Spotify's New Free Mobile Service Signals the Fate of the Music Industry

December 13, 2013 4:27pm
Source: Ad Age

Spotify announced yesterday that its mobile listening service will be free to users who do not subscribe. This is a significant shift for the Swedish company, which had offered mobile on-demand listening to subscribers only. It has been using mobile convenience as bait to lure about six million subscribers into a monthly paid relationship.

Tablet listeners can now have the same free, ad-supported experience that's available on the PC desktop. On mobile devices, users can get Spotify Shuffle, a Pandora-like service that lets users shuffle songs, based on a specific artist, or to shuffle among existing user playlists. This stops shy of mobile, on-demand music listening; there's no way that music labels, which have invested in the company, will permit that for free.

Spotify's hope is that the free mobile service will draw another six million people to try out the service and eventually splurge for a subscription to the on-demand version. The folks at Spotify have to be thrilled that the labels have finally come around to this way of thinking, even if it is only a partial solution for listeners.

But to appreciate the wider significance of this development, we need to look at the context for it. The music industry is no longer a product business.

Then what is it? Let's take a quick jog down memory lane. In 1993 when you wanted to laser-print something with an exciting new typeface that did not come standard on your PC or printer, you had two options: You could jump on an online bulletin board system (called BBS back then, a precursor to the open internet) and illegally download a bunch of Adobe fonts for free, or you could legally purchase (usually from a store, how quaint!) a pack of fonts that you installed. The latter option was a pain; it was ridiculously expensive, and the font business suffered. Apple understood this early on and bundled a variety of fonts into its Mac operating system. This made it more convenient to "buy" fonts -- via a subsidized model in which they came with your purchase of another product -- than to steal them. That's exactly the model Apple would later bring to music.

Microsoft, late to the font party but not to be outdone, upped the ante in Windows 95, introducing its own font format and making it easy for users to access dozens of bundled fonts. Microsoft also invited font developers to liven the scene with their own creations, exactly the model that Apple would later bring to apps.

The result has been free fonts -- an absurd number of them -- for everyone. Dozens are included for free in any computer operating system, and the world is a better -- if more visually cluttered -- place for it.

But the font business, selling fonts as separate products, is dead. It's ironic: When an industry shifts from being a product business to a subsidized feature of somebody else's product business, more people use your product than ever, but you get paid less and less for it until, for you, the connection between paying and using almost entirely evaporates.

This process has happened or is happening to many product businesses: stock photo images, financial-market tracking, mapping, travel booking, news, pornography, video hosting, shipping, photo taking and photo manipulation. To wit: I first bought Photoshop in the 1990s on academic discount for $300; last week I downloaded Adobe Photoshop Express for my Surface 2. It does most of the same things for free, not because Adobe likes that, but because Adobe can't afford not offer it when my mobile phone now packs nearly the same editing power into a host of free apps. Not all of these things are or will be free in every circumstance, but the opportunity to charge consumers for them is dwindling, because somebody somewhere is happy to give it away at no charge to deepen a connection with customers.

Music is clearly on this list. It is already a feature in many companies' products, with Apple clearly in the lead, followed by Amazon with its cloud music experience, which gives you back your own music via mobile, and including Google and Microsoft. Even Beats, the headphone company, wants to give you a music service as a way to keep you interested in paying a premium for its headphones. All of this must frustrate the Rhapsody people, by the way, who tried in vain to make their music service an alternative to music downloads but never got the formula right. That's mostly because they were still selling music as a product, not as an adjunct to some other relationship.

The Apples and Amazons are making sure that you can get any kind of music you want to hear for as little money as possible. The best way to do this is to mimic radio, which music labels have a hard time insisting you should pay for, given that you don't pay for it in your car. Pandora was first out of the gate. In that model, if you want on-demand music, which Spotify was among the first to offer in a compelling way once the label opposition forces were sufficiently worn down, you have to pay for it. But if you don't want to pay, every one of these companies will find a way to give you something that is as close to on-demand as possible, on any device, in any location. It's not your music-listening dollars they value; it's your time and attention.

Eventually we'll see music labels give in and allow somebody like Microsoft the option to offer a free on-demand music service to Xbox Live Gold subscribers. Amazon, which has already done this in video, will do the same with music for its Amazon Prime members. We will all listen to much more music, including on-demand music, than we ever have, but we will barely realize that somebody, somewhere has paid for it.

Spotify's move is not only good product marketing in the present, it's necessary positioning for a future in which Spotify itself will likely have to become a feature in somebody else's product, or disappear.