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Stuart Aitken, content manager at the IAB, talks to Spotify’s founder and chief executive Daniel Ek about that U2 deal, how to monetise great ideas and the potential of new platforms.
Wednesday, 4 March 2009
Ad-funded music service Spotify has been attracting widespread media attention over recent weeks with many tipping the Stockholm-based company to be next big thing in digital media. A key contributing factor was an exclusive deal which allowed users to listen to U2's new album one week before its official release.
Earlier this week Spotify announced that it had attracted one million registered users since it launched last October – not bad for a company who’s founder and chief executive Daniel Ek is a mere 25 years-old.
Can we kick off by talking about the U2 exclusive? How did that deal come about?
The label had given Spotify and a number of other music services U2’s first single off the album, Get On Your Boots, in the previous weeks and found out pretty quickly that most traffic was coming through us. That convinced them to give us an exclusive preview in the UK, which was wonderful news for our users.
To what extent has this deal raised your profile?
In the UK – quite a lot! We’ve been steadily raising our profile across the regions, especially in the music and tech press, and the news that we’d opened up access to everyone in the UK last month was big news too (at least for us). But in terms of demonstrating just how far we’d come in a relatively short space of time, getting U2’s first album in four years was a serious landmark, as was just announcing we’d reached one million users globally.
You currently offer two subscription models - a free, ad supported model and a premium ad free model which users pay for. Looking to the future, what do you expect will be the more popular model?
Both sets of users are equally important right now, but as the volume of users continues to increase (and the likelihood is that the Spotify Free users will expand far quicker than Spotify Premium users) Spotify's value to advertisers will increase exponentially.
Do you have any research relating to consumers' willingness to accept advertising in return for a free Spotify service?
Nothing specific as yet, but we’re in daily contact with our users via the blog and our Twitter page. We’re happy that practically everybody has been positive and feel that to listen to a near-unlimited amount of music for free with an ad every 20 minutes or so is a reasonable compromise. It’s certainly a lot less than anything they’d have on commercial radio, for instance, with the added bonus that they get to listen to exactly what they want.
The web is full of great ideas that are difficult to monetise. How hard is it for you to sell your service to potential advertisers?
It’s fair to say we all have different approaches. As regards what we at Spotify offer, I always like to make an analogy between something like YouTube and us. The content on Spotify is different from the content on YouTube, as you don’t know on YouTube if it’s a clip of a guy picking his nose or if it’s quality content. To pitch Spotify to an advertiser, they know that they are in a clean environment with high quality content.
Also in light of the financial crisis, the focus should be on providing the ad industry with a value that they don’t currently get. Those services that can provide that value will survive and those that can’t will have a hard time.
At Spotify, we can provide more measurability for brand advertisers; but we can also target, depending on mood. The key is getting the measurability and accountability that online can provide but still offer it in a way that offline ad buyers for brands feel is a good environment for them to be in.
What unique features can Spotify offer to potential advertisers?
We’re already talking to advertisers about various new formats and options, as some brands want a more bespoke advertising offering, which we’re always interested in looking at.
We can also facilitate a number of things for advertisers such as mood targeting, plus we can target demographics more clearly than offline media channels. For instance, we will be introducing age and sex, geographical (e.g. England or Manchester style focus) as well as socio-demographic (e.g. ABC1) targeting. This year we’re also looking to launch genre targeting which can be layered onto the other targeting options.
Being able to give audio ads a visual identity with the replaced cover art is unique, and we’ve also been able to offer audio call to action immediate click and trackability that commercial radio is unable to.
On top of this our close relationships with the music industry mean we have some interesting opportunities between bands and brands arising in the near future. Watch this space.
Can you tell us any about the advertisers you are currently working with?
Sure - current advertisers include the COI, Xbox, T-Mobile, Vodafone, Philips, HMV, Sainsbury's, Nissan, Sony Pictures, Paramount, Universal and findanyfilm.com.
In terms of licensing, I read an interview where you stated: "It’s now possible to do global deals and this wasn’t possible even a couple of years ago." Can you expand on this?
Mainly in terms of digital rights – digital licensing is such a complex space, with many of the rules and regulations created before the digital age at a time when regional restrictions were easier to implement.
The legal services need to have the support of all rights holders and the strength of marketing and distribution that they currently have. That's how we create a winning concept in the music industry today. It has helped us enormously to have aggregators like The Orchard on the independent side. We’re working with the labels as they continue to evolve in the digital arena.
There are some gaps in Spotify - huge artists like Metallica, The Beatles, Pink Floyd, ACDC and Led Zeppelin are missing for example, as are artists from some of the bigger independent labels. What work is being done to rectify this - and how difficult is it to resolve licensing issues with some of the more established names who have so far been reluctant to embrace the digital revolution?
We’re looking in time to include the artists you mentioned on Spotify as well as everyone else that currently prefers to restrict music digitally. We’re hoping that once people see how Spotify can provide an alternative to piracy that allows the artist to get paid for the music they provide, we’ll be able to create the most diverse music experience on the planet.
There was some talk amongst technology experts recently about the possibility of a Spotify iPhone application. Would you like to comment on this?
I can’t comment on the specifics, but we’re excited about platforms such as the iPhone as they enable third-party developers such as ourselves to develop interesting functionality.
We’re looking into a variety of ways where we can integrate the service into other platforms and devices. It’s good for the mobile industry in general if it becomes more open and we see people use mobile services a lot more. This is something we’re very keen to explore.
