

Apple Blocks Spotify in the U.S. - tuxychandru
http://www.wired.com/epicenter/2010/10/apple-blocks-spotify-in-the-u-s-report/

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petrilli
It seems a bit disingenuous to say that Apple is "blocking" it. They may be
working against it -- and probably are -- but blocking implies Apple has some
magical veto. It might be hard to believe, but this sort of thing is pretty
normal in the capitalist wunderland.

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Tycho
I don't like the naive tone of this article. First, they describe the prospect
of Apple fighting the service as 'sinister.'Second, they say Apple are trying
to scare labels by saying Spotify generates little revenue, which must be
'scaremongering' because Apple obviously 'don't care about record label
profits.'

There's nothing mysterious going on here... Spotify just doesn't make any
significant money for anyone. It's a big free party that could disrupt proper
businesses.

I also don't see how Apple are 'almost inevitably' going to launch a Spotify
style service. Where's their evidence for that, outside a large data-centre
being built - which could be for any number of purposes.

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mzl
Just curious, why do you believe that Spotify doesn't make any money for
anyone?

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Tycho
They seem suspiciously tight-lipped about how much money they take, then
there's been a few articles detailing how the royalties earned by
musicians/publishers per play are minuscule. And just listening to the
service, the adverts that get played are by charities and government for the
most part, there doesn't seem to be any big contracts there. Plus the free
service is excellent so I can't imagine there conversion rate to Premium
membership is very high. And even if it is, the small amounts they charge,
compared to the vast amount of intellectual property they're making available,
and the bandwidth needed to provide it, doesn't make it look like a good
business for the industry to get involved in.

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mzl
I agree that they are very tight-lipped about actual revenue streams, but I
don't think that is their fault. I would guess that it is the record companies
that want to keep such numbers secret. One of the guys who started Spotify
previously did Tradedoubler, so they know something about on-line ads. While
they haven't said much officially, they did comment that ad-sales were going
quite well.

Regarding what musicians earn, the most interesting note is probably that the
Swedish collection agency (STIM) said about half a year ago or more that
Spotify is the number one digital earner for music in Sweden (passing iTunes
for example).

As for the bandwidth, see the paper I linked in another comment for some
interesting statistics on how much bandwidth is actually needed (tl;dr
version, surprisingly little thanks to p2p and caches).

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Tycho
Hmm, interesting point about the bandwidth and about Sweden. But I'd like to
know if Spotify cannibalized the iTunes sales, cause that's kind of the whole
point about it being a free frenzy and not making significant money. Put it
this way, they may have taken in more money than iTunes... but how much more
music did they give away? (and even counting raw playing time, that doesn't
capture the full effect of customers knowing they can access something
whenever they want)

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mzl
As far as I remember it (it was something a STIM representative said in an
interview, can't find it just now), it was about how the revenues from Spotify
had increased significantly.

Also, one should remember that, AFAIK, the initial idea was the free account
type and Premium came later. It is all about competing with piracy, making
something that is easier and more convenient for the user while still giving a
revenue stream to the rightsholders.

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Tycho
I kinda thought they were always planning on Premium charges though, they just
wanted to build some momentum first. My main problem with it is I can see 'the
rights-holders' making a good new revenue stream, but only in the sense of
people/companies that own massive publishing catalogs. The _individual_
rights-holders, eg. the songwriters, I fear are being sold up the river.

~~~
mzl
I was in the original beta-trials of Spotify (started second half of 2007),
and the info then seemed to indicate that the intended model was ad-financed.
A lot of people apparently asked about paying to get rid of the ads.

As for smaller artists, compare it with the situation in commercial radio. A
few radio-plays will not get you very much money, but the number of people
that listened to your song is actually quite high.

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Tycho
Comparing it to radio is where the trouble starts. A potential customer cannot
rely upon radio to access your music/product. At best they'll hear a few of
the artist's tracks, if they're patient and lucky. Therefore the radio is in
no way a substitute for owning the LP, it's more like an advert/complement
than a competing service. But Spotify DOES let the potential customer access
your product in full, removing the main incentive to buy your LP. Furthermore,
you're not only competing with a free version of your _own_ product, your
competing with a vast catalog of other music, millions of records that can be
accessed effortlessly. "Should I spend £10 on this one album, or should I
spend £10 for a month of unlimited access to endless high-quality music?" The
economic position this puts individual artists in is _dire_.

Also, another thing about the ads is sometimes they're hardly ads at all,
they're just Spotify announcements. I can't believe they'd be wasting spots
like that if they were really pulling in serious advertising money.

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thewordpainter
don't doubt this story for one second. consumers may love the service, but no
way they achieve the 10% conversion rates that the labels have called for.

spotify has talked a big game, but their "imminent" US launch has yet to
happen...and i'm not convinced it ever will.

all said, i'd love to see daniel ek (spotify ceo) & steve jobs at the same
table...

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henrrrik
Funny how it so many journalists believe that Apple would need a huge $1
billion data center to do streaming when Spotify obviously doesn't.

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manvsmachine
Apple doing it and Spotify doing it are two completely different things,
traffic-wise. Assuming that Apple is basing their streaming solution off of
Lala's model (not a given, but why else acquire them?), we're talking about
giving _every_ iTunes user streaming access to their entire music library,
_including songs that weren't purchased through iTunes_ (which would require a
serious amount of cloud storage). Spotify reached one million users sometime
last year; there are how many millions of iPhones and iPod Touch's out in the
world?

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mzl
Even though the most recent numbers from Spotify indicate something on the
order of 10 million users, I agree that Apple still has larger innate
audience. However, Spotify uses filesharing to further decrease the load on
their own servers, which I don't think Lala used. For some fun details on the
Spotify model, see <http://www.csc.kth.se/~gkreitz/spotify-p2p10/>

