Spotify - Is it worth it?
We here at the Syllabus Agency are avid users of the Spotify product. In an office that we share with the Green House Group, were just over 10 people work, I believe just one of us Owns a Spotify Premium Account. I have used Spotify since it was launched in the UK and have watched it grow form strength to strength with great interest.
I was reading the Telegraph over a nice cup of tea and a crumpet this morning and while casting an eye over the front page of the Business Section (as one does), I noticed that there was an article on my beloved Spotify.
Turning to page 3 straight away I saw this head line:
Now as you can imagine I was quite shocked as well as being surprised - as for a music programme that certainly does not have subscribers even close to 1/50th of Facebook's (assuming Facebook's recent valuation of $50bn) - I had to ask myself, "How could Spotify (in this market) be worth $1bn after only 2 years in business"?
The reason, I have read, is because a Russian Billionaire who has invested significant sums previously in other fast growing web-businesses such as Facebook & Groupon has recently purchased around 5% of Spotify for $50m. Even though this has happened, Spotify have announced that they are to keep raising funds with a $100m target.
But what will they do with this money?
I believe the real objective behind this money raising is to break America! The easy assumption is that the company will turn around and redistribute its new investors’ funds to the big music labels, as part of the distribution deals it is cutting to get into the U.S.
Spotify already has deals with Sony & EMI & is supposedly closing in on one with Vivendi’s Universal Music Group, the world’s biggest label.
A rough estimate is that Rhapsody, Napster, MOG & Rdio have a total of about 1 million subscribers, about the same that Spotify has on its own. So in order to really make the case for music you rent by the month, Spotify is going to have to lay out serious marketing cash to get people to pay attention.
All I can say is that it certainly is going to become more interesting over the next 6 months for this "Hugely Valuable" company that is still only a baby!
DC
