Spotify heads towards TVs, gaming consoles and China

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At the first ever outing of the brand new (and quite high level) NOAH Conference in London a clutch of European companies, most mid-to-late stage startups, set out their wares to a broad range of European VCs, private equity people and bankers. Was it a pitch event? It was hard to say, but among them was a round-up from Shakil Khan, effectively Spotify’s consigliari, who wrapped up the company’s stats and opened the kimono a little on where it’s at.

The headline points from his talk were that we can, as we expected, see a US launch in Q1 2010 as well as a launch in Germany and China in Q1/2 (so no pressure then). Spotify will also extend from its existing handset deals into premium services on other platforms in 2010. They are talking to TV manufacturers about embedding Spotify into internet-enabled TV sets and Khan said they now get “a call a week” from games console makers which want to add Spotify to their service.

He also went through a round-up of its stats and model to date.

As we know it was conceived to be “more attractive than music piracy” and combines premium and subscription model. It’s probably not been emphasised enough that it was actually started in 2006, based on investment from the founders Daniel Ek and Martin Lorentzon who then spent the next two years on planes trying to negotiate global content licenses with all the record labels. As we now know, that came with a price as all major labels now have an interest in Spotify.

It now covers 6 markets in Europe (Sweden, Norway, Finland, UK, France, Spain) and has launched deals with mobile networks 3UK and Telia in the last month. Prior to this lots of music startups launched without negotiating with the labels – Spotify did the reverse. Khan said the most prevalent question they got from labels was “What will happen to our CD sales?”.

Spotify now has 6 milion users – 3 million users in the UK, with the next biggest market being Sweden. It carried 6.34 million tracks, has 120 staff in its 6 countries and 50,000 users per day join the service. It has mobile applications live on the iPhone, Android and Symbian.

It’s done no formal marketing as such, but although Khan made a big deal about not paying a PR agency, he did admit they have a full time internal PR person. But it is maintaining its invite only policy – although some observers point out that this may be down to issues scaling revenues to cover music rights payments than the technology itself, which is peer to peer.

Interestingly the average engagement time is 94 minutes a day which compares favourably to the average for websites which is 10-20mins. Why’s that? Khan says it’s because people are starting to use Spotify as a music platform to replace traditional entertainment systems like CDs (I know that’s definitely the case in my household).

On the mobile Spotify also allows you to hold 3,333 songs in the device for offline playing (that’s for premium users only).

The future for Spotify

The US is a high prioity, says Khan, and number one on their agenda for Q1 2010. They delayed the launch 2 weeks ago to make sure it goes right.

China is also going to be a huge market for Spotify. Khan knows it well – he launched and exited an internet advertising company in China years before it even appeared on most people’s radar.

He says the number one online activity there is music and guess what, “no-one buys music in China”.

Device wise Spotify “would like to be everywhere”, even if it has a “partial connection” like a car. They are looking to be in TV Screens, gaming consoles, but likely more for premium users only rather than free, ad-supoorted users.

It was interesting to hear a re-cap of Spoify’s investment history, The first 8m Euros was pumped in by Daniel Ek and Martin Lorentzon, who were followed by Creandum, Northzone. Later Wellington Partners and Hutchinson Wampoa Chairman Li Ka-Shing invested. It also has two Angel investors: Klaus Hommels and, it turns out, Shakil Khan.

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