD..., Why can't Spotify do the same or similar with strategic musical artists? It seems Spotify needs to evolve as well to keep customers or acquire more since other providers are similar. A big change might open a whole new network that can be leveraged, rather than smaller incremental things like ad changes, pricing etc...

  • BB

    Ben Basche

    over 2 years ago #

    I'd help out a messaging app that lets people send Spotify songs back and forth ;)

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