Spotify: Comes With Music's Latest Threat

As I referenced at the end of my previous post, Spotify – the European streaming music service – has struck a deal with UK mobile operator 3, bundling the cost of their premium subscription into the phone tariff.  I’ve done a few press calls on the story today and the recurring question has been “where does this leave Nokia’s Comes With Music”.

 

Although the business model and value proposition are very different in many respects (thus suggesting risk of direct competition is low), there are also many similarities. Both offer unlimited music free to the end consumer, and now both are mobile. The distinctions between streaming and downloading is becoming increasingly irrelevant to end users (though rights bodies will continue to obsess about the distinction). The differences the consumer feels are of course what matters.  Given that CWM and Spotify have comparable catalogue, the key differences between fully subsidized mobile offerings will be:

 

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Music Subscriptions wherefore art thou?

With paid music downloads falling far short of offsetting the impact of declining CD sales, next generation subscription services need to succeed if recorded music sales are ever going to come out of their nose dive.  There is certainly lots of supply side activity, with services launched or announced in the last year from, Nokia, Spotify, TDC, Sky, Virgin Media to name but a few. And the incumbents have been busy reworking their offerings (cf Napster’s new 50%-price-cut-with-MP3s play).

 

Music subscription services have a lot of history but not a huge amount of success, so what gives the current new crop any chance of survival, let alone success?  The key will be hiding some or more of the cost to the consumer and adding real value.  The bottom line is that many consumers are simply unwilling to pay for music and even fewer are interested in paying a monthly fee for it.  So success lies in making the services free or ‘feel like free’ to the end user, subsidizing the costs through savings to, or increased revenue from other core products.  TDC, the Danish telco, has pioneered this approach with its free-to-consumer service that is available only to its customers.  (A cynic might argue that Spotify is doing the same, subsidizing its free offering with VC funding!) 

 

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Why mobile could reinvent social computing

Many innovative start-ups have pioneered mobile social networking in the last few years: BuzzCity, Peperoni, Fring, Nimbuzz, eBuddy, Zyb, Plazes, Loopt, Foursquare and many others demonstrated the potential of the market.

 

In the last few months, a bunch of announcements clearly showed that the convergence between mobile and social computing is gaining traction and attracting the largest stakeholders:

 

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Sky Songs: First Take

Finally we get to see some fruits of the labour of the protracted negotiations between the UK music industry and the ISPs.  Sky’s long mooted service - Sky Songs - will go live on the 19th October with content from all the majors, powered by Omnifone  In doing so Sky brings three major assets to the table:

  • a scale of marketing clout and expertise that other music subscription services could only dream of
  • proven and deep understanding of packaging and marketing entertainment products
  • a large installed base of premium customers to target

 

At launch the service is to be marketed to all UK broadband customers rather than explicitly to Sky customers. This gives a wide addressable market, but it does mean that two other key assets are currently untapped:

  • bundling this offer with Sky TV packages
  • integration with Sky’s hardware

 

Sky does though, leave these as distinct possibilities on the road map, which is very wise as they could prove to be the secret sauce that could make Sky Songs a success.

 

Sky also do one other very smart thing that will stand them in good stead: they enable customers to ‘dip in an out’ rather than locking them in to a year’s commitment.  This is added to competitive pricing:

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Amazon Kindle launches globally, sort of

Today, Amazon have launched a new Kindle that they are marketing internationally. Prior Kindle models were limited to use in the US. Key details:

  • Big promotion in the centre of the front page of Amazon sites in the UK, France, Germany and Japan.
  • Only for sale on Amazon.com and priced in USD at $279 (i.e. a $20 mark-up over existing Kindle2). Promotions above have links to Amazon's US site to buy.
  • Books are also for sale only via Amazon.com and are also priced in USD (at least for now).
  • This is the first Kindle that uses a GSM-standard mobile phone radio -- rather than CDMA -- for wireless downloading of books, sync of reading position with other Kindles and the iPhone Kindle app (i.e. to drive Amazon's Whispersync consumer cloud service).
  • Uses AT&T's mobile network and AT&T's global mobile roaming partners for Whispersync.
  • When outside the US, Kindle owners pay an additional charge for each book downloaded, currently USD1.99 per download. I imagine this also includes downloading PDFs via the email to Kindle conversion process and downloading small items like blogs or newspapers.

I'm frankly astonished that Amazon is marketing the above product internationally so strongly. Instead, it looks like a great fit for US residents who want to own a Kindle that works both in the US and when they travel abroad. Or, Amazon could have chosen a much softer and lower key international promotion on their various global sites.

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