Why Spotify Needs an iPhone App to Get to Market

Spotify’s much anticipated iPhone app has been submitted to Apple for approval and certainly looks the part…in fact it almost looks too much the part.  This level of integration into the iPhone music playback experience may well be deemed by Apple to be too competitive to the core iPhone functionality. There is precedent, the Podcaster app was rejected, reportedly because it was too similar to iTunes functionality (it since developed a scaled back RSS Reader iPhone app).  The Spotify app certainly seems to mimic core iPhone music playback functionality (e.g. utilizing standard iPhone / iPod Touch playback controls) and would therefore be likely to compete with iPhone iTunes music playback. 

 

A cynic might argue that Spotify are already concerned that Apple won’t approve and are doing their best to raise the profile to build consumer demand by posting the preview video on YouTube and putting it in the hands of key tech journalists.  Will it work?  Not necessarily.  Spotify is currently little more than a minor irritation to Apple, most pertinently because it’s not in Apple’s core market (the US) but also because it’s largely been a complement to iTunes.  This app could make it a competitor, but only if Apple will let it.  Apple’s App Store is an unregulated monopoly.  It’s easy to forget that, but as developers become more adventurous more and more apps will fall at the approval hurdle (as Nine Inch Nails recently discovered).

 

But leaving the approval conjecture aside, the Spotify iPhone app is potentially a really important development.  It provides on demand streaming music on the go, but crucially with off-line playlists, which means that you can listen to ‘streaming’ music without being connected.  This really blurs the lines between what is a download and what is a stream.  This doesn’t mean the distinctions will become irrelevant, but they’ll certainly become less key as these sorts of consumer experiences proliferate, which I posit is an inevitability, regardless of whether Spotify’s iPhone app passes muster.

 

Spotify really need to make their premium business to work. They’ve got a clearly market leading consumer value proposition, but they have yet to develop a vibrant business model.  Advertising revenue is important, but alone simply isn’t going to cut it.  Not seeing ads is clearly not reason enough alone to convince sizeable enough chunks of Spotify’s millions of users to pay 9.99 a month.  Equally Spotify know full well that they can’t ‘slice and dice’ their way to premium subscriptions: if they take away from their free offering they’ll soon lose lots of users, and therefore weaken their ability to generate ad revenue.  Mobile is the most logical way to drive near to mid term premium revenue.  So even if this iteration doesn’t make it, Spotify will make sure that one does.  They quite simply can’t afford not to.