Spotify Readies Pandora-Like Online Radio Service
Spotify is readying a Pandora-like online radio service for the U.S, according to reports surfacing overnight. The move is an extension of Spotify's aggressive growth strategy which, while having netted 10 million users worldwide, is dwarfed by Pandora's 150 million registered in the U.S. alone. Set to launch before the end of 2012, Spotify is already informing content partners of its online radio plans.
Spotify currently has some radio-like features, but this new offering would go straight after Pandora according to Bloomberg News. Spotify has refused to comment on the reports.
Adding a Pandora-like service has many advantages for Spotify. First, it gives Spotify users access to songs by artists like the Beatles and others who have not allowed on-demand streamers access. Second, online radio roaylty rates are generally lower than for on-demand, giving Spotify a cheaper way to bring users into its ecosystem and serve current users. Both are essential to Spotify's free-to-paid freemium subscription model.
I don’t know if the economic advantages to this move are going to be true. They will have to pay the compulsory royalties for these spins, but they already have agreements to pay a % of ad revenue to the labels who they have direct licenses from, and a % of subscriber revenue. Unless they foresaw this or have managed to rework their licensing agreements, it stands to reason that they may still pay the higher amount on these streams, and may even pay more for playing things that aren’t in their catalog, where they have to pay both the SX royalties, plus their normal fees to their direct content providers.
“…online radio roaylty rates are generally lower than for on-demand.”
I don’t believe this statement is accurate.
If it were, then Spotify would have chosen the radio model instead of negotiating direct licenses in the first place.
I was thinking the same thing. Does anyone have real numbers to shed some light on this?