Follow the IAB on Twitter
Wednesday, 4 March 2009
Ad-funded music service Spotify has been attracting widespread media attention over recent weeks with many tipping the Stockholm-based company to be next big thing in digital media. A key contributing factor was an exclusive deal which allowed users to listen to U2's new album one week before its official release.
Earlier this week Spotify announced that it had attracted one million registered users since it launched last October – not bad for a company who’s founder and chief executive Daniel Ek is a mere 25 years-old.
Can we kick off by talking about the U2 exclusive? How did that deal come about?
The label had given Spotify and a number of other music services U2’s first single off the album, Get On Your Boots, in the previous weeks and found out pretty quickly that most traffic was coming through us. That convinced them to give us an exclusive preview in the UK, which was wonderful news for our users.
To what extent has this deal raised your profile?
In the UK – quite a lot! We’ve been steadily raising our profile across the regions, especially in the music and tech press, and the news that we’d opened up access to everyone in the UK last month was big news too (at least for us). But in terms of demonstrating just how far we’d come in a relatively short space of time, getting U2’s first album in four years was a serious landmark, as was just announcing we’d reached one million users globally.
You currently offer two subscription models - a free, ad supported model and a premium ad free model which users pay for. Looking to the future, what do you expect will be the more popular model?
Both sets of users are equally important right now, but as the volume of users continues to increase (and the likelihood is that the Spotify Free users will expand far quicker than Spotify Premium users) Spotify's value to advertisers will increase exponentially.
Do you have any research relating to consumers' willingness to accept advertising in return for a free Spotify service?
Nothing specific as yet, but we’re in daily contact with our users via the blog and our Twitter page. We’re happy that practically everybody has been positive and feel that to listen to a near-unlimited amount of music for free with an ad every 20 minutes or so is a reasonable compromise. It’s certainly a lot less than anything they’d have on commercial radio, for instance, with the added bonus that they get to listen to exactly what they want.
The web is full of great ideas that are difficult to monetise. How hard is it for you to sell your service to potential advertisers?
It’s fair to say we all have different approaches. As regards what we at Spotify offer, I always like to make an analogy between something like YouTube and us. The content on Spotify is different from the content on YouTube, as you don’t know on YouTube if it’s a clip of a guy picking his nose or if it’s quality content. To pitch Spotify to an advertiser, they know that they are in a clean environment with high quality content.
Also in light of the financial crisis, the focus should be on providing the ad industry with a value that they don’t currently get. Those services that can provide that value will survive and those that can’t will have a hard time.
At Spotify, we can provide more measurability for brand advertisers; but we can also target, depending on mood. The key is getting the measurability and accountability that online can provide but still offer it in a way that offline ad buyers for brands feel is a good environment for them to be in.
What unique features can Spotify offer to potential advertisers?
We’re already talking to advertisers about various new formats and options, as some brands want a more bespoke advertising offering, which we’re always interested in looking at.
We can also facilitate a number of things for advertisers such as mood targeting, plus we can target demographics more clearly than offline media channels. For instance, we will be introducing age and sex, geographical (e.g. England or Manchester style focus) as well as socio-demographic (e.g. ABC1) targeting. This year we’re also looking to launch genre targeting which can be layered onto the other targeting options.
Being able to give audio ads a visual identity with the replaced cover art is unique, and we’ve also been able to offer audio call to action immediate click and trackability that commercial radio is unable to.
On top of this our close relationships with the music industry mean we have some interesting opportunities between bands and brands arising in the near future. Watch this space.
Can you tell us any about the advertisers you are currently working with?
Sure - current advertisers include the COI, Xbox, T-Mobile, Vodafone, Philips, HMV, Sainsbury's, Nissan, Sony Pictures, Paramount, Universal and findanyfilm.com.
In terms of licensing, I read an interview where you stated: "It’s now possible to do global deals and this wasn’t possible even a couple of years ago." Can you expand on this?
Mainly in terms of digital rights – digital licensing is such a complex space, with many of the rules and regulations created before the digital age at a time when regional restrictions were easier to implement.
The legal services need to have the support of all rights holders and the strength of marketing and distribution that they currently have. That's how we create a winning concept in the music industry today. It has helped us enormously to have aggregators like The Orchard on the independent side. We’re working with the labels as they continue to evolve in the digital arena.
There are some gaps in Spotify - huge artists like Metallica, The Beatles, Pink Floyd, ACDC and Led Zeppelin are missing for example, as are artists from some of the bigger independent labels. What work is being done to rectify this - and how difficult is it to resolve licensing issues with some of the more established names who have so far been reluctant to embrace the digital revolution?
We’re looking in time to include the artists you mentioned on Spotify as well as everyone else that currently prefers to restrict music digitally. We’re hoping that once people see how Spotify can provide an alternative to piracy that allows the artist to get paid for the music they provide, we’ll be able to create the most diverse music experience on the planet.
There was some talk amongst technology experts recently about the possibility of a Spotify iPhone application. Would you like to comment on this?
I can’t comment on the specifics, but we’re excited about platforms such as the iPhone as they enable third-party developers such as ourselves to develop interesting functionality.
We’re looking into a variety of ways where we can integrate the service into other platforms and devices. It’s good for the mobile industry in general if it becomes more open and we see people use mobile services a lot more. This is something we’re very keen to explore.
Follow the IAB on Twitter
