Spotify CEO Daniel Ek has the Midas touch. In anticipation of the company’s US launch, the on-demand music streaming site is finalizing what is rumored to be a $50 million dollar round of investments. According to the Financial Times, if Spotify closes the round with Wellington Partners and Li Ka Shing Foundation, the Swedish company will be valued at $250 million dollars.
Spotify’s only real revenue at this time is it’s “premium” or ad-free subscription service. Critics may argue that this service will never earn the company enough to offset the cost of licensing music; however, the Telegraph’s Shane Richmond reports that Spotify’s iPhone application will only be available to premium subscription users. And if you’re questioning whether or not the subscription is worth it, you obviously haven’t seen the demo.
Unlike other mobile streaming music applications, the Android and iPhone applications allow members to cache streaming files for offline listening. In other words, there is no need to download a file for listening. It’s an amazing mobile feature for users, but as a free application it would cannibalize Spotify’s revenue stream from downloads. However, with the subscription requirement, the company is destined to make money from both downloads and streaming lists.
If the application doesn’t make it into the App Store, Spotify has other opportunities to generate revenue with downloads. Ek announced plans in late June to launch a one-click download solution for easier on-site purchases. The company’s ability to gain referral sales revenue shows potential, but the access model is less attractive than subscriptions. Spotify could offer a tiered file pricing system without compromising its existing service. The company could continue to stream compressed files for free while offering higher-quality files or rare releases for purchase and download. This option might appeal to diehard music fans, but it certainly doesn’t have the cool factor of the mobile applications.
Regardless of Spotify’s revenue streams, the company’s US release is widely anticipated. Americans are eager to see what UK and Swedish audiences have been raving about. Some of the company’s latest 3rd party tools look like amazing additions to the community. Spotify’s blog featured the following:
1. SpotifiTunes: Independent web developer Phil Nash’s iTunes playlist tool allows you to upload your iTunes library and generate additional links to your favorite artists in Spotify. Members can discover new album releases and sometimes surprising band collaborations from the past.
2. We Are Hunted: The curated We Are Hunted music community created a Spotify playlist complete with the site’s top tracks and artists. Once users can cache this on their devices, they’ll have the ability to listen to the community’s 99 hottest streaming songs in offline mode.
3. Share My Playlists: This site contains almost 4000 pre-compiled Spotify playlists for your listening pleasure. The service offers amazing potential to leverage the popularity of existing celebrity deejays, music bloggers, labels and music properties. Just think about the range this service could offer. From indie electronic labels to Motown, if brands were to release weekly tribute playlists you can bet there would be listeners.
After this sort of a build up for the North American launch, it would be a let down if American audiences thought the service was anything short of fantastic. We won’t have to wait long for a reaction, the release is expected before the end of summer.
