At a press conference in New York last week, Spotify announced several new features, including video content, podcasts, and a new running function. Many see it as that Spotify want to start compete with Youtube, snapchat, and other video sites, I don't think so. In a previous post, I wrote that Spotify's video service would become a competitor to Netflix (NASDAQ: NFLX) and HBO. Obviously, they chose a different route, instead of adding series you will be able to check videos and news clips, listen to podcasts, and get news updates. This entertainment content will be provided by ABC, BBC, Comedy Central, Condé Nast, ESPN, Fusion, Maker Studios, NBC, TED, and Vice Media. I do not see this as something offensive from Spotify but more of a defensive strategy, and I'll explain why.
Music streaming services will get to know you and what kind of music you like better, day by day.
Spotify wants to increase your time that you spend on their platform by adding more content and functionality in their app. The reason is very simple, the more people use an app, the more likely they are to continue using it. It's no coincidence that Spotify presents these features right now. Apple (NASDAQ: AAPL) is expected to present a new music streaming service next month and Spotify must protect their primarily music business. In recent months, we have seen a wave of stories that say that Apple has had numerous discussions with the music labels. It is said that Apple is trying to persuade them to clamp down on Spotify's freemium model, which would give Apple's upcoming music streaming service better prerequisites. Apple's presence is starting to be noticed even before they have announced their new service. Spotify is doing the right thing to prepare and they realize that they must reprotect its current users.
Spotify has also begun to focus on personalized playlists, something Beats Music is well known for. Their new "Now" home page is based, not just on algorithms to understand where you are and what you're doing, but also on thousands of themed playlist created by Spotify's in-house team. Playlists are based on a number of factors, including the time of day, your age, gender, location, as well as what you have and have not listened to in the past. After having used Spotify for a week, I must say that it works great. First, it detects what time of day it is and then displays playlists that you can easily browse through. Spotify's team of editors also helps choose music, and the recommendations will get better over time as you listen more.
This will make you more attached to a certain music streaming service which will make it harder and harder to get users to switch service.
Helping people discover music with a combination of data and artist curation is something Jimmy Iovine, record producer and co-founder of Beats, has been talking about for years. "There's a sea of music out there but there's no curation for it ... It's all about what song comes next ... I guarantee everyone here struggles to get music for the event or thing they're doing at the moment", Iovine said in an interview in 2013. Daniel Ek, Spotify's CEO, said basically the same thing during their press conference. “If we truly want Spotify to be the soundtrack of our lives … we needed to be able to deliver the right music and experiences based on who we are, what we’re doing and how we’re feeling — moment by moment, day by day.”
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Music streaming services will get to know you and what kind of music you like better, day by day. This will make you more attached to a certain music streaming service which will make it harder and harder to get users to switch service. With this reasoning, the fierce competition will slowly but surely begin to decrease. In other words, a war will break loose between streaming services in the music industry, and in a few years it will become clear who the winners are. The fact that I'm a shareholder in Apple, I really hope they use their big cash pile to take a large part of the market as quickly as possible. I have written a post where I explain why you should buy Apple for a long-term investment, you can read it here: My First Stock: Apple
This is a living hell for Spotify.
Warner Music Group reported in its quarterly for the first time that its music streaming revenue surpassed sales of the company's music downloads. While Warner Music might be ahead of others the entire music industry is moving this way, check the chart below. In 2014, Apple's digital music fell 14% year-over-year, the combination of falling iTunes music sales and the industry's rising music streaming revenue means Apple could launch its new service at just the right time. Moreover, when the entire music industry reshapes they will also have to deal with labels, publishers and creators. Artists continue to complain that they're not getting paid enough. And it seems hard to make everyone in the music industry happy.
Another new feature is "Spotify Running" which gives you a non-stop mix of music that finds your tempo and plays music to match. Not only do we see a lot of tracking devices, but there is a clear fitness trend that all tech companies want to be a part of. This is only one of several features that Spotify uses to clearly trying to differentiate itself from other music services to become more competitive. I have said before, and will say it again, that the toughest competition to Spotify will come from Apple in the future. They are expected to integrate Beats Music in iTunes as soon as next month and last year they had over 800 million iTunes accounts. This is a living hell for Spotify. If you thought this was interesting, I recommend you read the post I wrote before about Spotify. I talk about Spotify going public and their future opportunities: What's Next For Spotify?
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