I’m here at the last keynote of SXSW, where Spotify CEO Daniel Ek is being interviewed by Wired’s Eliot Van Buskirk. Ek will likely be revealing some new announcements about Spotify during this interview. I’ll be live blogging my notes below.
Van Buskirk kicked off the keynote by asking how many people in the audience had used Spotify, leading a significant portion of the audience to raise their hands. This was surprising, because Spotify is only widely available in Europe (you need a beta invite to use it in the US). Ek then took some time to walk the audience through the streaming music service if they haven’t used it before (see our extensive past coverage if you need a refresher).
Q: What drove the initial decision to make this an application as opposed to something in the browser?
A: There are a few things that applications are better for. In our case, we think that applications are better for swift music playback. What we see is that people tend to spend a lot of time on Spotify because it’s so swift. They tend to replace their media player with Spotify, because they notice no difference between playing a song locally (some have even remarked that it’s faster than playing it through iTunes).
Q: Let’s talk about the licensing realities. Spotify is available in Europe. How will the model work in America?
A:There could be slight changes. A year and a half since launch more than 7 users, only in six countries. What we’re working on is the next gen of Spotify. We’ll never be content to just have an app. There are a lot of things we want to fix in Spotify. We tend not to take the ‘release early, often’ approach. What we’ve been working on for last 6-8 months is next gen of Spotify. How to make it more connected. Easier sharing and management of music. We’ve realized people spend a lot of time on Spotify and they tend to manage their music with Spotify.
Q: Which platforms/devices are most exciting?
A: Three years ago if you wanted to develop for mobile, had to support 3-5 major mobile os’s. Long lead times. That shut out all this innovation. More recently, application devs can get the application on phones. We look a lot at bundling with devices. Mostly not for revenue possibility but more for pre-installs. With exception of the iPhone today, most of the other handset manufacturers lack a good media player. Historically hard to get music to other phones if you had in iTunes.
Q: Let’s talk about the business side of bundling. If someone is paying for cell phone bill, they can check off something to get Spotify, seems like easier decision. How has that been going in Europe?
A: We have two mobile operators working with us many more to come. If you go into any Telius store in Sweden, you can go in and pick out a smart phone that comes preinstalled with Spotify. 3-6 months included. Incredible takeup with that. One of the key things Spotify is pushing is that people listen/share to more music than ever, more diverse artists. People will still buy music they love, but vast majority of music they just want access.
Q: We’ve heard services like Spotify people say “oh no we’re not going to buy music any more”. The idea of geting people to play a monthly fee, that seems promising. Why would someone buy something?
A: I think we’re going that route. But we find that music I really love, I tend to want to buy it. Not necessarily a plastic disk, but a special edition for an artist I really like, I’m more than happy to pay $100 for a box set with a t-shirt in it, liner notes. Another person may be willing to pay for a live edition with extended tracks. Or pay for a live concert experience. The reality of the music industry today is that there isn’t one biz model. It’s about figuring out how to use downloads, streaming, promotion, ticketing, all these things. I don’t think streaming music is stream.. with Spotify people label us ‘free’ music. But people pay, either with time (adverts, which are targeting), or actually paying for the service.
Q: Are you going to start filtering ads by mood (e.g. if you listen to down tempo music).
A: We want to figure out a lot of things based on how people listen to music. Can figure out mood, brand preferences. We see that from CTRs, if you listen to same music and are from the same place who tends to like a certain brand, there’s a high likihood you will too. Ad model is getting better every month. But this for me is not about free vs paid music, it’s about a model where there’s a free music element and a paid one.
A: Tech savviness at labels is increasing, now more people that love music and know the digital space are working with labels and artists.
Q: How do indy artists get music on Spotify? On ITunes you can submit paperwork. You’re different in that approach.
A: The way to get on Spotify today is we have a bunch of aggregators we work with. Main reason we’ve wanted to work with aggregators is that they tend to understand format/structure. We get quality control, picture, bio, etc.
Q: Are we done with DRM?
A: If you look at Spotify, it has DRM associated with it. We want to make it so that there isn’t really any announcement what’s DRM or not, we can protect and give users flexibility you want.
Q: Let’s talk about Spotify of the future. How do we get to point of ‘music like water’.
A: I see that’s sort of where we’re heading. The music industry needs that happen. I think music and tech are aligned for the first time. We’ve had a lot of proprietary standards, trying to figure out how to get music on a BlackBerry phone vs. getting it on iPhone vs set top box, radically different. We need to open platforms.
Q: With regard to Twitter/FB. Are you thinking of integrating sharing functionality into Spotify?
A: We’re looking at integrating some social aspects. I think genres are non-sane. What classifies rock, or neo-pop, etc. Spotify is quickly approaching 10 mil tracks. How do you manage that? Search is one solution, but isn’t optimal way of discovering new content. We won’t be another social network. We never believed in being our own social network, we’re working with existing social networks.
Q: With your playlists people have read/write access, can delete entire thing, what are you doing about that?
A: Looking from tech angle. We support version updates. One way to solve that is that you can step back in history and go back. What we don’t have is user privilege on playlists. We think Twitter/FB will figure out those privileges, and will use them.
A: I think the total rev matters more than actual conversion rate. But we do want to make sure there are a number people are paying for Spotify and that will grow. We’re making a lot of progress. We’re in six countries, now well in excess of 320,000 paid subscribers. Last time we mentioned a fig. it was 260,000. 100 million playlists. 7 million users. People spend a lot of time on playlists. 30% of all playlists are albums (albums stored in collection). People say album is dead. I don’t agree. I think there’s a lot to develop there.
Q: Let’s talk about P2P element.
A: It was a key decision, and one reason we’re a native app. Helps offload bandwidth. P2P actually helps Spotify and users, it will take tracks on your friends and coworkers on same local network and stream to them so it’s faster. “We’re consuming more capacity than Sweden has as a country”. If we had to stream all the data from our UK center, we’d consume all the bandwidth.
Q: Why isn’t Apple doing this?
A: That’s a million dollar question. I think they are. I’m just speculating on this. Apple is very interested, we’ve had iTunes store. They’re understanding this is more to subscription model. They understand it’s going more to a cloud based model. I don’t have any magical insight into Apple.
Q: Let’s look at Spotify on this phone. I wanted to show this cool device. Sony Ericson X10 mini. Out in US in next couple of months. It’s an Android phone. We’ve installed Spotify. Now demonstrating the app. Has a spotify widget.
A: Over the next couple of weeks a lot of features coming in to Spotify. I hope from them moving in a more steady direction. We are listening to what users are asking us to do.
Q: US Launch? Also China?
A: The most important thing for us when it comes to US launch is that we want to build the best possible product we can and get all ducks in a row, partnerships with next gen of Spotify. Sort out publishing which is a huge task. Here you have to strike deals with almost 5000 publishers. Big thing for us is working on next gen of Spotify and getting that out there.
Q: How many plays equals one dollar?
A: Depends on the type on contract with the publisher/record labels. We share the rev we bring in. You can’t really equate to ‘per play’ we look at all our ad rev. Creates a bucket. For instance how do you account for a purchase of a song. There is no easy answer to your question. Over time our ad revs are growing, number of downloads growing. Amount of rev we bring in is growing.
Q: How are it working to convince American label that not everyone needs to be a subscriber for it to work.
A: This is the world’s biggest music market. We have potential reach of 170 mil people in Europe. America has much more. People spend more money in America. The whole industry is looking more and more about new opportunities. At the same time CD sales have been in decline, nothing online has been able to counter balance that decline. I think people are looking at how we can support Spotify, how do we ensure that people don’t stop buying CDs.